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Microsoft Wins a Round

Just up the road from Fool HQ stands the U.S. Patent and Trademark Office. It's an enormous, homely place where judgments are made that can make or break fortunes. The office recently issued just such an opinion, possibly crippling a small tech company, but in the process saving Microsoft (Nasdaq: MSFT  ) over half a billion dollars and saving Internet users from plenty of headaches.

At issue is a 1998 patent, number 5,838,906, held by the University of California at Berkeley and licensed by Chicago-area Eolas Technologies. It covers the method of embedding mini applications within Web pages so they can run in a browser. We call these plug-ins and they are everywhere, including on the Fool page you're reading right now.

Back in August, despite some compelling evidence that plug-in technology existed before the patent, Microsoft lost an Illinois civil trial that levied $521 million in damages. In January, a judge upheld the decision. By then, Microsoft was already busy retooling Internet Explorer, as well as fighting Eolas' attempts to stop the browser from shipping altogether, and other software writers and Web advocates were getting nervous. Apple (Nasdaq: AAPL  ) , Macromedia (Nasdaq: MACR  ) , RealNetworks, (Nasdaq: RNWK  ) , and other makers of browsers and plug-in software would all have faced substantial recoding or license fees in order to comply.

The debate made for strange bedfellows, with open-source advocates finding themselves in the unusual position of defending their usual whipping boy, Microsoft. The controversy peaked when the "Inventor of the Web," Sir Tim Berners-Lee (yes, he really has been knighted), pleaded with the USPTO to review its original decision, arguing that the vagueness of the patent would stifle growth, innovation, and commerce on the Web. For now, it appears the agency agrees.

The USPTO's preliminary overturn completely negates the previous court decisions, though the ruling is only the first step in a permanent revocation of the patent. Eolas has 60 days to appeal, and given the billions of dollars at stake, it's a safe bet the company will make an impassioned defense. Here's hoping Eolas doesn't win the fight.

Patent protections exist not simply to make inventors rich, but to provide incentives for innovation that benefit all of society. When they are overly broad, though, they have the opposite effect. This patent should never have been granted in the first place, and the USPTO should resist the call to revive it.

Discuss the plug-in patent in the Fool's Microsoft board.

Fool contributor Seth Jayson has filed for patents on a method of atmospheric respiration in mammals. He has no stake in any companies mentioned above. View his Fool profile here.

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