Microsoft Strikes Out in Word Patent Appeal

Toronto-based i4i LP has emerged victorious once again in its ongoing patent battle against Microsoft. An appeals court has upheld the earlier judgment and has imposed a deadline of January 11, 2010 for Microsoft to either modify Word to remove the patented technology or cease selling Microsoft Word.

The trio of judges on the appeals court panel stated “A small company was practicing its patent, only to suffer a loss of market share, brand recognition, and customer goodwill as the result of the defendant’s infringing acts,” adding “The district court found that Microsoft captured 80 percent of the custom XML market with its infringing Word products, forcing i4i to change its business strategy.”

Michael Vulpe, founder and co-inventor of the i4i technology in question, applauded the judgment “I4i is especially pleased with the court’s decision to uphold the injunction, an important step in protecting the property rights of small inventors.”

Microsoft must now pay the $290 million in fines and damages, and figure out what its next step is for Microsoft Word. The first two of the five reasons I listed in an earlier article on why you don’t need to be concerned that Word will go away are no longer on the table after the appeals decision, but that still leaves some options on the table.

Microsoft can still work with i4i to negotiate an amicable arrangement that allows Microsoft to license the technology for a fee and pay royalties to i4i. Depending on the licensing costs, if might be a wiser investment for Microsoft to simply purchase i4i–and its intellectual property with it.

Another option for Microsoft is to comply with the court order to modify the software. Microsoft would still have to pay the $290 million in damages and awards from the lawsuit, but it could continue to sell Microsoft Word, just without the functionality derived from the patent-infringing technology, or by developing an alternative solution that does not breach i4i’s intellectual property rights.

The odds that an injunction banning the sale of Microsoft Word will actually come to pass are slim because too many businesses and government agencies rely on the software. Having a dominant market share in a software segment does not give Microsoft license to break laws or bully smaller companies, but it does create a special situation when it comes to managing the injunction.

As I pointed out in my previous article about the i4i patent case against Word, “The United States Supreme Court has ruled previously that injunctions are generally not a reasonable consequence in a patent challenge.”

In past cases where national commerce would be significantly affected, the government has stepped in to override court orders and block injunctions. A recent example of the United States government stepping in is when it intervened in an injunction against RIM Blackberry comes to mind?

Tony Bradley tweets as @PCSecurityNews, and can be contacted at his Facebook page .