Microsoft Delays Lawsuit-Related Changes

Microsoft (Nasdaq: MSFT) has announced it will hold off on implementing modifications to the Windows operating system and Internet Explorer as a result of an ongoing patent lawsuit.

Web software firm Eolas sued Microsoft in 1999, claiming the software that allows IE to use plug-ins infringes on a patent that it holds jointly with the University of California. Last year, a federal court ruled in favor of Eolas, and the ruling was upheld a few weeks ago.

Microsoft previously had said it would alter IE and Windows XP to work around some of the disputed technology, but those plans have been changed, according to the recent announcement.

Drawn-Out Dispute

The lawsuit filed by Eolas has resulted in several twists and turns so far.

In August, a federal court ordered Microsoft to pay US$521 million in damages to Eolas. In mid-January, a Chicago federal judge upheld the verdict and, as part of its decision, barred Microsoft from distributing versions of its Web software that include the potentially infringing technology. However, the judge immediately put the injunction on hold until an appeal runs its course.

In its announcement, Microsoft indicated that the changes it had planned might not be necessary, largely because the Commissioner of the Patent Office has announced there will be a review of the Eolas patent. Several claims have arisen saying others developed similar technology before the patent was granted.

"Although Microsoft asserted that the patent was invalid due to pre-existing inventions," the company wrote in a release, "the court refused to let the jury consider the prior art."

Microsoft Maneuvers

Ryan Alexander, an attorney specializing in e-commerce with Resonance Law Group, told the E-Commerce Times that while Microsoft waits for the patent office's decision, it could be trying to avoid further difficulty by delaying the tweaks.

"If you have a product that's within the claims of a patent," he said, "further development is going to continue your liability on patent infringement and expose you to further damages."

The delay also could give Microsoft more control as it navigates through an appeal, Alexander said.

"If you're dealing with someone like Microsoft, money is no object in the face of having control of a product," he noted. "They'd rather have market power than to take a path around patent litigation. That means they'll completely exhaust the appeals process."

Development Stall

Web developers may be relieved that Microsoft has decided to hold off on its planned tweaks. The modified version of IE was set to change the behavior of a range of ActiveX controls, including Macromedia Flash, Apple (Nasdaq: AAPL) QuickTime, Adobe Acrobat Reader, Windows Media Player and RealNetworks RealOne.

By making the planned changes, Microsoft would have sent Web developers scurrying to update how they approach individual Web pages with ActiveX controls. If developers opted not to make the switch, users would have needed to signal their approval via a dialog box before the browser could load a control.

In a letter to the patent and trademark office, World Wide Web consortium director Tim Berners-Lee expressed concerns about the potential effects of the patent.

Berners-Lee wrote that the proposed redesign would affect only a small portion of Microsoft's brower program but would "render millions of Web pages and many products of independent software developers incompatible with Microsoft's product."

Property Protection

Although intellectual property disputes will always be part of business, no matter what the industry, Forrester analyst Nick Wilkoff told the E-Commerce Times that large software vendors like Microsoft are taking a closer look at intellectual property protection lately in hopes of being more diligent about protection.

"It's definitely a trend in software companies, especially the larger ones," he said. "They're recognizing how crucial it is to pay attention to the issue."

Wilkoff pointed to the recent formation of a centralized intellectual property licensing group at Hewlett-Packard (NYSE: HPQ) as a direction that the software industry is taking.

"With HP, the goal of the group is to really look after the use of the company's intellectual property," he said. "This is something you're going to be seeing in companies like IBM (NYSE: IBM) and Microsoft as well."