Microsoft settles Eolas patent saga

Microsoft has settled a long-running and expensive lawsuit with Eolas Technologies, a start-up backed by the University of California that alleged Internet Explorer infringed a patent.

The company said in a statement: "We're pleased to be able to reach an amicable resolution in this long-running dispute with Eolas and the University of California." Microsoft declined to share further details. Eolas couldn't immediately be reached for comment.

The suit concerned technology that lets web browsers call up separate applications or plug-ins such as Flash or Java within a web page. While at the University of California at San Francisco, Eolas chief executive Michael Doyle led a team that worked on the technology in the patent, and he spun off Eolas to help commercialise it, according to Eolas. Microsoft revamped Internet Explorer to work around the patent in 2005.

Eolas prevailed earlier in the case, with a court awarding damages of $521m in 2003 and the US Patent Office upholding the validity of the Eolas patent in 2005. However, a Supreme Court decision this year weakened Eolas' case, and Microsoft said it expected the damages in the case to be revisited.

The Seattle Post-Intelligencer reported the settlement and published a letter from Eolas chief operating officer Mark Swords to shareholders that said: "We are very pleased that we can now focus our resources on commercialising our existing intellectual property portfolio and developing new technologies." It didn't offer details of the settlement but said Eolas anticipates paying shareholders a dividend by the end of 2007.

Although Microsoft has been a target in several intellectual property cases, the company affirmed its support for the concept in the computing industry. "Microsoft values intellectual property and believes that the proper protection and licensing of IP enables companies and individuals to obtain a return on investment, sustain business and encourages future innovations and investment in the IT industry," the company said.

CNET News.com staff writers Anne Broache and Tom Krazit contributed to this report

Stephen Shankland writes for CNET News.com