Patent Office Deals Blow to Microsoft, Internet Explorer

The U.S. Patent and Trademark Office (USPTO) this week dealt Microsoft (Nasdaq: MSFT) a blow that may not be a knock-out punch, but comes pretty close to hobbling its argument that Internet Explorer (IE) does not infringe on a Web browser patent because prior art makes the patent invalid.

The USPTO reviewed and reaffirmed the patent owned by the University of California and licensed exclusively to Eolas Technologies. The patent, known as the 906 patent after its official patent number, 5,838,906, covers a method used to call up interactive applications, or plug-ins, within a browser.

Microsoft will have to redesign IE, the most widely used Internet browser by far, if it loses the suit and cannot come to a licensing agreement with Eolas.

Nothing's Impossible

"That decision is certainly going to make it harder for Microsoft in court," Bruce Sunstein, a patent attorney with Bromberg and Sunstein, told TechNewsWorld. "The patent office viewed the prior art and said, 'We think the patent is OK.' It will make it harder to invalidate at trial -- not impossible, but hard."

Sunstein said the standard for invalidating the patent is "clear and convincing" evidence that this prior art is within the scope of the claims of the patents. Considering that the USPTO just validated the patent, that argument will be tough to make.

The university and Eolas first sued Microsoft in 1999 and won the civil case in 2003, with the jury awarding Eolas $520.6 million in back royalty fees and interest. Microsoft appealed, but a Chicago District Court upheld the verdict in January 2004, and also banned the company from distributing the infringing software. That injunction was stayed during the appeals process.

Microsoft argued that it should have been allowed to present the browser Viola, which it said constituted prior art, but the trial judge excluded that evidence.

Gearing Up for a New Trial

The software giant won its appeal and will get another trial in District Court, however, in order to win the case, Microsoft must prove the patent invalid. Microsoft is arguing that Eolas knew about Viola and did not mention it when the company first applied for its patent. Pei-yuan Wei and colleagues at O'Reilly & Associates, Microsoft will argue, invented the technology and used it in Viola before the University of California patent application.

Some in the Internet community, including the World Wide Web Consortium (W3C), which sets Internet standards, have sided with Microsoft, fearing that redesigning IE would cause a domino effect in which Web sites designed around IE specifications would break.

Microsoft and Eolas are battling on another front as well. The software giant has petitioned the U.S. Supreme Court to review whether Microsoft should be liable for fees from overseas use of the software in question.

"The patent is related to making and selling things in the United States," Sunstein said. "But if you one master CD in the U.S. and the rest overseas, the master CD is very significant. The court can consider the effect of related activities outside the country. If as a result, the infringing company profited, it's settled law that you can get damages caused by that infringement."