Texas jury orders Microsoft to pay $200 million in patent infringement case

The world's largest software maker lost a patent infringement lawsuit May 20 when an East Texas jury ordered it to pay $200 million to a small Canadian company.

After a six day trial in Tyler, a federal jury found that Microsoft had infringed on a patent by i4i and awarded the plaintiff $200 million.

The jury also found that the infringement had been willful, so now U.S. District Judge Leonard E. Davis will consider if the i4i is also eligible to receive treble damages.

Represented by Douglas Cawley of McCool Smith, i4i disputed Microsoft Word's use of "extensible markup language" to process electronic documents. The plaintiff presented evidence that Microsoft knew of i4i's patent, but did not try to avoid infringement.

Microsoft was represented by Matthew Powers of Weil, Gotshal & Manges.

"We believe the evidence clearly demonstrated that we do not infringe and that the i4i patent is invalid," said David Bowermaster, a Microsoft spokesman in a press release. "We believe this award of damages is legally and factually unsupported, so we will ask the court to overturn the verdict."

It's the fourth-largest jury verdict in the U.S. so far in 2009, according to data compiled by Bloomberg. It's the second- largest patent jury award this year, behind a $388 million verdict against Microsoft won by a Singapore company in April.

According to Bloomberg, the $200 million equals about four days of profit for the company, based on fiscal second-quarter net income of $4.17 billion on sales of $16.6 billion.

The i4i dispute is over a method of processing electronic documents using embedded codes that provide instructions on how information appears.

Word 2003 and 2007 use "extensible markup language," or XML, for encoding, and customize the XML in a way that i4i contends infringes its patent. Both sides agree that many people use Word without ever using custom XML.

Microsoft, based in Redmond, Wash., argued at the trial that it didn't use i4i's technology and sought to invalidate the patent.

Microsoft's Windows software runs about 95 percent of the world's personal computers. Windows Vista, the company's current operating system, wasn't part of the case.

The case is i4i Limited Partnership v. Microsoft Corp., 07cv113, U.S. District Court for the Eastern District of Texas (Tyler).

The Microsoft verdict may put an end to a recent streak of wins for defendants in the Eastern District.

In April, ADT Security Services won a directed verdict before it even put on its own defense.

Another jury last month awarded OPTi Inc. $19 million in an infringement suit against Apple. A week later, OPTi asked the judge to consider increasing the award to $31 million in enhanced damages and interest.

Then a few weeks later, a jury in Marshall cleared Sun Microsystems of claims of patent infringement, trade secret theft and breach of contract by Versata Software.

Versata, formerly known as Trilogy Software was seeking $100 million in damages over allegations Sun stole technology for its WC5 technology.

Sun had hired Versata to work on the software in 1998, but later gave the work to Oracle. Versata claimed that Sun took the information Versata produced to develop Sun's programs.

But after a ten-day trial, the jury deliberated for three hours and gave Versata nothing.