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Originally published August 12, 2009 at 12:01 PM | Page modified August 12, 2009 at 12:01 PM

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Microsoft fails to quash $200 million patent verdict in i4i case

Microsoft failed to overturn a $200 million patent-infringement verdict won by Canadian company i4i over a way to process electronic documents and now must pay a larger award.

Bloomberg News

Microsoft failed to overturn a $200 million patent-infringement verdict won by a Canadian company over a way to process electronic documents and now must pay a larger award.

While rejecting Microsoft's request to throw out the verdict, U.S. District Judge Leonard Davis in Tyler, Texas, on Tuesday added about $90 million to the jury award, including $40 million as punishment for intentional infringement of the patent, $37 million in interest plus additional damages to cover the period from the May verdict to Tuesday's decision. Microsoft said it would appeal.

Davis also issued an order that would limit a feature in "extensible markup language," or XML, when used with Microsoft Word. Microsoft can't sell Word to allow for customized XML. It doesn't affect the ability to open an XML file as plain text, and both sides agreed that many people use Word without ever using custom XML.

"We're pleased the judge recognized the integrity of the jury verdict and recognized an injunction is appropriate," said Douglas Cawley of McKool Smith in Dallas, who represents i4i in the case.

Microsoft challenged every aspect of the verdict, arguing that the patent is invalid and wasn't infringed and that the damage award was too high. Davis rejected each of the company's arguments.

"We are disappointed by the court's ruling," said Kevin Kutz, a Microsoft spokesman. "We believe the evidence clearly demonstrated that we do not infringe and that the i4i patent is invalid."

I4i's invention related to custom XML "takes an enormous, complex document and converts it to a database," and is used by a wide range of industries, said i4i Chairman Loudon Owen. It's a key feature of the software and services sold by the Toronto company, he said.

Customers including drugmakers Merck & Co. and Bayer use the software, for example, to make sure that people get the correct and most up-to-date information on the labels of their medicine, Owen said in a phone interview.

Microsoft has pointed to the i4i verdict as one example of what it contends is a system that lets patent owners win jury awards that exceed the value of the invention. In arguments before an appeals court in an unrelated case in June, Microsoft asked for limits on how damages are calculated when the invention is one of a large number of features within a product.

The i4i verdict is the seventh-largest jury verdict this year, and the third-largest patent verdict, according to Bloomberg data. The second-largest patent verdict was another case lost by Microsoft and the largest was a verdict lost by drugmaker Abbott Laboratories in the same court district as the i4i case.

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