In victory for i4i, appeals court upholds Microsoft Word injunction

The U.S. Federal Circuit Court of Appeals in Washington, D.C., has upheld the Aug. 11 verdict that ruled in favour of i4i Inc., finding that Microsoft Corp. (NASDAQ: MSFT)had wilfully infringed on the Toronto-based company’s patent. Reports indicate Microsoft may already have a work-around patch ready to go.

A Texas jury verdict in August found that recent versions of Microsoft Word infringed on U.S. Patent No. 5,787,449 issued in 1998. Microsoft had appealed the verdict.

In an interview with ComputerWorld Canada, i4i chairman Loudon Owen called the ruling a vindication. “It’s yet again a further confirmation that we were right that we have a valid invention and that it was willfully infringed,” said Owen.

(View IT World Canada’s chronology of the Microsoft-i4i court battle.)

The decision, he said, is a battle cry to small inventors like i4i to have the courage to create something new and go against the herd. “The message that came through is, notwithstanding dramatically disproportionate resources, you can win,” said Owen.

He expects i4i to be inundated with customers looking for custom xml solutions, and that the verdict is an “exciting launch pad” for the company’s significant growth.

In an e-mail interview, Matt Rosoff, research vice-president with Directions on Microsoft, wrote: “It’s interesting because Microsoft faces these kinds of cases quite frequently — at any given time, they have between 20 and 30 infringement cases in court — and they occasionally lose them, particularly in district court cases where a jury is involved.”

“However, Microsoft has tended to prevail, at least partially, on appeal. Not in this case — here, the appeals court basically upheld the district court judge’s ruling in its entirety, except gave Microsoft until Jan. 11 to comply,” said Rosoff.

Rosoff said that if removing the offending feature from Word is costly, Microsoft will have to determine how important the functionality is to users. He added that if Microsoft deems it a “must-have feature,” it might consider licensing the patent from i4i. “They’d have to judge that the lost sales of Word 2010 would be greater than i4i’s licensing terms,” Rosoff said.

Owen said Microsoft will be treated with the same respect as any other should it approach i4i regarding licensing the patent. “We’ve always pointed out that Microsoft certainly knows our phone number, and knows how to contact us and we’re always happy to talk to any prospective partner,” said Owen.

As for what Microsoft might do about today’s court decision, Owen said the situation is unpredictable. “The one thing we know Microsoft can do is they can seek to have the case, or part of the case heard, at the Supreme Court of the United States,” he said. “So we fully expect they’ll try that and that’s outside our control.”

In a statement, Microsoft said: “While we are moving quickly to address the injunction issue, we are also considering our legal options, which could include a request for a rehearing by the Federal Circuit Court of Appeals en banc or a request for a writ of certiorari from the U.S. Supreme Court,” said Kevin Kurtz, director of public affairs.

And it appears they have. Microsoft already has a patch available that strips out XML technology the company is barred from using after Jan. 11, in Word 2007 and Office 2007, according to a Microsoft Web site. Microsoft’s OEM Partner Center now includes a prominent notice and a link to a 13MB update. The patch targets large computer makers that factory-install Microsoft Office on new PCs before they’re shipped to dealers or customers.

“After this patch is installed, Word will no longer read the Custom XML elements contained within DOCX, DOCM, or XML files,” the notice continues. “These files will continue to open, but any Custom XML elements will be removed.”

A Texas jury first ruled on the patent infringement case in May after an eight-day trial, awarding i4i US$2090 million. The company originally filed the suit in March 2007, claiming Word 2003, Word 2007, .Net Framework and Vista infringed on a 1998 patent on technology allowing regular word processors to function as XML editors.

In August, a Texas court gave Microsoft 60 days to stop selling custom-XML-capable versions of Word, and tacked on another $90 million in penalties and interest. That injunction was stayed in September, after PC makers Dell Inc. and Hewlett-Packard Co. went to bat for Microsoft in court, claiming their products would have to undergo expensive and time consuming retesting to ensure they worked with a custom-XML-free Word.

Few technology-watchers believed i4i’s case would stand up in the long run.

“I’ve read the patent and diagrams presented by i4i and they appear to be very broad and vague,” said Tim Hickernell, lead analyst with Info-Tech Research Group, in August. i4i’s patent “could be applied to any content application from almost any software vendor,” according to the 25-year document content expert.

Microsoft also has its own patent, granted earlier this year, that more directly describes the relationship between the Word format and XML, according to IDG News Service contributor Tony Bradley.

Patent attorney Barry Negrin said a simple technology workaround would allow Microsoft to sidestep the injunction. Rosoff agreed. “I don’t think it’s a horribly complicated or expensive process to remove the offending feature from Word, but it’s not cost-free either,” Rosoff wrote. “Microsoft has probably had some employees assigned to this since the original ruling in August.”

Microsoft has already removed the feature in the 2010 version, now in beta.

In October, Microsoft CEO Steve Ballmer discussed the i4i situation in an interview with IT World Canada editor-in-chief Shane Schick.

“I think we’ve handled the situation well,” Ballmer said. “We didn’t initiate the situation. We have two valid disputes: One, is it an invalid patent, and No. 2, did we infringe it? They’re valid disputes and they’re playing out the way they’re supposed to through the legal system. We didn’t initiate the dispute, i4i did. That’s they’re prerogative. We don’t begrudge them that, we just don’t agree with it.”

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