Microsoft seeks rehearing in Eolas case

Redmond seeks ruling on the "golden master" issue. Results could have a dramatic effect on how software is distributed worldwide.

Microsoft has stepped up its defense in the Eolas Technologies patent infringement case, asking for a new hearing on a software export matter it calls crucial to the whole industry.

The move comes shortly after the software giant claimed a major win in the case--earlier this month, the U.S. Court of Appeals for the Federal Circuit sent a district court's $565 million patent infringement judgment against Redmond back to the lower court for reconsideration.


Previous coverage

Microsoft claims victory
in high-profile Web
browser patent dispute;
$565 million verdict
may fall.

But in a court filing dated March 16, Microsoft asked for a new hearing on part of the appeals court ruling where it didn't prevail. In that section, the court ruled that software produced overseas from a "golden master" disc was subject to U.S. patent law.

The question is whether a company exports software when it sends a golden master disc abroad, where an OEM (original equipment manufacturer) makes copies from it. In its request for a rehearing, Microsoft argued that companies shipping golden masters are sending design instructions for the creation of software by the overseas OEM, rather than exporting "components of an invention"--and therefore shouldn't be subject to U.S. patent law for those copies.

"The panel's reading greatly expands the extraterritorial application of U.S. patent law, intruding on the sovereign rights of other nations, obviating the need to secure foreign patent protection, and placing U.S. companies at a disadvantage with respect to their foreign counterparts," Microsoft lawyers wrote in the request for an en banc hearing--that is, one by a larger panel of judges.

"We think this issue is of significant importance and deserves consideration by the full panel of the federal circuit," said Microsoft spokeswoman Stacy Drake. "The foreign sales issue is an issue that not only affects Microsoft but the rest of the computer industry."

But the University of California, which with its Eolas spin-off brought the case against Microsoft, said the filing demonstrated that a crucial share of the victory in this month's appeals court decision belonged to the university.

The filing "indicates that they considered these aspects of the circuit court ruling against them to be substantial," said university spokesman Trey Davis. "That goes to the issue of damages in the case."

The district court originally awarded the university and Eolas $521 million and later upped the amount to $565 million. Those awards included foreign sales. Should Microsoft lose on the patent infringement issue but prevail on the golden master issue, the latter ruling could slash its damages considerably.

Foreign sales of the Windows operating system with the Internet Explorer browser--whose system for running external or "plug-in" applications is the subject of the university's patent claim--accounted for more than 64 percent of the damages.

The Eolas golden master case is one of two such patent battles pending against Microsoft. Together, they could have a dramatic effect on how software is patented and distributed around the globe.

The other case is AT&T vs. Microsoft, which reached a settlement except in regard to the golden master issue, according to Microsoft.

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