Microsoft Faces Lasting Damage from Word Patent Judgment

A federal district court decision that found that Microsoft Word violates an XML technology patent held by a small Canadian company could prove to be a crippling market blow for the software giant's flagship Office desktop productivity package. Microsoft is scrambling for a way to overturn the decision and an injunction that would bar Microsoft from selling Word. But if these efforts fail, even a company of Microsoft's wealth and resources would be hard-pressed to recoup the potential financial losses and competitive setbacks if it has to keep Word off the market for an extended period.

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If you haven't been brushing up on the latest news, it's easily one of the most interesting stories in the enterprise software industry. But it's also one of the more troubling stories in the space.
If Microsoft loses its battle with i4i, Word as we know it will be gone. Even as its battle slogs on, an extended period of time when Microsoft isn't selling Office on store shelves is an even greater problem. The company has been pushing the court for a speedy trial to ensure that doesn't happen. But whether or not it can actually prove that i4i's patent on XML file types is invalid is up for debate. The longer the battle is waged, the more cash Microsoft loses. And the smaller the chances that it will be able to achieve critical business and financial goals in the coming years.
Word's Importance
The importance of Word and, by extension, Office, cannot be underestimated. Office represents the largest portion of Microsoft's revenue. It's one of the main reasons why the company has been so successful to this point. Without it, Microsoft would lose a key revenue stream that it relies on to help it in other areas of its business. Granted, an XML patent infringement probably won't lead to the total demise of Microsoft, but it could significantly impact its operation.
While the cash Microsoft generates from the Zune or the Xbox 360 is welcome, the cash it generates from Word and Office is a necessity. With that cash, Microsoft can invest in Windows, Office, the Xbox 360, the Zune, Bing and all of its other endeavors. It relies upon the sale of Office to maintain its strategy for the future. Most importantly, it relies upon Office to boost its revenue when other divisions aren't performing as well as they are supposed to.
Without Word, Microsoft would be in a tough position. It wouldn't be able to invest the cash it needs in all those other divisions. Plans it might have for Windows, Bing or a future Web-based browser might be put on hold. Updates to Windows that both enterprise users and consumers are looking for won't be released.
In the beginning, the fallout might be manageable. But what if i4i proves its patent case and forces Microsoft to not only pay up, but change its offering? It could be a disaster for Microsoft.
The Collapse of Office?
Without Word, Office is a shadow of its former self. Companies looking to have a full-featured productivity suite would need to look elsewhere. Consumers who want to perform basic work at home would pick an alternative option. Simply put, Office isn't Office without Word.

Don Reisinger

Don Reisinger

Don Reisinger is a longtime freelance contributor to several technology and business publications. Over his career, Don has written about everything from geek-friendly gadgetry to issues of privacy...