Court Denies Rehearing of Microsoft's I4i Appeal

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A federal appeals court declined Microsoft’s petition for the entire court to rehear its appeal of a king-sized patent infringement verdict that went against the software firm last year.

Microsoft (NASDAQ: MSFT) already had lost its appeal to a three-judge panel of the appeals court late last year in a challenge to the case brought by tiny Toronto firm I4i.

Now, its request for the entire U.S. Court of Appeals for the Federal Circuit to rehear its appeal “en banc” — meaning all of the judges in that appeals court would hear the case together — has been turned down.

What Microsoft will do now is open to speculation, but it appears the company may appeal the case to the U.S. Supreme Court.

“We’re disappointed with the decision,” Kevin Kutz, Microsoft’s director of public affairs, said in a statement. “As far as next steps, we continue to believe there are important matters of patent law that still need to be properly addressed and we are considering our options for going forward,” he added.

The case revolves around a patent held by i4i for what is called “a custom XML” editor. Microsoft had included a feature very similar to i4i’s editor in copies of Word 2003 and 2007, as well as Office 2003 and 2007.

Microsoft was found guilty of infringing i4i’s patent by a jury in Texas last spring, and in August the judge levied fines, penalties and interest of roughly $290 million against the software titan.

The company was also ordered to stop selling versions of Word and Office containing the infringing feature. It complied. (The upcoming Word 2010, due out in May, does not contain the feature.)

In December, a three-judge panel from the appeals court ruled in favor of i4i. A request by Microsoft for clarificationof the appeals court’s ruling was also rebuffed in mid-March.

Last month, Microsoft also came a cropper to another Texas juryin the same jurisdiction when a lower court jury found the company guilty of infringing two other patents.

In that case, the Scotts Valley, Calif. firm VirnetX claimed that Microsoft had violated patents it holds for virtual private networking (VPN) technologies used in Windows XP, Windows Vista and several Microsoft communications products. The jury proposed Microsoft should be penalized to the tune of $105.75 million in that case.

Two days after that victory, VirnetX sued Microsoft againin the same Texas lower court — this time for infringing the same two patents in Windows 7, which had not yet been released when the original suit was filed.

Stuart J. Johnston is a contributing writer at InternetNews.com, the news service of Internet.com, the network for technology professionals.