Eolas patent rejected, but decision not seen as final

The U.S. Patent and Trademark Office has rejected the validity of a patent licensed to Eolas Technologies Inc. which was at the heart of a patent infringement judgement against Microsoft Corp. last August. The office's finding is not final, however, and is being appealed.

The patent, held by the University of California Regents and licensed exclusively to Chicago-based Eolas, covers technology for embedding interactive elements into Web pages, a common practice on the Internet. In the case last August, a Chicago jury ordered Microsoft to pay $521 million for infringing the patent in its Internet Explorer browser. Microsoft has appealed that ruling.

In November, the patent office decided to review the patent after Tim Berners-Lee, the director of the World Wide Web Consortium, wrote to U.S. Under Secretary of Commerce for Intellectual Property James Rogan. Lee urged the Patent Office to invalidate the 1998 patent due to the existence of "prior art," or previous examples of the technology's use.

The patent office has conducted only 151 such re-examinations since 1988, despite having issued nearly four million patents in that time, said Microsoft spokesman Jim Desler, who called the decision "welcome," but "not surprising" in an e-mail statement.

The patent office's decision, issued Feb. 25, may be good news for Microsoft, but it is common for claims to be rejected at this stage of patent review, said Jeff Norman, a partner with the intellectual property division of Chicago law firm Kirkland Ellis LLP. The finding, called an "Office action," is only the first stage in the lengthy process of reexamining the validity of a patent, he said.

Eolas and the University of California now have two months to respond to the patent office, and they will have a number of avenues of appeal, including an appeal in the courts, if their claim is ultimately rejected, said Norman. "This could go on for quite a while," he said.

The University of California intends to appeal the decision and remains confident of the validity of its patent, said Trey Davis, director of special projects in new media with the university system.

The patent claims were already tested and upheld in the case last August, according to Davis. "In the trial, Microsoft had tons of money and time to present their position on various prior art. That was rejected by the jury," he said.

Norman said there was reason to believe the patent might not be upheld. "The good news here for the rest of the world -- other than Eolas -- is that the examiner has come up with some very strong reasons why the Eolas patent should be invalidated," he said.

In his finding, the patent office examiner referred to a "seminal" paper and a number of extensions to the HTML (Hypertext Markup Language) "embed" tag that suggest that the university's technology may have been previously implemented and is, therefore, not patentable, said Norman.

"I think the entire programming community has been scratching their heads and saying this embed tag has been around since the beginning of time," he said.

The patent office's determination is good news for Internet users, said one industry analyst.

"The initial determination, while not final, is an important victory for Microsoft and many other companies," said Joe Wilcox, a senior analyst with Jupiter Research.

"If the Eolas patent is permanently invalidated, it will be business as usual for Microsoft, other software vendors, Web sites and anyone regularly using the Internet," he said.

(Joris Evers in San Francisco contributed to this report.)