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Software Patents: How Microsoft Makes The World Turn

Microsoft is a defendant in more than 30 pending patent-infringement cases. These cases involve a wide range of Microsoft's products, including its Windows operating system, office productivity software, Xbox video game machine, Pocket PC handhelds, keyboards and mice. Here are two interesting cases showcasing Microsoft's power within the industry.

Immersion Corp. V. Microsoft:

Microsoft has been sparring with Immersion Corporation, a San Jose based technology company, when Immersion filed a lawsuit claiming that Microsoft's Xbox game console infringed on their patent for Haptic Technology. Haptic Technology allows video game users to feel sensations such as shooting a gun or hitting a golf ball.

Microsoft ended up paying Immersion $20 million for a perpetual license and invested another $6 million in the company. This accounted for a 10% stake in the company and the next day sent Immersion's stock skyrocketing.

Eolas & UC Regents V. Microsoft:

In 1993 Doyle, Michael Doyle and colleagues of University of California at San Francisco's Innovative Software Systems Group, were exploring ways to interactively share research information. In 1994, Doyle launched Eolas to market technology that allows users to access interactive programs embedded in the Web. Eolas owns the exclusive rights to market the technology, while the University of California (UC) owns the patent. The technology would allow web users to not only read online information but also interact with it.

In the mid-1990s, the Internet became extremely popular, and the technology became a staple of the Web experience, supporting stock information, video players, virtual real-estate tours and games. It was at this juncture that Microsoft is believed to have infringed on Eolas' technology. Microsoft was contacted by UC during this time about obtaining a license for the software but Microsoft never pursued the matter.

During the trial, Microsoft argued that prior art existed at the time of issuance and that in any case they never infringed. Microsoft also said the patent described features the technology didn't deliver. Neither of these arguments were able to hold weight, and jury returned a verdict in favor of Eolas and UC for $521 million, the largest jury verdict in 2003. In January, the court added $45.3 million in prejudgment interest, increasing the already staggering $521 million award to more than $565 million.

In response, Microsoft proposed changes to Internet Explorer that would possibly render millions of pages obsolete. Web developers and the World Wide Web Consortium (W3C) got wind of this information and came to Microsoft's side. They requested that the patent office revoke the patent. Soon after, the USPTO director, James Rogan, ordered a re-examination of the Eolas' patent (Patent No: 5,838,906).

A preliminary finding was issued by the patent office which concurred with the claims by the W3C and others that the patent was improperly granted because of pre-existing similar inventions such as the web browser Viola developed by Pei Wei.

Re-examinations can drag on for years and so instead of waiting for the USPTO to respond, on June 3rd, Microsoft filed an 174-page brief, asking the United States Court of Appeals to overturn the 565 million patent infringement judgment.

In its brief, Microsoft contends that the district court erred multiple times on issues related to prior art and claim construction and that the court's error distorted the proceedings. The jury should be given the opportunity to consider the prior art that was improperly excluded. Microsoft also asked that the infringement judgment be reversed. Short of that, the company asked the court to vacate the verdict and grant a new trial. Microsoft also requested that the court ignore non-U.S. Windows sales in determining a fine, which would result in a 64 percent reduction of the $521 million award to $187 million.

The University of California said it will file its response to the brief by the July 16, 2004 deadline and said Microsoft's arguments are nothing new. If the ruling stands, Microsoft could be doling out payments to the U.C. for another nine years -- until the patent expires in 2012.



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