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The U.S. Patent and Trademark Office has endorsed a Web-browsing patent that Microsoft is accused of infringing, dealing a setback to the software company.

In a decision unveiled Wednesday, the office reconfirmed a patent held by Eolas Technologies that allows interactive content to be embedded in a Web site, which is a common practice on the Internet. Eolas is a spin-off of the University of California.

According to a news release from the university, the patent office completed a "re-examination process" on the original patent, which was published in November 1998, and plans to issue a re-examination certificate to uphold its validity.

Retrial Ahead

"We are gratified that the patent office's re-examination has validated its original evaluation of the University's unique contribution to the technology, which fuels the Internet," said James Holst, general counsel for the University of California, in the release. "This decision ensures that the patent rights of the public institution that developed this technology, a significant innovation with wide-reaching public benefits and use, will be protected."

In a statement, Microsoft said it is studying the patent office's decision but still plans to present its side of the argument at the retrial as scheduled. "We are confident we will achieve a successful resolution," the company said.

Long Battle

Eolas first filed suit against Microsoft in 1999 for infringing its patent in Internet Explorer, and it was awarded a $520.6 million judgment in August 2003. However, an appeals court judge threw out that ruling in March 2005 and ordered a new trial to determine the patent's validity.

After that judgment, Microsoft filed an appeal asking the court to overturn a portion of Eolas's case that was not reversed when the court ordered a new trial. That part dealt with patent claims on foreign sales of Microsoft's Internet Explorer browser. Microsoft has asked the court to strike down Eolas's argument that it should be awarded money based on Microsoft's U.S. and foreign sales, saying the Eolas U.S. patent covers only U.S. sales.