Microsoft loses appeal in patent case, must make changes to Word

Microsoft lost an appeal in a patent case brought by software company i4i, and a federal court has prohibited the Redmond company from selling any more copies of Word and Office 2007 that have the infringing feature after Jan. 11.

On Tuesday, the U.S. Court of Appeals for the Federal Circuit upheld a lower court's decision that Microsoft had infringed on i4i's patent. It also upheld an injunction and damages of $290 million.

Microsoft is considering asking for a rehearing or requesting a writ of certiorari from the U.S. Supreme Court to review the case.

"We are moving quickly to comply with the injunction, which takes effect on Jan. 11, 2010," said Microsoft spokesman Kevin Kutz in a statement.

"It's another step forward and vindication," said i4i CEO Loudon Owen. "We have a valid patent. It was infringed on willfully."

To comply with the injunction, Microsoft said it will have to remove the feature from copies of Word and Office 2007 sold after Jan. 11.

The disputed feature in Word allows the use of custom XML elements in documents. Microsoft dismissed it as "little used" on Tuesday while i4i claimed the feature was a "cornerstone" of Microsoft's internal architecture.

People who buy Word after Jan. 11 will not be able to use custom XML features in .docx, .docm or .xml files. The custom XML tags will appear as pink outlines around the tag.

The injunction will not affect users who bought copies of Word before Jan. 11.

i4i, a private software company with 30 employees in Toronto, builds software for pharmaceutical companies to manage their documents. The company received a patent referred to as the " '449 patent" for the XML editing feature.

"Microsoft's ability to write enterprise software is severely compromised by this," said Michel Vulpe, i4i's founder. "They did it by stealing someone else's software. They should ask where Microsoft gets its innovation from."

Microsoft's Kutz said 0.2 percent to 0.5 percent of Word users in the U.S. use the feature.

A federal jury in Texas found in May that Microsoft had infringed on i4i's patent and awarded i4i $200 million in damages.

Judge Leonard Davis in the U.S. District Court for the Eastern District of Texas affirmed the decision in the case in August, and changed the damage award to $290 million.

In its appeal, Microsoft challenged the evidence, the damage award and the injunction.

A three-judge appeals panel affirmed the lower court's decision Tuesday in an opinion written by Judge Sharon Prost.

Addressing whether there was enough evidence to conclude whether Microsoft knew its feature in Word would infringe on i4i's patent, Prost wrote: "Internal Microsoft e-mails showed that other Microsoft employees received a marketing e-mail from i4i containing the patent number, were 'familiar' with i4i's products, and believed the Word's custom XML editor would render that product 'obsolete.' "

Sharon Pian Chan: 206-464-2958 or schan@seattletimes.com