Patent Office Rules in Favor of Microsoft

The U.S. Patent and Trademark Office has invalidated a claim to Web browser technology central to a case against Microsoft Corp., a move that could spare the software giant from paying more than half a billion dollars in damages, according to documents obtained Friday.

The patent agency’s preliminary decision, if upheld, also means that Microsoft will not be required to make changes to its Internet Explorer Web browser.

The Redmond, Wash., company has claimed that those changes would have crippled the program’s ability to function with mini-programs that work over the Internet, such as the QuickTime and Flash media players.

Last year, an Illinois jury found that Microsoft infringed on technology developed by the University of California and Eolas Technologies Inc., a privately held firm based in Chicago. The jury delivered a $521-million verdict against Microsoft.

“We have maintained all along that, when scrutinized closely, this patent would be ruled invalid,” Microsoft spokesman Jim Desler said.

Desler said that Eolas had 60 days to respond to the decision and that the agency’s ruling was “just one step in their review process but clearly a positive step.”

Martin Lueck, the lawyer who represented Eolas, said it was not uncommon for the patent office to invalidate a claim as the first step of a review process. But he said he was confident the patent office would ultimately uphold Eolas’ claim on the Web technology.

In response to last year’s jury verdict, Microsoft had started to make changes to Internet Explorer but suspended those plans last month, saying it believed its claim on underlying technology for the Web browser would be upheld by the patent office.

Desler noted that the patent office had invalidated only 151 patents out of nearly 4 million patents awarded since 1988.

Last month, Judge James Zagel of the U.S. District Court for the Northern District of Illinois upheld the $521-million verdict, saying jurors were correct in determining that the company had infringed patents held by the University of California and Eolas, which jointly hold a key Web browsing technology patent.

The judge also suspended an injunction that would have required Microsoft to make changes to its programs, pending the outcome of the patent office’s review.

Microsoft shares fell 2 cents Friday to $26.35 on Nasdaq.