Microsoft

A federal court on Tuesday reversed an earlier ruling that Microsoft's product activation technology infringed on another company's patent, overturning a $388 million verdict in the case.

In a ruling on Tuesday, the court vacated the earlier decision and decided the case in Microsoft's favor.

"We are pleased that the court has vacated the jury verdict and entered judgment in favor of Microsoft," Microsoft spokesman Kevin Kutz said in a statement.

Tuesday's ruling is the latest twist in a case that has had plenty of them. Microsoft initially won a summary judgment ruling, which would have ended the case in its favor, but Uniloc appealed that ruling and a federal appeals court last year ruled that the case needed to go to trial with regard to two counts.

The victory in the Uniloc case comes as Microsoft is awaiting the result of an appeal in another patent case in which the custom XML feature in recent versions of Word was found to infringe on patents held by Canada's I4i. If it fails in its appeal bid, Microsoft faces damages of more than $200 million in that case as well as an injunction that would halt sales of word with the infringing feature.

A federal appeals court on Wednesday heard arguments over whether to uphold an injunction that would ban sales of Microsoft Word in its current form.

Microsoft is appealing a jury's ruling that a custom XML feature in recent versions of Word infringes on a patent held by I4i, a Canadian software company. The jury ordered Microsoft to pay $200 million, while a judge raised that amount and also issued the injunction, although it has been temporarily put on hold while Microsoft's appeal is being heard.

The hearing before a three-judge panel in Washington, D.C., lasted about 90 minutes, with lawyers from both sides making their case.

"At today's hearing we emphasized three points for why a reverse judgment or retrial is warranted: courts need to construct claims properly, the patent is not valid and we do not infringe it, and common sense can't be abandoned when it comes to damages calculation," Microsoft spokesman Kevin Kutz said in an e-mailed statement. "We are pleased with how the hearing proceeded and we look forward to the Court's ruling.

For its part, I4i said Microsoft's arguments are the same ones that have been unsuccessful in prior hearings.

"The good thing is there was nothing surprising," I4i Chairman Loudon Owen said in a telephone interview on Wednesday. "It was the same thing that failed at trial."

A ruling from the appeals court is expected soon, but no specific time frame was given by the court on Wednesday. I4i executives expressed hope that the ruling will come soon, but such decisions can often take two to four months, or even longer in some cases.

Should Microsoft lose its appeal, the software maker could also pursue a technical workaround that allows the custom XML function to work in a different way that doesn't infringe on I4i's patent, remove that feature from Word, or pursue a settlement.

Although XML technology may seem arcane, Owen said it is important technology and he said I4i is suffering each day that there is no injunction because the market is growing so quickly.

"It's not a 'would-like-to-have' (technology)," Owen said. "We believe it is a must-have going forward. This is infrastructure so that commerce and government can function and solves some of the problems that are seemingly insurmountable in managing data today."

Microsoft will have its day in court on Wednesday.

OK, so the software maker still spends lots of days in court, even if it has settled many of the antitrust cases that once filled its Outlook calendar. Wednesday, though, it will make its case to an appeals court for why it shouldn't face an injunction banning sales of Word that contain a custom XML feature.

Earlier this year, a federal jury found that recent versions of Word infringe on a patent held by I4i and ordered Microsoft to pay the Canadian company $200 million. Last month, a federal judge hiked the damage award and also ordered the injunction.

Both sides have made their arguments (and counter arguments, and counter-counter arguments abundantly clear), so now it will be up to the federal appeals court to weigh those positions. The hearing is set for 10 a.m. EDT/7 a.m. PDT, and we'll try to post an update after the hearing is done.

For its part, I4i has said it isn't seeking to have Word pushed off the shelves entirely. It just wants the offending code removed.

If it loses its appeal, Microsoft could try to offer an XML feature that behaves differently, pull the custom XML feature from Word, or pursue some sort of settlement.

Microsoft on Monday reiterated its case in an appeal of an injunction ordering it to stop selling Word in its current form and argued against fines totaling $240 million for patent infringement and willful infringement.

The software giant is trying to get the federal appeals court to reverse a ruling in favor of Toronto-based I4i. That company sued Microsoft in March 2007 alleging that the software giant violated its 1998 patent (No. 5,787,449) by including in the program XML code, which eliminates the need for manually embedded formatting codes.

In May, a federal jury in Tyler, Texas, ruled that the custom XML tagging features of Word 2003 and Word 2007 infringed on I4i's patent. Last month, a federal judge in Texas issued a permanent injunction barring Microsoft from selling Word with the code.

Microsoft appealed and in early September, the U.S. Court of Appeals for the Federal Circuit in Washington, D.C., granted Microsoft's motion for a stay of the injunction.

Last week, I4i defended the case, the trial outcome and damages, saying they accurately reflected its patent ownership and Microsoft's infringement.

In its counter reply, Microsoft again argued that the lower court rulings used erroneous claim construction and definitions and applied the wrong legal standard to the case.

In addition, the damages verdict of $200 million is not a reasonable royalty amount and can not be sustained, and there is no basis for the $40 million award for willful infringement, the filing said.

A hearing is set for September 23 in the case.

A federal appeals court on Friday affirmed a lower court ruling that Microsoft infringed on a patent owned by Alcatel-Lucent, but said the jury award of $358 million in damages was excessive.

The U.S. Court of Appeals for the Federal Circuit in Washington, D.C., upheld a ruling that the patent at issue was valid and had been infringed on, but said there was not sufficient evidence to support the calculation of damages. The question of damages was sent back to the district court.

The patent, whose application was originally filed by engineers at AT&T, covers a method of entering information into fields on a computer screen without using a keyboard. Lucent initially sued computer maker Gateway for the patent infringement in 2002 and Microsoft subsequently intervened. Dell is listed as a third defendant in the case.

The trial court found that the "date-picker" calendar tool in Microsoft Outlook, and similar features in Microsoft Money and Windows Mobile, infringe on what the court refers to as the "Day patent." However, for damages purposes, the court said there was no evidence of widespread use of the infringing tool by customers and questioned the calculation of damages.

Alcatel-Lucent argued that it was owed damages representing 8 percent of the revenue of Microsoft's sales. The jury apparently arrived at its sum based on that percentage of Microsoft's sales or the entire market value of the software products that contain the feature, the opinion said. Microsoft, meanwhile, had suggested a sum of $6.5 million. The appeals court did not suggest a method for calculating the damages, but said the amount chosen by the jury was out of proportion to the potential for infringing use.

The infringing feature is a tiny piece of a large software program, and thus "the portion of the profit that can be credited to the infringing use of the date-picker tool is exceedingly small," the ruling said.

"In short, Outlook is an enormously complex software program comprising hundreds, if not thousands or even more, features. We find it inconceivable to conclude, based on the present record, that the use of one small feature, the date-picker, constitutes a substantial portion of the value of Outlook," the court said.

Representatives from both Microsoft and Alcatel-Lucent said they were pleased with the ruling.

"We are pleased that the court vacated the damages award, and we look forward to taking the next step in the judicial process," Microsoft spokesman Kevin Kutz said in a statement.

"We are very pleased with this decision by the U.S. Court of Appeals for the Federal Circuit affirming the jury's decision that Microsoft infringed the Alcatel-Lucent Day patent and that the Day patent is a valid patent," Alcatel-Lucent spokeswoman Mary Ward said in a statement.

"While we are disappointed that the court did not affirm the jury's decision on damages, we look forward to an upcoming proceeding to determine the compensation to which Alcatel-Lucent is entitled based on the court's finding that Microsoft did use our patented invention, which Microsoft included in each of the infringing products, presumably because they recognized that it added real value for their customers," she said.

The case is just one of a number of patent infringement cases the two companies have filed against each other over the years including cases involving the MP3 format, as well as communications technology, and digital speech compression.

Update, 11:10 a.m. PST: Added response from Microsoft.

I4i said Wednesday that it refutes the latest claims made by Microsoft in an XML patent infringement case involving Word.

I4i Chairman Loudon Owen called Microsoft's claims "the same weak defenses Microsoft repackaged from the trial and raised on appeal."

Following its recent appeal, Microsoft was granted a stay of an injunction last week that would have forced the company to stop selling Word in its current form by next month.

In its appeal, Microsoft criticized the district court that ordered it to stop selling Word, claiming the judge made several errors and didn't fulfill his responsibility as a gatekeeper.

But in its responding brief filed in the U.S. Court of Appeals for the Federal Circuit on Tuesday, I4i leveled several charges against Microsoft.

"Microsoft repeatedly attacks the district court's performance as a 'gatekeeper,' said I4i in the Responding Brief. "But Judge Davis has a substantial track-record in patent cases, and Microsoft's criticism of him as unable (or unwilling) to fulfill his duties is nothing less than an unfair attempt to divert attention from what really happened."

I4i also cited specific areas where it believes Microsoft's attacks on the court are misguided, including an I4i survey that the court used to determine damages.

"In criticizing the survey testimony that formed the basis of I4i's damages claims, Microsoft demands a level of perfection that this Court has never required and few surveys would ever meet. I4i's survey was designed, conducted, and analyzed using accepted methodology, and its admissibility was beyond legitimate question. Moreover, in arguing that I4i's survey respondents were inadequately screened, Microsoft relies on inaccurate and cropped quotes from the screening questions. Most egregiously, though, Microsoft repeatedly distorts this Court's case law."

In a response to CNET News, Microsoft spokesperson Kevin Kutz issued the following statement: "We're looking forward to the hearing on the merits of our appeal." The next hearing is scheduled for September 23.

In the brief, I4i also accused Microsoft of intentionally taking its technology.

"When it suited its purposes, Microsoft touted I4i as a 'Microsoft Partner' able to provide software that Microsoft could not. But behind I4i's back, Microsoft usurped I4i's invention, destroying I4i's ability to compete in the market that it had created."

I4i also recounted its history of partnering with Microsoft on the XML (Extensible Markup Language) feature.

"Word, the dominant word processing software, could not always work with XML documents. In fact, when the U.S. government requested that functionality in 2001, Microsoft turned to I4i for help and the two companies worked together to provide a solution. The partnership ended, however, when Microsoft incorporated into Word (then the 2003 version) the capability that I4i had been providing (i.e., the ability to work with XML documents). Since then, I4i has struggled to maintain any position in the market."

In another point in the brief, I4i refers to the timing of its patent.

"I4i began selling products covered by the '449 patent before Microsoft's infringement, and the accused functionality in Word can be removed without any impact on the overall product. In short, the injunction is both proper and necessary to protect I4i's rights."

"I4i is confident we will prevail on appeal," said Owen. "We believe the Final Judgment in favor of I4i, which included a finding of willful patent infringement by Microsoft and an injunction against Microsoft Word, was the correct decision."

The case goes back to March 2007 when Toronto-based I4i first filed suit against Microsoft, claiming the company's use of certain XML features in Word infringed on an I4i patent.

A pro-open-source group said on Tuesday that it has acquired 22 patents recently sold by Microsoft--patents that the group said could have been used against Linux.

The Open Invention Network said that the patents were purchased from Microsoft by an entity known as the Allied Security Trust. OIN said it has now acquired the patents from AST, although it wouldn't say how much it paid.

"Today's announcement evidences OIN's continued commitment to acquire patents that may be relevant to Linux," OIN CEO Keith Bergelt said in a statement. "The prospect of these patents being placed in the hands of non-practicing entities was a threat that has been averted with these purchases, irrespective of patent quality and whether or not the patents truly read on Linux."

Allied Security Trust said it was pleased that OIN had bought the patents. "OIN's purchase ensures that these important patents will not be used by patent trolls or others seeking to disrupt Linux and the many companies and individuals advancing this important technology," AST Chief Executive Dan McCurdy said in a statement.

The Wall Street Journal reported on Monday that OIN was close to acquiring the former Microsoft patents.

In an interview, Bergelt said that his organization was not invited by Microsoft to directly participate in the bidding for the patents, raising the specter that Microsoft was more interested in selling to someone that might have targeted Linux as opposed to just maximizing the sales price for the patents.

"We were not offered an opportunity to participate in the bidding for this portfolio that Microsoft was selling," Bergelt said.

For its part, Microsoft confirmed that it sold the patents to AST in July, but declined to comment on the terms of the deal. Microsoft said that the patents were indeed ones that it had acquired several years ago in a deal with SGI.

"These patents were deemed to be non-core to our business and non-essential for our IP portfolio," Microsoft spokesman Michael Marinello said in a statement. "When an interested buyer for this technology was identified, after discussing it both internally and with the potential buyer, we felt this was the right direction to go in relating to these specific patents."

OIN began in 2005 and includes IBM, Sony, Red Hat and Google among its members. TomTom joined OIN earlier this year, during its now-settled patent spat with Microsoft.

Microsoft has long asserted that various implementations of Linux infringe on a number of its patents, however, until its suit against TomTom, Microsoft had never litigated any of those contentions. Linux-related claims were part of Microsoft's suit against TomTom.

Bergelt said OIN acquired the patents to try to help Linux-based companies avoid becoming targets for more legal action. "In this case it's not that we saw these patents as so fundamental that Linux was at risk," Bergelt said. "Our goal is to reduce the potential challenges that are associated with patents."

Microsoft has at times alleged patent infringement in its attempts to stifle certain Linux-based applications. But one group is hoping to fight back by using Microsoft's own former patents.

The Open Invention Network (OIN), a group made up of Microsoft competitors and Linux advocates,said it's close an agreement to buy 22 patents that Microsoft sold to another organization earlier this year. According to Tuesday's Wall Street Journal, the patents may relate to Linux.

The OIN believes that getting these patents is critical to protecting Linux developers from costly lawsuits, according to the Journal. The concern is that otherwise the patents could be grabbed by patent trolls, which will then try to make money from patent-infringement lawsuits.

The group that currently owns the patents, Allied Security Trust, buys them to protect its members from lawsuits. Composed of such companies as Google, Hewlett-Packard, Verizon Communications, and Cisco Systems, Allied Security Trust bought the patents in a private auction held by Microsoft. The Journal reports that Microsoft presented the patents to potential bidders as relating to Linux.

Microsoft has said that it holds more than 50,000 patents, according to the Journal, and that it believes 200 of those are violated by Linux applications.

Over the past few years, Microsoft has signed deals with several open-source companies in which they pay Microsoft money to protect themselves from intellectual property claims.

The OIN's goal is to promote and protect Linux by using patents that allow for free and open collaboration. The group says its patents are available to any company or individual that agrees not to assert those patents against Linux. The idea is to help developers use Linux without having to worry about violating existing patents.

The OIN is trying to use such cases as the recent lawsuit between Microsoft and GPS-maker Tom Tom to prevent similar actions against Linux-based apps. Although Tom Tom settled with Microsoft, the OIN is concerned that the case may establish a precedent.

Started in 2005, the OIN counts among its members IBM, Sony, and Red Hat. Over the years, other powerhouses have joined, including Oracle, Google, and most recently Tom Tom.

Updated at 8:30 p.m. PDT with comment from i4i.

Microsoft has been granted a stay of a landmark injunction in a patent infringement case that would have required the software giant to stop selling its popular Word in its current form by next month.

The U.S. Court of Appeals for the Federal Circuit on Thursday granted Microsoft's motion for a stay, pending appeal, of an injunction issued in August by a federal judge that bars sales of Word that include a custom XML code found to infringe on patents held by i4i--the plaintiff.

"We are happy with the result and look forward to presenting our arguments on the main issues on September 23," Microsoft spokesman Kevin Kutz said in a statement.

In response to the court's decision, i4i expressed confidence in its position and accused Microsoft of employing "scare tactics."

"Microsoft's scare tactics about the consequences of the injunction cannot shield it from the imminent review of the case by the Federal Circuit Court of Appeal on the September 23 appeal," i4i Chairman Loudon Owen said in a statement. "i4i is confident that the final judgment in favor of i4i, which included a finding of willful patent infringement by Microsoft and an injunction against Microsoft Word, was the correct decision and that i4i will prevail on the appeal."

Toronto-based i4i sued Microsoft in March 2007 alleging that the Redmond,Wash.-based software giant violated its 1998 patent (No. 5,787,449) for a document system that eliminated the need for manually embedded formatting codes. In May, a jury ordered Microsoft to pay $200 million for infringing on a patent held by i4i.

In filing its formal appeal last week, Microsoft made a number of arguments for overturning the infringement finding, saying that the judge made several procedural errors and failed to live up to his role as "gatekeeper."

In addition to pursuing its appeal, Microsoft has other options, including creating a technical workaround, removing the XML function, or reaching a settlement with I4i.

I4i said earlier that it is not seeking to torpedo Word, but does want the infringing custom XML code removed.