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Microsoft has become the first major beneficiary of a patent precedent set by the US Supreme Court last month. The software giant does not have to stop using technology that infringes someone else's patents as long as it pays the patent holder.

Entrepreneur David Colvin's company z4 Technologies had previously won its case that Microsoft's Windows XP operating system and software from Autodesk infringed its anti-piracy patent which describes a form of product activation.

Z4 was awarded $133m from the two companies by a Texas jury and went on to argue for a permanent injunction against Microsoft using the technology. That demand has been rebuffed.

Since z4 does not make any products, and since the product activation function is only a small part of Windows, the court said an injunction would be inappropriate.

"Microsoft's continued infringement does not inhibit z4's ability to market, sell, or license its patented technology to other entities in the market," wrote US District Judge Leonard Davis.

"Microsoft does not produce product activation software that it then individually sells, distributes, or licenses to other software manufacturers or consumers. If it did, then z4 might suffer irreparable harm in that Microsoft would be excluding z4 from selling or licensing its technology to those software manufacturers or consumers."

"However, Microsoft only uses the infringing technology as a small component of its own software, and it is not likely that any consumer of Microsoft's Windows or Office software purchases these products for their product activation functionality," he wrote.

The case follows the precedent set in May when eBay was allowed to continue to infringe a patent held by MercExchange. The Supreme Court ruled that it should not be banned from continuing to infringe as long as it paid the patent holder.

That case was a landmark one since previous decisions had presumed that the "general rule" that an injunction should almost automatically follow an infringement was almost always to be applied. The case expanded the practical meaning of the "exceptional circumstances" in which an automatic injunction should follow.

Each case hinged on a "four-factor test" traditionally used in such cases. They are: irreparable injury to patentee (z4); remedies available at law (is money sufficient?); balance of hardships, and public interest. On each of the four criteria the court found for Microsoft.

Microsoft was also recently found to have infringed another patent, that held by Guatemalan inventor Carlos Armando Amado. He was awarded $9m for Microsoft's infringement of his technology which linked Microsoft Excel spreadsheets to Access databases. Amado had sought $500m in damages.

See: The ruling (13 page/295KB PDF, hosted by Dennis Crouch's excellent Patently-O blog)

Copyright © 2006, OUT-LAW.com

OUT-LAW.COM is part of international law firm Pinsent Masons.

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