XML Magazine on Ulitzer

Microsoft has lost its appeal of the i4i patent infringement decision ordering Word off the market and dunning Microsoft $290 million.

The US Court of Appeals for the Federal Circuit Tuesday winnowed all of Microsoft’s legal arguments like a thresher, finding completely for the little Canadian company that holds a patent on some rarely used custom XML widgetry that Word treads on.

The only quarter the appeals court gave Microsoft was the timing of the injunction. It said the infamous district court for the Eastern District of Texas that made the original decision back in August should have given Microsoft more time to fix its code.

The injunction won’t take effect now until January 11.

Microsoft says it should have the offending code out of Word and Office by then. Copies of Word sold before that date won’t be affected. New revs of Office and Word don’t contain the code.

The appeals court might have reviewed the size of what Microsoft called the “grossly excessive or monstrous” monetary award, given that only about 2.1 million people are estimated to have ever used the technology in Word, but Microsoft’s lawyers didn’t ask the court for a pre-verdict judgment as a matter of law on damages.

Microsoft is now talking about asking the appeals court for an en banc rehearing and taking the case to the Supreme Court, both real long shots.

The Texas jury awarded i4i $200 million. The court added another $40 million when it could have trebled the damages to $600 million and $50 million for interest. The money was found to be “only a small fraction of Microsoft’s profits from the sale of Word products.”

The courts said Microsoft didn’t copy i4i’s code, but didn’t support Microsoft’s claim that i4i’s patent is invalid, found that Microsoft started infringing in 2002, failed to conduct an infringement analysis after being notified of existence of the i4i patent in 2003 and “implemented the infringing custom XML editor with the purpose of rendering i4i’s products obsolete.”

The district court, the appeals court repeated, found that “Microsoft captured 80% of the custom XML market with its infringing Word products, forcing i4i to change its business strategy.”

Naturally i4i and its 30 people are thrilled.

See here for the decision.