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Court bans Microsoft Word in patent case, could impact sales

Discussion in 'Tech, Gadgets & Science Forum' started by Ex Spy, Aug 15, 2009.

  1. Ex Spy

    Ex Spy Senior Member

    Aug 15, 2009
    Joined: Jan 15, 2007
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    by Jaspreet Virk

    Ruling in favor of i4i Ltd, and against Microsoft, a federal district court in Texas has fined Microsoft $290 million and ordered the software giant to stop selling some versions of its extremely popular Word software in United States in 60 days.

    i4i Ltd, a small Canadian firm with only 30 employees, had accused Microsoft of infringing a patent related to Extensible Markup Language (XML) held by it.

    In the ruling, the district judge Leonard Davis stated, “Microsoft had knowledge of the patent and its relation to i4i’s products and willfully chose to render the technology obsolete while simply ignoring the patent.”

    The judgment applies to Word 2003 and Word 2007 as these versions enable users to open .XML, .DOCX, or .DOCM files that contain custom XML.

    Significant achievement for i4i
    While the decision dealt a blow to Microsoft, it marked a significant achievement for i4i.

    Hailing the judgment as “a landmark decision”, Loudon Owen, i4i's chairman for the past 13 years, stated, “This is a Canadian entrepreneurial victory versus giant Microsoft in what is a highly strategic area of the IT industry."

    The XML technology, a key constituent of many Web sites, and other programs, enables users to access any kind of computer file as a regular text. It is often used to make computer data readable and publishable on multiple platforms.

    Microsoft to appeal
    Microsoft, which has been involved in a number of legal battles, said that it will appeal in higher court in Washington and is hopeful that the ban will be stayed by the judges.

    "We are disappointed by the court's ruling," Microsoft spokesman Kevin Kutz said in an e-mail. "We believe the evidence clearly demonstrated that we do not infringe and that the i4i patent is invalid."

    The judgment could impact sales
    The Word software is a part of Microsoft office. The injunction can potentially hurt the sales of MS Office, which recorded $18 million in revenue in the last fiscal year.

    Both Word and Office are of strategic importance to the software behemoth as it is used by millions of consumers worldwide for everyday works like word processing, preparing spreadsheets, presentations etc.

    Further, the software is the front end to information stored in Microsoft's SharePoint server and SQL Server database. The ban could adversely affect company’s future plans related to these products.

  2. Invisible

    Invisible Admin Staff Member

    Aug 26, 2009
    Joined: Feb 11, 2006
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    Written by Gregg Keizer| IDG News Service

    Microsoft's lawyers said the verdict that awarded a Canadian developer nearly $300 million in damages and resulted in an impending ban on sales of the company's popular Word software was a "miscarriage of justice.

    Microsoft Corp.'s lawyers late yesterday said the verdict that awarded a Canadian developer nearly $300 million in damages and resulted in an impending ban on sales of the company's popular Word software was a "miscarriage of justice."

    In a brief filed with the U.S. Court of Appeals for the Federal Circuit, Microsoft asked the three-judge panel to overthrow a Texas court's verdict and quash the injunction that prohibits the company from selling current versions of Word 2003 and Word 2007 in the U.S. after Oct. 10.

    The brief is the first step in a fast-track process approved last week after Microsoft appealed the May jury verdict that found the company guilty of patent infringement. Two weeks ago, U.S. District Court Judge Leonard Davis awarded software developer i4i Inc. more than $290 million in damages and interest and blocked Microsoft from selling Word in its current form.

    An oral hearing for the appeal is slated for Sept. 23, after i4i files its response and Microsoft is given a chance to rebut.

    Yesterday, Microsoft castigated Davis' role in the trial. "This case stands as a stark example of what can happen in a patent case when a judge abdicates [his] gatekeeping functions," Microsoft said. "If the district court had been more faithful to its role as gatekeeper, it should have recognized a trial run amok and interceded to prevent a miscarriage of justice."

    The 84-page brief, thick with legal citations of prior cases, continued to attack Davis' judgment during the case, saying that he failed to properly instruct the jury, awarded "enhanced" damages of $40 million, $15 million more than i4i had asked for and added the injunction against selling Word.

    "This is not justice," Microsoft said. "If district courts are free to admit theories of infringement that nullify a patent s claim terms, specification, prosecution history, and title; if they will allow an inventor to validate his patent by testifying without corroboration that he lied about the date of conception & then patent litigation will be reduced to a free-for-all."

    Attorneys for Microsoft also argued that Davis should not have issued the injunction that bars Word sales. Citing a Supreme Court ruling from 2006 that set aside a lower court's injunction against eBay in a patent dispute over its "Buy It Now" auction feature, the lawyers said i4i had failed to present evidence that justified Davis' injunction.

    In its decision, the Supreme Court said that lower courts must use a four-factor test when considering patent injunctions.

    Microsoft said that i4i "utterly failed to meet [the burden of irreparable harm]" and did not "present a shred of evidence on its alleged loss of brand share." The company also argued that the damage to i4i had occurred in the past, and that i4i's software was complementary to Word, not a competitive product.

    Its lawyers also complained that the injunction was unfair. "Given that i4i does not even have a stand-alone product that could compete with Word on the market, while Microsoft would lose its significant investments in creating the custom XML functionality of Word and would have to invest significant resources in redesigning it, the balance of the equities plainly favors Microsoft," the company's brief said.

    Finally, Microsoft claimed that Davis overlooked the public interest, one of the four factors cited by the Supreme Court in the eBay decision. "The public interest thus favors a final -- and better-tested -- determination of validity before Microsoft and its distributors are forced to incur additional costs in redesigning Word, and removing the current copies of Word from the market," stated the brief.

    During the trial, Microsoft said it would take five months to craft new versions of Word that omitted the offending "custom" XML feature. i4i, meanwhile, countered that it could be done much faster than that with a software patch.

    "The injunction should be vacated," Microsoft concluded in its brief. "The judgment should be reversed and the case remanded with instructions to enter judgment of noninfringement and invalidity."

    If Microsoft fails to convince the Court of Appeals to overturn the verdict, or to issue a stay on the injunction, it will have to pull Word 2003 and Word 2007, and the corresponding editions of its Office suite that include Word, from the U.S. market in just over six weeks. Computer makers would also not be able to bundle Office 2003 and Office 2007, even trial versions, with new PCs sold after Oct. 10. In a motion it submitted last week, Microsoft warned of chaos if that happened.

    "Microsoft and its distributors (which include retailers such as Best Buy and OEMs such as HP and Dell) face the imminent possibility of a massive disruption in their sales," Microsoft said in the motion.

    Monday, both Dell Inc. and Hewlett-Packard Co. asked permission to file amicus curiae , or "friend of the court," briefs in support of Microsoft's motion to stay the injunction.

    "We believe the court erred in its interpretation and application of the law in this case and look forward to the Sept. 23 hearing before the U.S. Court of Appeals, said Microsoft spokesman Kevin Kutz today.

    i4i was not available for comment today, but Tuesday, the company issued a statement from its chairman Loudon Owen. "We firmly believe that the U.S. District Court made the right decision on the merits of the case [and] we are confident that we will prevail on the appeal," Owen said. "This is a vital case for inventors and entrepreneurial companies who, like i4i, are damaged by the willful infringement of their patents by competitors; particularly competitors as large and powerful as Microsoft."