Microsoft loses court case - and $521m

A federal court in Chicago has ruled that Microsoft must pay $521m to a web technology company and the University of California after finding that the software giant's Internet Explorer infringed on their patents.

The company, called Eolas Technologies, originally filed suit against Microsoft in 1999, alleging that the tech giant infringed on its patents when enabling Internet Explorer to use plug-ins and applets in the software. The company's technology was first outlined in a patent application in the early 1990s.

Martin Lueck, an attorney with Robins Kaplan Miller & Ciresi who represented Eolas, said the jury was likely swayed by internal documents from Microsoft. The specific patent from Eolas was not mentioned in the documents, but Microsoft executives had described the necessity for technology that conformed to the outlines of the patent.

"Microsoft executives talked about the need to have a browser that would serve as an application delivery platform," Lueck said.

The University of California will receive 25 per cent of the proceeds from the verdict, while Eolas will obtain the rest, minus legal fees and costs, Lueck said. The university owns the patents for the technology, which it licensed to Eolas in 1994. Eolas has one formal employee, Mike Doyle, who is a former University of California researcher.

"It's been 10 years since we first created the technology, and it has been a long road," Doyle said. He added that the company will use the proceeds of the case to fund research projects already under way at Eolas. Eolas has 100 stockholders.

Although Eolas obtained a jury verdict on Monday, the case is far from over. Microsoft will appeal.

Microsoft said in a statement: "While today's outcome is disappointing, we do plan to appeal this decision, and we are confident the facts and the law will support our position. We believe the evidence will ultimately show that there was no infringement of any kind and that the accused feature in our browser technology was developed by our own engineers based on pre-existing Microsoft technology."

Additionally, the judge in the district court case will hear evidence in the coming weeks on a counterclaim from Microsoft. The software giant said that Eolas' patents are invalid and that an inventor name Pei Wei, who worked at O'Reilly and Associates, came up with similar technology, but at an earlier time. A Microsoft representative said that Eolas knew of his work, which makes their lawsuit inequitable.

Lueck dismissed Microsoft's allegations that the technology was covered by earlier inventions crafted by Pei Wei.

"If you look at the time when these patents were filed, 1993, the internet was just beginning. There isn't any prior art," Lueck said. "It is a weak argument."

The technology in question is one of the fundamental elements of web browsing. Applets and plug-ins allow web surfers to view multimedia or real-time content within a web browser rather than a separate software application. Features such as movie clips, streaming audio, and live stock quotes can be embedded into a web page and served to consumers.

Eolas claimed that Microsoft's patent infringement allowed the software giant to win the browser war against Netscape Communications. Microsoft said in May it would pay AOL Time Warner $750m to settle a lawsuit brought on by America Online subsidiary Netscape.

The patent was originally filed by the University of California and inventors Michael Doyle, David Martin and Cheong Ang.

Eolas also came up with the 'e' logo, which IBM purchased the rights to use in 1997.

Michael Kanellos and Jim Hu write for CNET News.com