Jury orders Microsoft to shell out $520 million

CHICAGO -- A federal court jury awarded a Chicago-based software company and the University of California more than $520.5 million damages Monday after finding that Microsoft Corp. infringed on a patent.

Microsoft said it would appeal the verdict by the jury of eight men and four women following a five-week trial before U.S. District James B. Zagel.

The jury could have awarded $1.2 billion to the university and Eolas Technologies Inc. of suburban Wheaton for the alleged infringement.

"We are very satisfied," said Eolas attorney Martin R. Lueck. "It shows that the jury system works. Patents need to be respected regardless of the size and the market power of the company involved."

Microsoft spokesman Jim Desler said the software giant believes "that the facts will ultimately support our position because we do plan to appeal."

"We believe the evidence will show there was no infringement of any kind and this technology was developed by our own engineers," he said.

Eolas, which stands for "embedded objects linked across systems" and is also Gaelic for knowledge, was launched in 1994 to market technology that allows users to access interactive programs embedded in web pages.

Eolas Chairman and CEO Michael Doyle along with two others, David Martin and Cheong Eng, invented the technology while they were working at the University of California at San Francisco.

Eolas owns the exclusive rights to market the technology. The university owns the patent.

Eolas and the university say Microsoft made their technology part of Internet Explorer and bundled it with Windows.

Microsoft attorneys argued that the patent was invalid. They claimed the patent described features the technology didn't deliver.

The figure of $520,562,280 in damages was based on a jury calculation that $1.47 per unit represented reasonable royalties for the 354,124,000 copies of Windows sold from the time the patent was granted in November 1998 until September 2001.

That award could grow when royalties between September 2001 and the present are calculated six months from now.

Eolas and the university had been asking for $3.50 for each unit, an amount Microsoft attorneys had said was absurd. The average price of Windows during the period was $61 per copy, attorneys said.

After deliberating for about six hours, the jury found that three separate claims of patent infringement on Microsoft's part were valid.

Attorneys said Eolas would receive the lion's share of any damages that are paid after the appeal or any settlement but declined to provide the specifics.

Microsoft faces more than 30 patent-infringement lawsuits, covering digital rights management, online video game software and other technologies.

Matt Rosoff, an analyst with independent research firm Directions on Microsoft, in Kirkland, Wash., said he was surprised by the verdict.

"It seems like a very broad patent," he said.