Microsoft planned to bury XML developer, says federal judge

Microsoft knew of the patent held by i4i as early as 2001, but instead set out to make the Canadian developer's software "obsolete" by adding a feature to Word, according to court documents.

The patent infringement case brought by Toronto-based i4i resulted in a $290 million judgment against Microsoft, and an injunction that bars Microsoft from selling Word 2003, Word 2007 and Word for Mac 2008 in their current forms.

In a 65-page summary opinion dated Aug. 11, U.S. District Court Judge Leonard Davis said that evidence presented during the May 2009 jury trial showed Microsoft had met with i4i executives as far back as 2001, knew of the firm's patent for XML editing, and yet did nothing to guarantee that its implementation of "custom" XML would not infringe the i4i patent.

Davis highlighted an internal Microsoft e-mail that was presented by i4i during the trial as "particularly damaging." The e-mail was sent by Martin Sawicki, a member of the XML for Word development team, as a reply to another Microsoft employee who forwarded a message from i4i that described both its software and patent.

"We saw [i4i's products] some time ago, and met its creators," said Sawicki in the Jan. 23, 2003, e-mail. "Word 11 will make it obsolete. It looks great for XP though."

Word 11 was the in-development code name for what was eventually dubbed Word 2003.

"The trial evidence revealed that Microsoft's intention to move competitors' XML products to obsolescence was quite bold," Davis said in his opinion.

During the trial, i4i's expert testified that 80% of the market for the company's products was made moot when Microsoft added custom XML capabilities to Word 2003.

"My main concern with i4i is that if we do the work properly, there won't be a need for their product," stated another internal Microsoft e-mail submitted into evidence.

Last May, a Texas jury awarded i4i $200 million in damages for Microsoft's patent infringement. Davis added another $40 million in "enhanced damages" for Microsoft's "willful infringement," and additional damages and interest that brought the total to $290.6 million.

Davis slapped an injunction on Microsoft that blocks it from selling Word 2003, Word 2007, Word 2008 for Mac, and when it's released, Word 2010, unless the company changes or removes the word processing programs' custom XML feature. Microsoft has until Oct. 20 to comply.

One patent attorney said last week that Microsoft should be able to work around the injunction with an "easy technical" fix.

"All Microsoft has to do is disable the custom XML feature, which should be pretty easy to do, then give that a different SKU number from what's been sold so it's easy to distinguish the two versions," said Barry Negrin, a partner with the New York firm Pryor Cashman LLP who has practiced patent and trademark law for 17 years.

Microsoft, however, has said a work-around would be arduous. "Microsoft argues that redesigning current and upcoming Word products is an enormous task," said Davis in his summary.

"Microsoft suggests that compliance with i4i's proposed injunction would take approximately five months to re-release the currently infringing products."

By the terms of the injunction, Microsoft does not have to retroactively update already-sold copies of Word, but only insure that versions sold after Oct. 20 do not infringe the i4i patent.

"Thus, i4i's proposed injunction would have little effect, if any, on the daily operations of Microsoft's current customers," said Davis.

Microsoft had asked Davis to issue a stay of the injunction "pending reexamination of the [i4i] patent," but Davis denied the request.

Interestingly, Microsoft also pitched the idea that its upcoming Word 2010 -- part of the Office 2010 that is now in preliminary public testing and slated to ship in the first half of next year -- be allowed to hide the custom XML functionality from users.

The feature would be turned on at customer request. Microsoft said it would track the use of the feature and pay an ongoing royalty for each such use.

"This option would amount to a compulsory license," said Davis, "while ignoring i4i's ongoing injury by way of loss of brand recognition and market share. It is clearly improper, and Microsoft's request is denied."

Davis was clearly puzzled by the contradictions in Microsoft's allegations that it would take months to remove the feature from Word, but yet it could modify Word 2010 relatively easily.

Finally, Davis took a shot at Microsoft's continued determination to do business as usual. "Even after several years of litigation and a jury verdict of infringement, Microsoft requests the ability to continue selling the accused products and release an upcoming product with the same infringing functionality," he said.

Microsoft said last week that it will appeal the verdict and the injunction. The company has not yet filed an appeal with the U.S. Court of Appeals for the Fifth Circuit.

This is not the first time that Office file formats have been taken to task. Two weeks ago, Microsoft said it would add a file format "ballot" to Office 2010 as part of a campaign of concessions to ward off European Union (EU) antitrust regulators.

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