Court Reverses $520 Million Ruling Against Microsoft

Matt O'Conner
WASHINGTON — An appeals court yesterday threw out a $520.6 million jury verdict that found Microsoft had infringed on patents held by Eolas Technologies Inc.

In the case, Microsoft was accused of using Eolas technology to embed and invoke interactive objects, such as applets and plugins, within its Internet Explorer web browser. The decision had could have forced changes in millions of web pages that use plugin applications, such as Macromedia Flash and Adobe Acrobat, that run inside the browser.

U.S. patent No. 5,838,906, which Eolas licenses from the University of California, protects the execution of remote code embedded in hypertext pages. In 2003, a jury found that Microsoft IE had infringed on the patent and awarded damages of $1.47 for each copy on the 350 million copies of Windows that Microsoft shipped worldwide between November 1998 and September 2001.

Microsoft denied the infringement and asserted that Eolas’ patent claims were invalid based on the existence of “prior art” and widespread belief that the technology has been an integral part of the web long before the patent was issued.

Nonetheless, the decision was upheld in U.S. District Court in 2004. Microsoft appealed the ruling to the U.S. Court of Appeals for the Federal Circuit, leading to today’s reversal of the lower court decision.

“It's a huge victory,” said Andy Culbert, associate general counsel of patent litigation for Microsoft. “The essence of our defense was that this patent was invalid, based on the good work done by Pei Wei, and the court of appeals has completely vindicated our assertions.”

Culbert was referring to what he claims is evidence that Eolas did not invest in or contribute to development of the patented technology, and that it was actually developed by Pie-yuan Wei of O’Reilly & Associates, which would substantiate the company’s “prior art” argument.

Despite Culbert’s enthusiasm, Microsoft can claim only a partial victory because the case is being sent back to U.S. District Court for a second jury trial. However, Culbert added that he plans to produce evidence at retrial proving that Eolas knowingly withheld information about Wei’s invention from the U.S. Patent and Trademark Office.