By Reed Stevenson
SAN FRANCISCO (Reuters) - A federal appeals court on Wednesday
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, Washington-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)
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Lisa Minter (lisa_minter2001@yahoo.com)