Redond, Washington -- Software behemoth Microsoft Corp., lost its appeal of a lawsuit involving a Canadian company called i4i in May, after a jury ruled that the Redmond, Wash., software maker infringed one of i4i's patents with a custom XML feature found in Word, is preparing to modify its popular Word software to avoid an injunction on sales of the product.
In August an injunction was placed on sales of Word pending the appeal, which did not go in Microsoft's favor Tuesday. The lawsuit, a patent dispute over a feature few business users ever see, will cost Microsoft $290 million to settle patent-infringement verdict won by a Canadian firm.
The US Court of Appeals for the Federal Circuit defended a jury verdict and lower court ruling in the patent case filed against the US software giant by Toronto-based i4i Inc nearly three years ago. The dispute is over an invention related to customizing extensible markup language, or XML, a way of encoding data to exchange information among programs. Microsoft has called it an “obscure functionality.”
“This ruling is clear and convincing evidence that our case was just and right, and that Microsoft willfully infringed our patent,” i4i founder Michel Vulpe said in a statement.
“We could not be more satisfied with the ruling from the appeals court which upheld the lower court's decision in its entirety. This is both a vindication for i4i and a war cry for talented inventors whose patents are infringed,” said Loudon Owen, chairman of Ii4i, in a statement.
The company, based in Redmond, Wash., was allowed until Jan. 11 to make the change or stop sales, the judge also issued an injunction that would ban Microsoft from selling versions of its word processing program Word that violated on the patented technology, which Microsoft dismissed on Tuesday as a “little-used feature.” Word is part of Microsoft’s Office software, used by more than 500 million people.
“This is what we have been looking for since March 2007,” added Owen.
Microsoft was accused by i4i of infringing on a 1998 XML patent in its Word 2003 and Word 2007 programs. The subjected technology in question involves “any Microsoft Word products that have the capability of opening .XML, .DOCX or DOCM files (XML files) that includes custom XML,” according to a copy of the injunction released in August. I4i's Owen said at the time that his company was not out to force a halt in sales of one of Microsoft's most profitable products, and it does not appear that will happen.
The Federal Circuit does not seems to grant such a request, and “there is no issue really sexy or different for the Supreme Court to address either,” said James Kulbaski, a patent lawyer with Oblon Spivak in Alexandria, Va., who is not part of the case.
“This was a small company that appeared to be performing reasonably well, and Microsoft's product essentially eliminated that part of the business,” Kulbaski said. “i4i could not compete with Microsoft Word incorporating their feature”.
Microsoft emphasized that the injunction only refers to US sales of versions of Microsoft Word 2007 and Microsoft Office 2007 and said it has already “put the wheels in motion to remove this little-used feature from these products.”
Copies of Word 2007 and Office 2007 with the feature removed will be available by Jan. 11, and “beta versions of Microsoft Word 2010 and Microsoft Office 2010, which are available now for downloading, does not contain the technology covered by the injunction,” said Kevin Kutz, a company spokesman.
“While we are moving quickly to address the injunction issue, we are also considering our legal options,” Microsoft said.
Microsoft is testing Office 2010 with customers and will release the completed version in the first half of next year. The unit that sells Office is Microsoft's biggest, with $18.9 billion in sales in the year ended June 30.
According to the company's statement yesterday, it is doubtful that Microsoft will try to reach a licensing deal with i4i, said Matt Rosoff, an analyst with Directions on Microsoft, based in Kirkland, Wash.
“There may be conversations going on now, but the safest thing is to not include it in 2010,” said Rosoff, whose company is a research firm focused on Microsoft’s strategy.
The patent in this case, No. 5,787,449, was issued in July 1998.