In August 2009, i4i, Inc., a Canadian development company, won a $290 million judgment against Microsoft Corporation for willfully infringing on a 1998 patent for a custom XML editing feature used in Microsoft Office Word software. Microsoft’s software allows users to edit XML, a computer code that controls the way content is displayed in the document.  i4i had alleged that Word’s XML editor constituted an infringement of its patent.

Microsoft appealed the judgment, the injunction against selling Word, the jury award and the enhancement of damages.  During the trial, Microsoft had denied its knowledge of the existence of i4i’s patent and also had alleged the patent was invalid.  However, the appellate court confirmed the findings of the jury, noting the evidence presented by i4i of an e-mail exchange between Microsoft employees discussing i4i marketing material and the patent number for the custom XML editor.  These e-mails purportedly claimed Microsoft’s custom XML editor would render i4i’s technology obsolete.

After interest and fees, the judgment against Microsoft totals nearly $300 million. In addition, the injunction against Microsoft went into effect January 11, 2010, and bans sales for Word 2003 and Word 2007.  It is expected to affect the 2007 Office Suite as well.  In anticipation of losing the appeal, Microsoft already had removed the infringing code from Word 2010, and has plans to do the same for Word 2007.  The injunction will not apply to sales of Word products that do not contain the code, and Microsoft will be able to continue to offer technical support to users who currently own the affected software.

However, at this time it is unclear if the judgment will affect the Business Software Alliance (“BSA”)’s pursuit of alleged copyright violations of affected Word and Office products through software audits. In light of the judgment, if your business has been targeted by the BSA for a software audit, you should work with counsel to determine an appropriate strategy relevant to any installations of Word for which you are unable to locate proofs of purchase in the form demanded by the BSA.