MS Lawsuit: Word Will Remain On Sale, Settlement More Likely?

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Microsoft has won a delay of a Texas court's order that would have stopped sales of Microsoft Word in mid-October. The appeals court ruling is a setback for the trial judge in the controversial case, in which Microsoft was sued for patent violation by a small Canadian firm.

Under the original ruling, handed down Aug. 12 by a U.S. District Court in East Texas, Microsoft was also ordered to pay $290 million in damages to the plaintiff, i4i, in a dispute over Microsoft's use of XML in Word 2003 and 2007.

Microsoft appealed the ruling amid speculation over how easy--or difficult--it might be for Microsoft to simply remove the offending code, create a workaround, and move on. The disputed code is not used by Office 2010, the next version of the Microsoft cash-cow productivity suite.

In its appeal, Microsoft complained of a massive disruption of both its and partners' businesses if sales of Word were halted while the case continued to be heard. Dell and HP provided supporting testimony.

Microsoft, which said through a spokesman that it was pleased with the ruling, will be back on court Sept. 23 to further press its appeal, which seeks to have the earlier ruling overturned.

The lawsuit, filed in 2007, claims that Microsoft features that allow users to create and manipulate custom XML documents violate a patent held by i4i. (Read more about the patent issue and what XML does here).

The stay, handed down Thursday, did not surprise. First, such delays in federal court are not common, and second, the initial ruling had a draconian quality that seemed likely to interest an appeals court.

This does not mean, however, that Microsoft is out of the woods. The appeals court may find the original ruling to have been appropriate. But, the stay adds some jeopardy back into the case for i4i, which now stands to lose what less than a month ago seemed like a huge win.

The idea an appeals court might decide it was too big a win could help i4i and Microsoft reach an agreement to settle the case. Now, both sides are in a position to lose, which may cause the two combatants to settle rather than face further delays and possible defeat.

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