A federal appeals court has thrown out a controversial patent-infringement verdict against Microsoft and ordered the case to be retried in a lower court. The appeals court's ruling is significant, because the original verdict, if upheld, would have required Microsoft to change certain technologies in the Internet Explorer (IE) Web browser, which in turn would have forced organizations to redesign many of their Web pages. Nonetheless, this ruling is not final, and a retrial could still find IE in violation.

Microsoft Prevailing on Two Fronts

In Aug. 2003, a jury found that IE violated a patent covering a Web browser's ability to display interactive content directly in the browser, rather than requiring a new application to be opened. The patent was filed in 1994 by Michael Doyle and other employees of the University of California, was granted in 1998, and is currently held by Eolas Technologies, a company Doyle founded to capitalize on the patent. The verdict set financial damages at more than US$500 million but did not clearly order Microsoft to stop using the patented technology. Nonetheless, anticipating such an order, in fall 2003 Microsoft began previewing changes to IE that would have required Web site designers to make significant changes to Web pages containing interactive content, such as ActiveX controls, Java applets, and embedded QuickTime videos. Without these changes, IE users visiting these pages would experience a barrage of error messages.

Meanwhile, the decision was challenged on two fronts:

• Worried that the patent could stifle Web-based innovation and disrupt Web sites, the World Wide Web Consortium (W3C) joined Microsoft in asking the United States Patent and Trademark Office (USPTO) to reconsider the validity of the patent
• Microsoft appealed the jury verdict.

Microsoft appears to be winning on both fronts. In Aug. 2004, the USPTO issued a tentative order invalidating Eolas's patent on grounds of "prior art"—that is, the existence of similar inventions prior to the time the patent was filed. However, Eolas has successfully overcome similar USPTO orders in the past and continues to argue its case. The USPTO is expected to make a final decision no later than 2006.

Microsoft’s appeal is also having positive results for the company. In Mar. 2005, the U.S. Court of Appeals for the Federal Circuit vacated the jury verdict and ordered a retrial. The court said that the original judge improperly ignored possible prior art, a "Viola" Web browser that Pei-Yuan Wei created in 1993, demonstrated to a group of Sun Microsystems engineers, and posted for download on the Internet. The appeals court also ruled that Microsoft may argue that Doyle misled the USPTO by withholding information about Viola; the district court had not allowed Microsoft to make this argument. If Microsoft can successfully convince the court that Doyle misled the USPTO, the patent will probably be ruled legally unenforceable, regardless of the results of the USPTO examination.

The appeals court decision means that Microsoft will not make any changes to IE in the near future as a result of this case. Nonetheless, Web developers should keep an eye on the retrial and the USPTO investigation for further developments that could affect the design of Web pages and Web-based applications.

The appeals court's ruling is available in PDF format at fedcir.gov/opinions/04-1234.pdf.