The U.S District Court of Appeals on Wednesday called for a new trial on a key aspect of the $520 million jury verdict that found that Microsoft had infringed on Web browser technology patents held by Eolas Technologies.
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.
Eolas Founder Responds
Eolas founder Mike Doyle, who developed the browser technology while working at the University of California at San Francisco, also expressed confidence that the court would uphold the validity of his patent.
“Thats the only issue that remains to be decided,” Doyle said. “If we prevail on that issue, then we have won.”
Other attorneys specializing in intellectual property law said Wednesday that the appeals court decision still leaves Eolas with an advantage in any retrial, but that the ultimate outcome still could go either way.
“Fundamentally, I would say this is really a reprieve for Microsoft rather than a total victory,” said Steven Glassman, a partner with the New York firm of Kaye Scholer LLP.
“A reversal on the issue of patent validity is something that was probably widely expected, or at least not a surprise in the community, because the real issue is whether the evidence about the Viola Web browser should have been put before the jury,” Glassman said.
The general rule is that anything that might have a strong bearing on the case should be presented to the jury and not thrown out by the court, Glassman said.
But Microsoft is still at a disadvantage because it has to go before the next jury with the courts affirmation in the earlier trial that it had infringed on the Eolas patent, he said.
“Its a significant opinion anytime an appeals court reverses” any part of a $520 million trial judgment, said Douglas Winthrop, intellectual property attorney and partner with the law firm of Howard, Rice, Nemerovski, Canady, Falk and Rabkin in San Francisco.
The decision means that Microsoft has a chance to go back to the court and present legal arguments about validity of the patent based on whether it was anticipated by other inventions and whether it was based on “inequitable conduct” by the inventor, if it can prove that Doyle knew of the prior existence of the Viola browser when he applied for the patent for the Eolas technology.
The jury decision also was controversial within the broader Internet technology development community. The World Wide Web Consortium and other parties persuaded the Patent Office to review the patent validity based on “prior art.”
Glassman said the patent office could “pull the rug out from under” Eolas case if it reviews and then invalidates its patent.
Editors Note: This story was updated to include comments from Eolas, the University of California and third-party attorneys.