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Microsoft Could Save $521M - PTO Preliminary Ruling Finds Eolas Patent Invalid

Microsoft Could Save $521M - PTO Preliminary Ruling Finds Eolas Patent Invalid

Microsoft may not have to pay Eolas Technologies upwards of a half-billion dollars in damages for patent infringement after all, or, for that matter, change its Internet Explorer browser and gum up the inner workings of the web because of Eolas' far-reaching patent claims.

Microsoft yesterday also settled part of a patent infringement complaint made by AT&T that had just gone to trial and was looking for somewhere $90 million and $300 million charging because Microsoft's NetMeetings and TrueSpeech widgetry allegedly tread on a 1981 patent AT&T had on digital voice.

The amount of money Microsoft is paying AT&T is being kept quite.

The two are going to take the unsettled part of the case to the federal court of appeals.

Anyway, getting back to Eolas. The US Patent and Trademark Office yesterday made a preliminary finding that the 1994 Eolas-University of California at Berkeley plug-ins/applets patent was invalid by virtue of prior art.

Eolas now has 60 days to protest the PTO's decision and get it reversed. Eolas's lawyers claim that PTO backflips are common and that Eolas will ultimately prevail.

Eolas can also appeal to the Board of Patent Appeals and Interferences or to the federal courts.

The jury verdict against Microsoft last August provoked the computer industry to unusual solidarity with Microsoft when it became clear that, in the words of one lawyer, Eolas was "screwing with the whole world" and that everybody had some skin in the game.

Tim Berners-Lee, the esteemed director of a spooked World Wide Web Consortium, wrote to the director of the PTO asking that the Eolas patent be reviewed.

Berners-Lee told the PTO that Eolas' patent would do "substantial and technical damage" to the Web and force "cascades of incompatibility to ripple through" it.

W3C's web specifications like the web touchstone HTML would have to be rewritten and Berners-Le said that even a small redesign of the Microsoft browser "would render millions of web pages and many products of independent software developers incompatible with Microsoft's product."

He was thinking of plug-ins like RealNetworks' RealAudio and RealVideo streaming, Apple's QuickTime video, Macromedia Flash and Shockwave players, Adobe's PDF Reader and Sun's Java not to mention Microsoft's own Windows Media Player, now made controversial by the European Commission trustbusters.

Berners-Lee also claimed that without plug-ins, "The cycle of innovation on the Web would be substantially retarded."

The PTO immediately granted his petition.

The Chicago trial court has stayed its injunction forbidding Microsoft to distribute any more offending code until the PTO and a promised Microsoft appeal to the federal court of appeals sorted things out.

Microsoft has already paid Eolas $45.3 million in interest on the $521 million award. Eolas wanted $110 million, but the judge went with Microsoft's formula, which was based on Treasury Bills and not the prime rate.

Unfettered, however, the trial court is making noises that would expand how long Microsoft has been infringing the Eolas patent and double the award, already one of, if not the biggest award ever made.

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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Most Recent Comments
Lawrence B. Ebert 03/02/05 03:41:04 PM EST

The Court of Appeals for the Federal Circuit, ruling on the district court decision (not the re-examination) has vacated the district court rulings on Microsoft's defenses, and remanded, so that Microsoft will get to attack the '906 patent on invalidity (anticipation, obviousness) and unenforceability (inequitable conduct) grounds. The Viola browser of Wei (versions DX-34 and DX-37) is available as prior art; further, the failure of Doyle to disclose the Viola browser to the PTO may be considered to be inequitable conduct.

legal alien 10/06/04 10:56:48 PM EDT

silly americans, and the litigation continues... the rest of the world laughs.

Lawrence Ebert 03/20/04 09:00:16 PM EST

As a followup, in the Office Action mailed February 26, 2004, all ten claims were rejected for obviousness under 35 USC 103. Although the filing under 37 CFR 1.501 of W3C had presented claim charts for anticipation rejections under 35 USC 102, there are no 102 rejections in the Office Action. Further, claims 1-3 and 6-8 are rejected over the admitted prior art in view of the internet draft of Berners-Lee (in the one 501 filing) and the Raggett-I and -II references (in the other 501 filing). Claims 4-5 and 9-10 are rejected over these references, further in view of two additonal references (Reicherd and Cox), making this latter rejection complex. It is very likely that Eolas/UC (among other things) will argue that these obviousness rejections are improper, without amending the claims (especially claims 4-5 and 9-10). As a minor side point, the examiner did not attach patentable significance to the "computer program product" claims, suggesting that this type of claim, in the absence of additional novelty over the corresponding method claim, does not really assist patent applicants. As another side point, I have an article coming out ["Be Careful What You Ask For," Intellectual Property Today, April 2004] which touches on some of these issues.

Lawrence B. Ebert

Lawrence B. Ebert 03/11/04 12:22:27 PM EST

For an alternative viewpoint, from intelproplaw:
Editor’s note: It is quite normal for an examiner at the USPTO to reject claims in a first office action so one should not put too much value on the initial judgment from the USPTO. It is entirely possible (and I would say likely) that after some minor amendments to the claims the patent will remain valid and infringed.

As a minor point, if the claims are narrowed in response to a rejection over patentability from the PTO, one might not say that the claims "remained" valid. If there is a narrowing in scope of all pertinent claims, then there is an issue of intervening rights and an issue of loss of equivalent protection.

Lawrence B. Ebert

Lawrence B. Ebert 03/10/04 01:34:21 PM EST

Also, I would agree with Counsel that Eolas will try to avoid narrowing its claims. For any claim element that is narrowed in response to questions about patentability, there is a rebuttable presumption of surrender, so that coverage through the doctrine of equivalents is likely lost. See Festo, 535 US 722 (2002); 344 F3d 1359 (Fed. Cir. 2003). If (hypothetically) Eolas has to narrow claim scope, and can't literally cover methods of Microsoft, Eolas will likely have problems. The more likely outcome is that Eolas will not amend down, and appeal as necessary.

Lawrence B. Ebert

Lawrence B. Ebert 03/10/04 01:11:03 PM EST

Counsel is correct that intervening rights, described in 35 USC 252 for re-issues, also apply in re-examinations. However, one needs to keep in mind the general point of why one has intervening rights. In a re-issue, where patent claims can be enlarged, intervening rights protect people who practiced (or seriously planned to practice) a process (before re-issue) that later fell within the scope of the enlarged claim (after re-issue). People are allowed to rely on the claims of the initial patent, and are not punished because their process fell within the scope of a later enlarged claim. However, if the process fell within the scope of an (unchanged) valid claim, before and after re-issue, then there are no intervening rights. The Eolas matter is a re-examination, not a re-issue. Because claims cannot be broadened in a reexamination, intervening rights can be a factor where a narrower valid claim is infringed but the original, broader claim was invalid. Separately, does anyone know why the references of the W3C 501 filing (Raggett-I and Raggett-II) were mentioned in the district court litigation, but were not considered as prior art? Also, does anyone know what piece of prior art is mentioned in the other 501 filing?

Lawrence B. Ebert

Counsel 03/08/04 06:11:10 PM EST

Lawrence B. Ebert is correct. However, keep in mind that if Eolas modifies its claims, Microsoft can make a good argument for intervening rights under 35 USC 252. If Microsoft was found to have intervening rights, then the damages award might end up being vacated. So, Eolas will probably fight hard for its original claims before trying to amend them.

Ping Yang 03/07/04 12:09:43 PM EST

Whoever called USPTO an idiot is an idiot him/herself.
It is written in the law that "any method, process..." is patentable as long as it is novel and non-obvious. The Supreme Court Upheld this point. The USPTO was right to issue the patent when it found no prior art to reject the patent claim. The problem in this case was the USPTO did not have the resource to do a competent search to find these prior art. Part of the reason was that the Congress diverted a large portion of the fees it collected to somewhere eles and the USPTO lacks the resources to do a complete job.

Lawrence B. Ebert 03/07/04 10:40:56 AM EST

The point of jdkane is well-taken. This is the first Office Action in a re-examination initiated by the Commissioner on October 28. The patent holder has an opportunity to respond before any final decision is made. The patent holder can argue that the examiner is wrong and the patent holder can amend claims. Re-examinations can be undertaken by the patent holder, a third party, or the commissioner to evaluate the effect on patentability of claims of previously unconsidered prior art. There is a long way to go here before this becomes final.

braddock 03/07/04 09:56:04 AM EST

Wow, so if you're a multi-billion dollar corporation in a half-billion dollar lawsuit, then after a few million dollars in lawyer fees and several years and god knows what type of political influence you can actually get a patent seriously reviewed and invalidated by the USPTO?!?! So there's hope!

For only about the vested interest of the entire GNP we should be able to get the other four million patents since '88 reviewed. One down, four million to go...

braddock gaskill

lucius 03/07/04 09:51:24 AM EST

What happens next? Right now, we have a federal district court saying the patent is valid and the USPTO saying it's invalid. Presumably, both decisions are based on the same art. Normally, the federal court's opinion trumps the USPTO's.

So, does this decision have any legal effect? Or does MS still have to win an appeal/reconsideration (which is presumably made easier by this decision)?

FightthePatent 03/07/04 09:50:27 AM EST

Now isn't this interesting.. Microsoft's attorneys couldn't invalidate the patent, but the W3C and its supporters seemingly came up with the prior art to invalidate the patent on their re-exam petition.

The current defendants against Acacia's DMT patent (which covers the process of downloading audio/video from a web server) will most likely get a non-infringing verdict, since it's faster and cheaper than trying to invalidate the patent in their current litigation.

When this happens, it means that the patent doesn't apply to the internet. Cable companies would be left to deal with the DMT patent, and would most likely need to file a re-exam of their own and provide prior art to the USPTO to invalidate the DMT patent.

www.FightThePatent.com provides free prior art found by volunteer searchers to defense patent attorneys.

kindofblue 03/07/04 09:48:50 AM EST

Sue the PTO for incompetence?, negligence? dereliction of duty? How about restraint of trade? Criminal neglect? There's got to be something legalistic way to get the patent reviewers fired or jailed.
Hell, if Martha goes to jail for trying to cover her tracks to save less than 100K, then surely lots of heads should roll at the PTO. Their incompetence costs the high tech industries probably billions of dollars in unnecessary licensing for trivial patents and for legal fees.

prash_n_rao 03/07/04 09:21:04 AM EST

I am neither on Microsoft's side nor on Eolas' side. I am simply against the idiots in the USPTO.

This is the case Eolas can make: If the grant for the patent was a vaild one, the USPTO has no right to reject the patent. The point I am making is: what's the point of registering a patent if you know that by some arbitrary decesion of the USPTO the patent can be recalled? Doesn't the USPTO know what is worthy of patenting and what is not? If it doesn't, it has no right to exist.

I don't know if one has to pay extra if the patent is accepted, I mean in addition to the patent application charges. But if one does have to pay extra after the patent has been accepted, Eolas should ask for a refund (and maybe punitive damages).

jdkane 03/07/04 09:19:55 AM EST

This Info World articleexplains that "The patent office's decision, issued Feb. 25, may be good news for Microsoft, but it is common for claims to be rejected at this stage of patent review" ... so in other words we shouldn't count our chickens before they hatch.

ReliefMX 03/07/04 09:18:14 AM EST

And a cheer is heard from millions of Macromedia Flash developers everywhere

Liselle 03/07/04 09:16:00 AM EST

Remember back when this story first broke, and Microsoft was set to add pop-up confirmation to IE in order to get around the EOLAS issue? That was supposed to happen earlier this year, but there was an update posted at the end of January for those of you who might have missed it.

Xenographic 03/07/04 09:14:38 AM EST

I fear that the reexamination was triggered by Microsoft's many lawyers and massive amounts of cash, rather than any sudden desire for the USPTO to be more consumer-oriented...

ClifGriffin 03/07/04 09:14:06 AM EST

A consumer oriented decision in this case. Web developers and users everywhere should start clapping.

mmurphy000 03/07/04 09:13:14 AM EST

Can holders of patents that are subsequently invalidated sue the US Patent Office for lack of due diligence in granting the patent?

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