Technically Legal

On December 22, 2009, the Federal Circuit ruled all issues on appeal in favor of i4i.  The Federal Circuit reestablished the effective date of the injunction to January 11, 2010.  Microsoft is left with few avenues in terms of the litigation.  They can appeal to the Federal Circuit (again) and ask for a rehearing en banc.  Another viable option maybe to appeal the Circuit court’s ruling to the Supreme Court.  Finally, they can always wait and see what happens will the Bilski case, which was argued before SCOTUS earlier this fall, and hope the ruling affects the underlying validity of i4i’s patent (not an attractive option).

We covered the first part of this saga on our podcast back in August.  In short, i4i Limited Partnership sued the 800 lb gorilla, Microsoft, for patent infringement based on its Patent # 5,787,449.  The patent claims “a system and method for the separate manipulation of the architecture and content of a document, particularly for data representation and transformations.”   The target of i4i’s litigation was Microsoft’s XML document editing software which is integrated into Microsoft Word (primarily affecting Word 2003 and 2007).   More specifically, i4i claimed Microsoft willfully infringed the ’449 patent.  After a jury found Microsoft guilty of infringement, the district court awarded i4i $200M for the infringement, an additional $40M because the infringement was willful, and pre- and post-judgment interest.  Ouch.

Here’s the kicker though.  In August, i4i filed a post-judgment motion seeking to permanently enjoin Microsoft from supporting, using, or selling editions of MS Word that contained the infringing technology.  The motion was granted; and, Microsoft was dealt a serious blow to the gut.  This sparked a fury of speculation in the blogopshere and media as everyone tried to figure out the fate of MS Word.  As you might imagine, Microsoft did not lay down in defeat– instead they filed an emergency motion to stay the injunction.  The stay was granted and Microsoft filed an appeal before the Federal Circuit challenging the ruling, arguing the District Judge erroneously construed a claim– in  lay-speak, Microsoft argued that the Judge incorrectly applied meaning to a portion of the invention which made the patent broader than what was actually claimed.  Additionally, Microsoft argued that the patent should be invalidated and injunction lifted through other precedent (KSR and EBAY) and pandered about with some other evidentiary arguments that occurred during the trial.

Most importantly, the injunction became effective this week, and Microsoft was forced to comply with it. Since the appellate decision, sources are reporting that Microsoft has indeed made changes to the software to comply with the ruling.  The changes will apparently allow Microsoft to continue selling versions of Word without violating the injunction.  Fear not!  Word is here to stay– in some form.  No word yet if it is technically feasible for Microsoft to redevelop the XML editor in a way which prevents them from violating the ’449 patent.  However, I suspect Microsoft will do something to reincorporate the lost XML functionality back into future versions of Word.

Something that I have not seen covered on other blogs is how this injunction is affecting Microsoft’s corporate clients.  I’ve already received  a handful of phone calls from friends and even a family member asking about the Federal Circuit’s ruling.  Each of these people are employed at the executive or senior executive levels of Fortune 500 companies and all expressed concern about how the ruling was going to affect their company’s future revenue streams.  Undoubtedly, a large number of companies who develop products that depend on certain functionality (like XML manipulation) or proprietary file formats (DOCX and DOCM come to mind) might have just been hurt in a previously unanticipated way.  Depending on what Microsoft changes, this might end up being the focus of more lawsuits from large corporate licensees.  On a brighter note, maybe the litigation will turn around the economy? <kidding>

Stay tuned for more updates.  I’m sure they are coming.

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