Microsoft loses XML patent appeal, Word injunction upheld

As reported by Bloomberg and Reuters, the US Federal Circuit Court of Appeals today upheld a verdict by a lower Texas court that Microsoft infringed on an i4i patent by embedding “Custom XML” functionality in Word 2003 and 2007. As part of the verdict Microsoft has to pay $290 million and must stop selling infringing products on January 11, 2010.

Here is the full text of the court decision issued by Judge Prost today (PDF), which gives some insight into the matter especially claim construction, what the court considers separate files to be, and what constitutes “independent manipulation”.

Also of great interest is the discussion of the damages calculation starting on 27 of the court decision, which goes into detail of how i4i’s expert came up with a $98 royalty rate multiplied by the copies of Word used in an infringing manner (2.1 million).

This patent isn’t so much about Office Open XML as a file format, as it is about the one feature in Word 2003 and 2007 that allows the use of a custom XML Schema inside a Word document. As Mary-Jo Foley reported in her blog, Microsoft may have the option to simply disable that feature by releasing a new update to Word 2007.

Alternative to the removal of that feature, a settlement between Microsoft and i4i seems likely that would allow Microsoft to continue supporting that feature in exchange for paying royalties to i4i.

More blog reactions and discussions here

UPDATE: Microsoft has responded with its own press release and said that it will remove the “little-used” disputed feature from Word 2007 and Office 2007 as well as the beta versions of Word 2010 and Office 2010 and is further considering legal options including a request for a rehearing by the Federal Circuit Court of Appeals en banc or a request for a writ of certiorari from the U.S. Supreme Court.