Microsoft's patent defeat has industrywide implications

Companies with products that work on the internet are slowly waking up to the broad implications of a recent judgment against...

Companies with products that work on the internet are slowly waking up to the broad implications of a recent judgment against Microsoft in a patent infringement case.

The $520m award to Eolas Technologies of Chicago and the University of California stemmed from a 1999 lawsuit in which Eolas and the university charged Microsoft with infringing on a 1998 patent owned by the university and licensed to Eolas.

However, the verdict could spell trouble for a wide range of popular web-based products and services, experts warned.

The patent was developed by Eolas president Michael Doyle at the University of California in San Francisco and covers technology which enables small computer programs, often referred to as "applets" or "plug-ins", to be embedded in web pages and interacted with through web browsers such as Microsoft's Internet Explorer.

In response to the judgment against it, Microsoft said it would make changes to Internet Explorer which may affect a "large number of existing web pages", according to a statement by the World Wide Web Consortium (W3C).

In addition to pursuing post-trial motions against Eolas, Microsoft is also evaluating what changes may be necessary and will not comment on its work.

The company stands by its claims that it did not infringe on the Eolas patent, but will work to minimise the effect on customers of changes to internet Explorer and is co-operating with the W3C to co-ordinate that effort, a spokesman said.

Technology and legal experts agree that the ruling could affect a wide range of technology companies with products that interact with web browsers, or services that rely on customer interaction through web browsers.

"Fundamentally, [the Eolas patent] describes a way of implementing plug-ins in a web browser," said Richard Smith, an independent technology expert in Boston. "People who use plug-ins such as Flash or Java applets are covered by the Eolas patent."

Macromedia, which distributes a free plug-in to view Macromedia Flash files, did not respond to requests for comment. Real Software, which makes multimedia software that can be played through web browsers, said it could not immediately comment on the ruling.

However, the W3C is scrutinising the implications of the Eolas patent and the legal decisions that led to the company's court victory over Microsoft. The analysis could take six months or more, but the group will make its findings public once they are known.

"There certainly are concerns whenever patent issues ... appear to be relevant to basic technology. That gets the attention of the W3C membership," a spokesman said.

Past patent claims, such as those affecting the P3P (Platform for Privacy Preferences) standard, have stopped development or the implementation of development standards, the W3C noted.

The W3C is particularly anxious to determine whether any of its published standards infringe on the Eolas patent. In the meantime, technologists and executives who feel they may have products that infringe on Eolas' patent are following the post-trial motions closely and hoping for an indication about how Eolas and the University of California will proceed.

Many developers of remote client-server applets believe the technique was around long before any patent was filed and that this can be used to defuse patent infringement claims - an argument known as "prior art".

But Smith warned that technologists routinely underestimate the reach of patents. "Technology people don't understand what patents are and they make big claims, like, 'There's prior art.' But there was none produced by Microsoft."

Assuming the Eolas decision stands, the fact that Microsoft apparently could produce no prior art will only serve to strengthen the patent, according to attorney Douglas Kline, chairman of the patent and intellectual property group at Boston law firm Testa, Hurwitz & Thiebeault.

"Microsoft would know better than anybody what they were working on when the patent was filed," Kline said. "To the extent they did exhibit [prior art], the jury disagreed. So if Microsoft couldn't prove that their own activity didn't render a patent invalid, it could be difficult for anyone else to prove it."

The likes of Macromedia, Real and Apple should all be on the alert following the Eolas ruling, Kline said. "If they didn't know about this patent before, they do now. And they have guidance about what one court thinks the patent means."

Under patent law, Eolas and the University of California are free to chase end users as well as technology companies, according to attorney Jim Gatto, co-head of the intellectual property group at legal firm Mintz, Levin, Cohn, Ferris, Glovsky and Popeo.

Typically, however, small companies will target one or two large companies, collecting significant damages and enforcing their patent rights, he said.

Regardless of what happens in the Eolas case, there are likely to be more and bigger patent cases in the future, Gatto warned. The size of the judgment against Microsoft, which is one of the largest so far in terms of monetary damages, and the increasing importance of intellectual property to companies' bottom lines, will drive an interest in pursuing big patent cases, he said.

The Eolas case may send a message to small companies that they can defend patents in court successfully,  even when pitted against much larger companies with limitless resources like Microsoft, Gatto added.

Paul Roberts writes for IDG News Service

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