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Microsoft's attempt to create a lucrative future revenue stream from its patent portfolio has tripped at the first hurdle. After an appeal, the US Patent Office has struck down Microsoft's '517 patent (USPTO 5,579, 517) on the FAT file system. Camera makers, amongst many other consumer electronics manufacturers, use the FAT file system on compact flash cards and other removable media.

Microsoft introduced FAT in version 2.0 of MS-DOS in 1982, but was not granted patent '517 until 1996. Last year Redmond used it as the basis of its first ever licensing program, offering manufacturers the right to use the ubiquitous file system in return for a low royalty rate. At the time, Microsoft described this as "liberalization". Industry watchers noted how earlier in the year, Redmond had hired Marshall Phelps, the IBM attorney who in the Eighties, built up Big Blue's IP program from nothing into a multi-billion dollar business.

But an appeal citing prior art from IBM and Xerox, filed by the Public Patent Foundation, has proved successful. Dan Ravicher, the Foundation's executive director, urged licensees who'd signed up for Microsoft's FAT licensing program to tear up their contracts:

"I hope those companies that chose to take a license from Microsoft for the patent negotiated refund clauses so that they can get their money back," he said in a prepared statement.

Although the US Patent Office is fiercely criticized for granting unnecessary patents, it has begun to repair some of its reputation by rejecting them on appeal. Microsoft itself benefited from the appeals process when Eolas web patent was rejected earlier this year. Microsoft had been ordered to pay $528m to the one-man outfit. ®

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