Microsoft Battles Gold Master Ruling

In the latest wrinkle in the Eolas patent infringement suit, Microsoft hopes to persuade federal judges that gold masters for Windows software contain ideas, not things.

On March 16, Microsoft asked the U.S. Court of Appeals to decide an epistemological question: Does the software code delivered to OEMs on a master CD become a component of the computers the OEM ships?

“It’s an industry issue that not only affects Microsoft but the rest of the computer industry, as well,” said Microsoft spokeswoman Stacy Drake.

The request for a rehearing of elements in Microsoft’s appeal of the $520.5 million patent infringement judgment followed a decision in early March that was a clear victory for neither party.

In that ruling, the appeals court judges decided that the so-called “gold master” became a substantial component of computers made by foreign manufacturers. Therefore, each computer was subject to U.S. patent laws and infringed the Eolas patent.

Because of this decision, Eolas was awarded royalties on both domestic and foreign sales of machines running Internet Explorer.

Microsoft’s argument quotes the “Manual of Patent Examining Procedure,” which says that the master’s software code is “merely a set of instructions capable of being executed by a computer.”

The rehearing request compares source code to a design for automobile tires. Just as a tire designer’s drawings of a tread design must be turned into a rubber mold by the manufacturer, it argues, the source code must be compiled before it’s useful. Both the tire design and source code should be considered ideas, not products.

Microsoft said the panel’s reasoning could disrupt international commerce by extending the reach of U.S. patent law.

Microsoft could save big bucks if it wins this one. It could get off paying 64 percent of the original judgment if it can convince the appeals court that a gold master should be considered an idea.

The rehearing request also claimed that the jury gave the broadest possible interpretation of what the patent covers.

This battle began in 1999, when Eolas sued Microsoft within months of being granted a patent for embedding small executable applications such as plug-ins, Java applets, scriptlets or Microsoft’s ActiveX Controls in Web pages.

On March 2, the U.S. Court of Appeals ruled that the original jury should have been allowed to consider whether the patent should have been granted in the first place.

By so doing, the federal court opened the door to letting Microsoft try to prove that Michael Doyle, CEO of Eolas, withheld information about an earlier browser, Viola, that also used plug-ins. Under U.S. law, a patent is granted to the earliest inventor, not the first to apply.

The U.S. Patent and Trademark Office is in the process of reexamining the Eolas patent, a lengthy process begun in October 2003.

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