Microsoft wins again in Eolas patent dispute

By Paul Festa
Posted on ZDNet News: Aug 18, 2004 10:28:00 PM

The U.S. Patent and Trademark Office has handed Microsoft a second victory in its dispute with Eolas, rejecting browser patent claims that could roil the Web if upheld.

The patent in question, owned by the University of California and licensed exclusively to its Eolas software spinoff, describes the way a Web browser opens third-party applications, or "plug-ins," within the browser. Download the full ruling here (1MB PDF file).

In the second of what are projected to be three opinions, or "office actions," on the case, the Patent Office rejected all 10 patent claims under review, according to a source familiar with the document. The agency's first office action on the matter came in February.

Attorneys for Eolas and the university could not be reached for comment. The Patent Office confirmed it had mailed the office action Monday but declined to comment on its substance. A UC representative said the university had not yet seen the office action and declined to comment further.

Microsoft praised the PTO's move.

"Today's action is another step in the Patent Office's reconsideration of the Eolas patent," said Microsoft spokesman Jim Desler. "We've maintained all along that when scrutinized closely, the Eolas patent would be ruled invalid."

Patents and copyrights have been taking on a higher profile in the software industry in recent months. The issue is especially contentious in the open-source arena, where the Linux operating system has become embroiled in a number of intellectual-property disputes. And Microsoft itself, which is trying to boost the licensing of its intellectual property to other companies, says it is on track to file 3,000 patent applications this year.

Eolas and the university still have at least one more chance to argue their case before the patent examiner in a decision being watched closely by the software industry.

If upheld, the patent could force Microsoft and other browser makers to take out a license if they want to run, within the browser, applications like Macromedia's Flash animation software, Adobe's PDF document software, or Sun Microsystems' Java programming language. A workaround could disrupt millions of pages around the Web, industry and standards experts warn.

The fight between UC and Microsoft is proceeding on two fronts. The legal battle has seen UC win against Microsoft a $521 million infringement judgment, later raised to $565 million and poised to climb from there. Microsoft is appealing that decision.

On the second front, Microsoft's allies in the software industry last fall persuaded the Patent Office to initiate a re-examination of the patent on the grounds that it was awarded improperly.

In its first office action, the Patent Office in February appeared to side with Microsoft and its allies, mirroring their argument that similar technologies, or "prior art," had been demonstrated before Eolas filed its application in 1994.

The university and Eolas subsequently replied to the office action, arguing that the cited technologies were irrelevant to the patented one.

Even if UC and Eolas fail to sway the patent office and it winds up ruling against them, they have two levels of appeal, the first to the Board of Patent Appeals and Interferences and the second to the Federal Circuit Court of Appeals in Washington, D.C.