By Byron Acohido, USA TODAY
SEATTLE — A federal district court judge has ordered Microsoft (MSFT) to stop selling Word in the U.S. — and the tiny company behind the lawsuit is digging in for a David vs. Goliath showdown.
Toronto-based i4i, which has 30 employees, claims that Microsoft violated an obscure patent related to Extensible Markup Language or XML. It’s a key software component of many websites and computer programs, including Word.
Judge Leonard Davis agreed Tuesday, ordering Microsoft to pay $290 million in fines and stop selling Word in the U.S. in 60 days. That could derail a core business for the world’s largest software maker.
As part of Microsoft Office, Word is used by hundreds of millions of people worldwide. Office accounted for more than $3 billion in sales in the company’s last fiscal year.
“It’s not a question of fear or pride or anything else,” Loudon Owen, i4i chairman says. “We’re very respectful of Microsoft, but when you’re in the right you have to persevere.”
Microsoft plans to appeal. “We are disappointed by the court’s ruling,” said Microsoft spokesman Kevin Kutz in a statement. “We believe the evidence clearly demonstrated that we do not infringe and that the i4i patent is invalid.”
I4i, which mainly makes software for drug and defense companies, obtained the patent for a “customized XML” tool in 1998. XML is a specialized alphabet that can capture any kind of computer file as a regular text.
Microsoft started using XML as an alternative way to save Word files in Word 2003 and made it the default format for all Office files in Office 2007.
This made it easier for Microsoft and its partners to create programs such as accounting software that generates reports in Word formats, says Rob Helm, analyst at research firm Directions on Microsoft.
I4i sued Microsoft in 2007, claiming that Word uses the patented process. Now, “Microsoft is behind the eight ball and has 60 days to see if it can get the federal appeals court to stay the injunction,” says Henry Sneath, a Pittsburgh intellectual property lawyer.
No one expects Microsoft to actually pull Word off the market. It’s a big company with deep pockets that has faced many legal challenges over the years. It could win the appeal, settle with i4i, or even buy out the company.
| LEGAL BATTLE |
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| It might not be easy for Microsoft to get a federal appeals court to throw out the injunction requiring the Redmond, Wash. company to stop selling Word.
That’s because back in 2006 the U.S. Supreme Court set forth four strict criteria for granting injunctions in patent cases, as part of the milestone case of eBay vs. MercExchange.
To convince Texas district court Judge Leonard Davis to issue the injunction, Toronto-based tech firm i4i had to produce evidence that Microsoft’s use of XML in Word caused irreparable injury; that money damages alone will not fix the injury; that there’s an imbalance of hardship between i4i and Microsoft; and that the injunction would not harm the public interest.
Davis’ 65-page ruling, which came after a jury found that Microsoft had infringed on i4i’s patent for a tool that enables use of “customized XML” in business applications.
I4i’s XML tool enables large pharmaceutical companies and big defense contractors to share inventory data and other business intelligence with suppliers and customers using disparate business applications, says i4i chairman Loudon Owen
Davis’ post trial ruling came after Microsoft asked him to dismiss the jury verdict — and i4i countered by asking for the injunction. In denying Microsoft’s motion and granting i4i’s, Davis awarded i4i $90 million more in settlement charges, on top of the $200 million awarded by the jury. (Microsoft has more than $30 billion in cash reserves.)
“It’s a very strongly worded opinion,” says Pittsburg intellectual property lawyer Henry Sneath.
Sneath says that Microsoft’s strongest argument to the appeals court might be that the public interest will be disserved if it must stop selling Word 2007 — or strip it of XML.
But i4i could make the counter argument that a viable alternative is readily available with the free and popular productivity suite, OpenOffice, which adopted XML as its standard format before Office 2007 did.
Yanking XML from Word will not be easy. Microsoft weathered controversy when it tried to limit use of Office XML formats to licensees. Many in the tech community complained that Office XML wasn’t sufficiently documented for companies other than Microsoft to use them reliably, says Rob Helm, analyst at Directions on Microsoft.
Helm says Office XML licenses have had to become more liberal, and he credits Microsoft for coming around and making the documentation more complete — at the behest of interventions by U.S. and European antitrust regulators.
The bottom line: Microsoft has two months to solve a big problem. It must get the appeals court to issue a stay against what has the look of an iron-clad injunction, or “spend a lot of money to redesign this product because they can’t sell it any more,” says Sneath. |
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