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Microsoft Blocked From Selling Word, Fined $290M

Microsoft Word and Patents
A U.S. court yesterday slapped Microsoft with a $290 million fine and ordered it to cease selling versions of Microsoft Office Word, marking the latest fallout from a patent dispute with a smaller firm.

The U.S. District Court for the Eastern District of Texas, Tyler Division, ordered Microsoft (NASDAQ: MSFT) to pay a $200 million fine, plus $40 million for violating a previous injunction and $50,826,580 in accumulated interest on earlier unpaid fines.

The fines stem from a ruling in a patent lawsuit brought by Toronto-based i4i, which describes itself as a specialist in Extensible Markup Language (XML) content development and management.

In an earlier ruling, the court said that Microsoft had violated i4i's 11-year-old U.S. Patent No. 5,787,499, which covers software designed to manipulate document architecture and content through metadata.

That decision prohibited Microsoft from selling software capable of manipulating XML files -- including Microsoft Word 2003, Microsoft Word 2007, and "Microsoft Word products not more than colorably different from Microsoft Word 2003 or Microsoft Word 2007" if those products can manipulate XML files.

"During the trial, attorneys from McKool Smith and Tyler, Texas-based Parker, Bunt & Ainsworth successfully argued that Microsoft infringed the i4i patent issued in 1998 ... which covers software designed to manipulate 'document architecture and content,'" i4i's lawyers said in a statement. "The software covered by the patent removed the need for individual, manually embedded command codes to control text formatting in electronic documents."

Spokespeople from Microsoft did not return requests for comment by press time.

The company is expected to appeal the ruling. While it's not immediately clear what its chances might be for challenging the ruling, Microsoft may have several factors working in its favor.

For one thing, the patent in question is on a list of "withdrawn" patents at the U.S. Patent Office.

"The patent is being re-examined," said i4i lawyer Douglas Cawley, a principal in the Dallas office of McKool Smith. "Microsoft asked the U.S. Patent Office to reconsider whether the patent is valid or not and that process is ongoing."

Furthermore, XML is defined by Webopedia as a "pared-down version of SGML," a previous metadata language. According to the patent, as represented in the complaint filed in court, XML improves upon SGML and Microsoft's Rich Text Format document languages. Microsoft participated in the development of XML, and has released versions of XML as a standard, but the authors of the standard are generally acknowledged to be Tim Bray, Michael Sperberg-McQueen, and James Clark, none of whom are part of the company that filed the suit.

However, i4i's lawyers said the firm has room to enforce its patent in specific areas.

"The lawsuit covers custom XML only," Cawley said in an e-mail to InternetNews.com. "Although XML is an open standard, there can still be patents covering features of the standard. If the owners of those patents have not dedicated them to the standard, they can enforce them."

The patent also extends another six years, i4i Chairman Loudon Owen told InternetNews.com -- and he added that he does not believe that there's a method of manipulating custom XML without infringing the i4i patent.

"We don't believe there is, but ... if there is, our solution is the most elegant," Owen said. "There are so many brilliant people on the planet. People can find solutions to things that seem impossible."

"It has been incorporated into Word," he added. "If incorporated with our blessing, it would be incorporated even more seamlessly and effortlessly."

In the meantime, the ruling marks another win for i4i, whose XML technology has won it a number of customers in the medical area. Other users include publishers, the military, manufacturers -- and the U.S. Patent Office itself, Owen said.

Update adds comments from Cawley and Owen.