Microsoft Word Sales Banned In 60 Days

Microsoft plans to appeal; the court also said the software maker must pay $240 million in patent-violation damages
By Paul McDougall

A Judge on Tuesday ordered Microsoft (NSDQ: MSFT) to stop selling its popular Word document creation application in the United States in 60 days, after finding that the software contains technology that violates a patent held by a third party.

Microsoft Office, which includes Word, accounted for more than $3 billion in worldwide sales in Microsoft's most recent fiscal year and is used by literally millions of businesses and consumers for everyday tasks like word processing and making spreadsheets and presentations.

The judge said the ruling applies to Word 2003 and Word 2007.

Investors shrugged off the news—perhaps in anticipation of a higher court overturning the ruling, which arose from the plaintiff-friendly Eastern Texas federal jurisdiction. Microsoft shares were up 1.6% to $23.50 in early trading Wednesday.

Judge Leonard Davis, of U.S. District Court for Eastern Texas, said Microsoft "unlawfully infringed" on a patent that describes how programs go about "manipulating a document's content and architecture separately." The patent, No. 5,787,449, is held by Toronto-based i4i, Inc. i4i develops "collaborative content solutions," according to its Web site. i4i originally sued Microsoft for patent infringement in 2007.

"We are disappointed by the court's ruling," Microsoft spokesman Kevin Kutz said in an e-mail. "We believe the evidence clearly demonstrated that we do not infringe and that the i4i patent is invalid. We will appeal the verdict."

Davis on Tuesday ordered Microsoft to pay $240 million in damages to i4i, plus court costs and interest. More significantly, he enjoined Microsoft from continuing to sell Microsoft Word, in its current form, in the U.S.

Specifically, Davis said Microsoft can't sell versions of Word that can open documents saved in the .XML, .DOCX, or .DOCM formats that contain custom XML. Those formats were at the heart of the patent dispute. .DOCX is the default format for the most current version of Word, which is included in Microsoft Office 2007. Custom XML is used by businesses to link their corporate data to Word documents.

"Microsoft Corporation is hereby permanently enjoined" from selling Word 2003 and Word 2007 in the U.S. Davis, wrote in his order.

Davis also prohibited Microsoft from providing technical support for infringing products sold after the injunction takes effect, or from "testing, demonstrating, or marketing the ability of the infringing and future Word products to open an XML file containing custom XML."

Davis said the injunction does not apply to versions of Word that open an XML file as plain text or which apply a transform that removes all custom XML elements—possibly paving the way for Microsoft to issue a patch that rectifies the problem.