SAN FRANCISCO: A federal appeals court has overturned a
$521 million patent infringement ruling against Microsoft Corp. and ordered a
lower court to retry the case against the world's largest software maker.
The U.S. Court of Appeals for the Federal Circuit said the
original verdict, which found that parts of Microsoft's Internet Explorer Web
browser had infringed on technology developed by privately held firm Eolas
Technologies Inc. and the University of California, had ignored two of
Microsoft's key arguments.
The case sparked concerns that Microsoft would have to
alter its Internet browser, making it unable to run certain applets, or
mini-applications, that run on Web pages. Microsoft's browser is used by 9 of
every 10 Web surfers.
But a year ago, Microsoft won a ruling by the U.S. Patent
and Trademark Office, which invalidated a claim by the plaintiffs to the browser
technology that allows other mini-applications to work with Microsoft's Internet
Explorer.
"We have maintained throughout this process that the Eolas
patent is not valid and today's ruling is a clear affirmation of our position,"
Microsoft spokeswoman Stacy Drake said in an e-mailed statement.
Martin Lueck, the lawyer heading the business litigation
group at Robins, Kaplan, Miller & Ciresi LLP that represented Eolas, was not
immediately available for comment.
Redmond based Microsoft said it was looking forward to
presenting its case again. No date has been set for a retrial.
In Wednesday's ruling by the Appeals Court judges, they
said "this court vacates the district court's decisions and remands for further
proceedings on these issues," according to court documents.
In 2003, an Illinois jury delivered a $521 million verdict
against Microsoft, saying it infringed on technology developed by Eolas and the
University of California. That ruling was later upheld in early 2004 by Judge
James Zagel of the U.S. District Court for the Northern District of Illinois.
In response, Microsoft said it would prepare a version of
Internet Explorer without the technology in question, but held off on making key
changes after the patent office said it would reexamine the Eolas patent.
Internet standards groups, including the World Wide Web
Consortium, had argued that preexisting inventions may invalidate Eolas' patent
claims.
Pressure from software developers that depend on
Microsoft's Internet Explorer also likely prompted the company's decision to
hold off on making changes.
Lueck, the lawyer for Eolas, had previously said his client
was still open to a settlement with Microsoft. Microsoft's Drake declined to
comment on the possibility of a settlement.
Shares in Microsoft closed down 2 cents on Nasdaq on
Wednesday at $25.26.
(Additional reporting by Peter Kaplan in Washington)