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Microsoft alters Word to comply with court

Canadian firm wins appeal of patent case

By Susan Decker and William McQuillen
Bloomberg News / December 23, 2009

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NEW YORK - Microsoft Corp., the world’s biggest software maker, is preparing to alter its popular Word software after it lost its appeal of a $200 million patent-infringement verdict won by a Canadian firm.

The company, based in Redmond, Wash., was given until Jan. 11 to make the change or stop sales, in a decision released yesterday by the US Court of Appeals for the Federal Circuit in Washington. Word is part of Microsoft’s Office software, used by more than 500 million people.

The court upheld a verdict that has grown to $290 million, won by closely held I4i LP of Toronto. The dispute is over an invention related to customizing extensible markup language, or XML, a way of encoding data to exchange information among programs. Microsoft has called it an “obscure functionality.’’

Microsoft said it has been working on the change since the trial judge first ordered a halt in August and has “put the wheels in motion to remove this little-used feature from our products.’’

Copies of Word 2007 and Office 2007 with the feature removed will be available by Jan. 11, and “beta versions of Microsoft Word 2010 and Microsoft Office 2010, which are available now for downloading, don’t contain the technology covered by the injunction,’’ said Kevin Kutz, a company spokesman.

Microsoft is testing Office 2010 with customers and will release the completed version in the first half of next year. The unit that sells Office is Microsoft’s biggest, with $18.9 billion in sales in the year ended June 30.

Microsoft can continue to provide technical support to current Word users. It cannot instruct new users who buy Word after the deadline on how to use the custom XML editor or sell copies of Word with the feature, the court said.

The software maker said it might ask the Federal Circuit to reconsider the decision or appeal to the US Supreme Court.

The Federal Circuit is not likely to grant such a request, and “there’s no issue really sexy or different for the Supreme Court to address either,’’ said James Kulbaski, a patent lawyer with Oblon Spivak in Alexandria, Va., who is not part of the case.

“This was a small company that appeared to be doing reasonably well, and Microsoft’s product essentially eliminated that part of the business,’’ Kulbaski said. “I4i could not compete with Microsoft Word incorporating their feature.

Based on the company’s statement yesterday, it is doubtful that Microsoft will try to reach a licensing deal with I4i, said Matt Rosoff, an analyst with Directions on Microsoft, based in Kirkland, Wash.

“There may be conversations going on now, but the safest thing is to not include it in 2010,’’ said Rosoff, whose company is a research firm focused on Microsoft’s strategy.

The disputed feature is used by large companies to add special data to Word files, such as information in forms submitted by customers.