Microsoft Hit with $290 Million Fine in i4i Case

| About: Microsoft Corporation (MSFT)

Microsoft Corporation (NASDAQ:MSFT), one of the world’s largest software companies, has lost another battle. The company has been slapped with a $290 million penalty for infringement of Canada-based i4i’s patent number 5787449.

The description of the i4i patent is very broad—“A system and method for the separate manipulation of the architecture and content of a document, particularly for data representation and transformations”. What it basically means is, the software enables editing of data presented in Extensible Markup Language (XML) format.

XML is an open standard programming language defined, recommended and maintained by the World Wide Web Consortium. It enables the organization and presentation of data through the allotment of tags and descriptions, resulting in structured computer documents.

The i4i technology is integral to Microsoft Word versions 2003 and 2007, a part of the respective Microsoft office packages.

Accordingly, the federal appeals court has upheld the Aug 2009 decision of the Texas Court, requiring Microsoft to pay hefty damages to i4i and stop selling any more products incorporating the offending technology. Moreover, while the company is not debarred from supporting current Word users, it is no longer allowed to help purchasers of the new version Word after Jan 11, 2009.

While the appeal to the federal court bought some time for Microsoft and the company was able to start writing a program to replace the technology, final versions are not expected until the second half of the year. Given Microsoft’s history, we expect more hiccups, although management assures that a workaround solution will be available next month.