Appeals Court Orders New Trial in $500 Million Microsoft-Eolas Web Browser Case

Eolas v. Microsoft

Eolas v. Microsoft (Fed. Cir. March 2, 2005).

Eolas and the University of California sued Microsoft for infringement of its patent that involves a method of using a web browser to open third-party applications using plug-ins.  The District Court for the Northern District of Illinois granted final judgment to Eolas after a jury found that Microsoft infringed the patent and actively induced United States users of Internet Explorer to infringe. The district court also invoked 35 U.S.C. § 271(f) to include foreign sales of Internet Explorer in the royalty awarded to Eolas.  The jury awarded Eolas a royalty of $1.47 per unit of infringing product, which amounted to a total award of $520,562,280.

On appeal, the Court of Appeals for the Federal Circuit (CAFC) found that district court improperly granted judgment as a matter of law (JMOL) in Eolas’ favor on Microsoft’s anticipation and obviousness defenses and improperly rejected Microsoft’s inequitable conduct defense — and thus vacated the district court’s decision and remanded for a new trial on these issues. The CAFC also affirmed the district court’s claim construction and related jury instruction. 

Finally, the biggest news from a patent law perspective is that the Court affirmed the district court’s holding that "components," according to section 271(f)(1), include software code on golden master disks.

More Details:

Prior Art Defenses – VIOLA Browser:

The district court found as a matter of law that an early demonstration of a browser ("Viola") had been abandoned, suppressed, or concealed under 102(g) and thus was not available as prior art against Eolas’ patent. As a consequence, the Jury did not consider Microsoft’s anticipation and obviousness defense.  The Federal Circuit disagreed, finding that Viola was not abandoned.  Rather, according to the CAFC, the prior art browser was improved and re-released as a new version:

Because creating an improved version of an invention does not in any sense abandon the original invention, the district court erroneously excluded [the reference] as prior art.

In the new trial, the jury will be allowed to consider the earlier browser in determining whether the Eolas patent is anticipated or obvious.  The court must also reconsider whether Eolas’ failure to submit the references to the PTO during was a form of inequitable conduct that may make the patent invalid.

Claim Construction:

The dispute on claim construction revolved around the meaning of "executable application."  According to the CAFC, the record shows that the term "executable application" does not have a customary meaning in the computer science field. Thus, the district court’s decision to give the term a broad ordinary meaning was appropriate.

Because this court "consistently declines to construe claims according to the preferred embodiment," this court agrees with the district court that Microsoft’s proposed construction, limiting "executable application" to stand alone programs, does not comport with the entire technological and temporal context for this term.

International Application of the Law 271(f):

Under 271(f) of the Patent Act, supplying a component of a patented invention from the U.S. to a foreign buyer can constitute patent infringement.  The CAFC determined that software code on a "golden master" disk sent from the U.S. was a component of the computer program invention.

A "component" of a process invention would encompass method steps or acts. See, e.g., 35 U.S.C. § 112, ¶6 (2000). A "component" of an article of manufacture invention would encompass a part of that construct. Because a computer program product is a patented invention within the meaning of Title 35, then the "computer readable program code" claimed in claim 6 of the ’906 patent is a part or component of that patented invention.

Exact duplicates of the software code on the golden master disk are incorporated as an operating element of the ultimate device. This part of the software code is much more than a prototype, mold, or detailed set of instructions. This operating element in effect drives the "functional nucleus of the finished computer product."

Thus, the software code on the golden master disk is not only a component, it is probably the key part of this patented invention. Therefore, the language of section 271(f) in the context of Title 35 shows that this part of the claimed computer product is a "component of a patented invention."