RealTime IT News

IP Upstarts: Get Microsoft

Editor's note: This is part two of a three-part series entitled They Claim The Workings of the Web

Microsoft and AT&T squared off in a New York City courtroom Feb. 26: Ma Bell wants $90 million for technology used in Microsoft's NetMeeting and TrueSpeech products, one of 30 patent infringement complaints battering against Microsoft's coffers these days.

Perhaps it makes sense the world's largest software company should bear the brunt of Web patent infringement suits, but if its legion of high-priced lawyers can't beat back the horde of complainants, successful intellectual property suits against the Redmond, Wash., software giant will trickle down, possibly wreaking havoc among any company using commonplace technology on its Web site.

The most prominent of the infringement suits, Eolas Technologies v. Microsoft, was filed in December 1999. The next three years saw a spate of suits filed by companies who claim to own basic Internet or computer functions used in Microsoft software.

In Eolas v. Microsoft, Eolas alleged the Internet Explorer browser infringes on a patent covering the delivery of text, graphics and sounds in multimedia applications -- in other words, the World Wide Web as we know it. Eolas says the patents cover the embedding of small interactive programs, such as plug-ins, applets, scriptlets or ActiveX Controls, into online documents. (See our Special Report on the Changing Face of ActiveX).

In August, 2003, Eolas won in a Chicago jury trial, and on January 14, 2004, a Chicago federal appeals court upheld the decision, granting Eolas a permanent injunction preventing Microsoft from distributing its Internet Explorer browser until changes were made.

Microsoft spokesperson Jim Desler told internetnews.com the judge in the jury trial ruled he would decide the issue of whether Eolas might have acted deceptively in its patent application.

"So the jury wasn't allowed to consider evidence we were prepared to present related to the issue of prior art, which we felt was strong," he said

The injunction was suspended pending Microsoft's appeal, but the company still created a near-panic among interactive advertisers and e-tailers by announcing the results of the court case.

Last October, the World Wide Web Consortium (W3C) went so far as to ask the USPTO to re-examine Eolas' patent. The USPTO promptly agreed, but the process could take up to 18 months, leaving an entire industry in the lurch. Microsoft said it would hold off on changes to IE until the USPTO rules.

"We're heartened by the fact that the standards body has called this to the attention of the Patent and Trademark Office," Desler said. "And we're heartened that the office feels it's worth a review."

So far, Microsoft hasn't done that well in defending against such suits. This January, Microsoft's Germany office settled with E-Data Corp., a Port Washington, N.Y., company that owns a patent on downloading media from a computer to another device or object, such as CDs, DVDs and MP3 players. (Three other European companies also settled, including On Demand Distribution GmbH, a fledgling Italian digital music service.)

Also in January, Research Corporation Technologies won a partial summary judgment against Microsoft, finding that major product groups -- including Windows XP and Office 2000 -- improperly used its technology for digital half-toning.

In December 2003, the Redmond Goliath negotiated down a $62.3 million damage jury award to ImageExpo. The jury said it owed ImageExpo for the white-boarding feature of Microsoft NetMeeting. Microsoft settled for $60 million plus a paid-up license.

Yet more suits are working their way through the court system. InterTrust technologies has expanded its 2001 suit against Microsoft to 50 claims of infringement covering digital rights management and product activation technologies; .Net and related security; and trusted computing technologies.

TV Interactive Data Corp. sued in May 2002, saying Microsoft's autoplay feature infringes on its patents.

One contributor to these late-surfacing claims is that there's no need for patent holders to prove intent to infringe, said Douglas Kline, chair of the Patent and Intellectual Property Practice Group at the Boston law firm Testa, Hurwitz & Thibeault.

"I can have a patent that nobody knows about and, five years from now, there's nothing to stop me from enforcing it," he told internetnews.com.

Kline said that with a lot of patents, it would be easy enough to engineer around them -- until the software is widely adopted. Take Explorer, for example.

"If you asserted your patent in the early days, Microsoft might just go off and pay some engineers to design around it," Kline said. "Now that Explorer is the dominant browser, it might not be so difficult to design around, but the bigger problem is all the copies of Explorer and all the Web pages out there (today)."

Other companies are canny about when and where to sue. While E-Data has 39 or so domestic license agreements for point-of-sale digital distribution technology, its patent expired in the U.S. last year, while it has a year to run under European laws. So the company will focus on Europe, where it can still ask for injunctions, potentially shutting businesses down until they pay up.

Then, according to Gerald Angowitz, special assistant to the chairman of E-Data, it will move its legal artillery back to the U.S. and go after retroactive damages for infringement taking place within the last six years.

"The potential for getting an injunction gives us more leverage," Angowitz told internetnews.com. "We're picking our spots."

A win against Microsoft would make any of these companies feel invincible -- and armed for bear.

Of course, Microsoft itself is in the game. It recently received a patent for XML script automation, leaving many in the open source community to worry about whether they'll end up owing Microsoft money every time they create an XML doc. And the DVD Forum approved Microsoft's VC-9 video decoding technology as part of the HD DVD Specifications for Rewritable Disc version 0.9.

Turnabout is fair play. But if Microsoft turns its attention to IP licensing as a way to bolster slowing revenue growth, look out.