The appeals court found that the trial court erred when it failed to allow the jury to hear Microsofts assertion that Eolas patent for Web browser technology was invalid because other developers had invented similar technology before Eolas submitted its patent application.
The case has been sent back to the U.S. District Court for the Northern District of Illinois for a retrial of this issue. Eolas, based in Chicago, holds the license from the University of California for a patent on technology for embedding and invoking interactive objects in Web browsers, such as applets and plug-ins.
After a trial in August 2003, a jury found that Microsofts Internet Explorer browser infringed on the patent and awarded damages of $1.47 for each copy on 350 million copies of Windows that Microsoft shipped worldwide between November 1998 and September 2001.
In the trial, Microsoft Corp. denied the infringement and asserted that Eolas patent rights claims were invalid and unenforceable.
However, Microsoft, Eolas and the University of California system all claimed that the appeals court decision represents a victory.
"Todays appeals court decision overturning and remanding the district court verdict in the Eolas patent case is a clear victory, not only for Microsoft, but for Internet users as well," Microsoft said in a statement released Wednesday.
"Todays reversal gives Microsoft the opportunity to tell the jury the whole story of how this technology was developed, and present evidence that shows that Eolas did not invent this technology and that it was developed by others, particularly Pei-yuan Wei and his colleagues at OReilly & Associates. They are the true pioneers of this technology," the statement said.
If the case goes to retrial, Microsoft indicated that it intends to present evidence that Eolas knowingly withheld information about Weis prior invention to the U.S. Patent and Trademark Office. The trial court didnt allow the jury to hear Microsofts claims that the Eolas patent was invalid because Weis browser, called Viola, used similar technology that predated the Eolas technology.
However, both Eolas and the university contend that the appeals court decision upheld both the jury award of $520 million in damages and the original finding that Microsoft had violated the patent held by the university and licensed by Eolas.
The "decision represents a victory on balance for the university," said Trey Davis, a spokesman for the University of California. "We won on the issues that would have been most important to Microsoft," the damage award and the patent-infringement finding.
"These questions of prior art and the distinction between various [patent] codes are very technical and complicated issues, and we have been working with these right along" through the trial, Davis said.
"We feel confident that the universitys position will prevail on questions of prior art at the end of the day," he said.