Microsoft had its one and only day in the Appeal Court yesterday, arguing against a half-billion-dollar judgement against it for a browser patent owned by Eolas.

The court should throw out the patent infringement judgment because a lower court failed to recognise the Web browsing patent was based on a technology not invented by the company awarded the money, the software giant's opening legal argument ran.

The Eolas Technologies patent that covers browsers recognising and running embedded applications on Web pages was demonstrated by Viola WWW browser developer "Perry" Pei-Yuan Wei in May 1993, more than five years before the Eolas patent was granted, Microsoft lawyer Constantine Trela told a panel of judges at the US Court of Appeals in Washington DC.

But Eolas lawyer Martin Lueck argued back that the patent is valid because Wei abandoned the functionality in later versions of his browser and never demonstrated his browser's ability to run embedded applications to anyone, not even in the May 1993 meeting with Sun engineers. Wei demonstrated Viola on a computer that was not connected to the Internet; therefore, he couldn't show Sun employees an example of his browser running an application over the Internet, Lueck said.

Microsoft is appealing an August 2003 jury decision ordering it to pay Eolas $520.6 million for using the patent in its Internet Explorer browser. A judge in Illinois upheld the jury verdict in January. Microsoft is asking the appeals court to reverse the infringement verdict and send the case back to district court for a new trial.

The three-judge panel questioned Lueck about the validity of the patent, granted to The Regents of the University of California in November 1998. Researcher Michael Doyle developed the technology covered in the patent and went on to found Eolas.

Judge Randall R. Rader suggested Wei didn't abandon Viola and the embedded application functionality but made the functionality public and improved the browser. "That's not what happened," Lueck said. "If you put a feature in a piece of software, and you never show it to anyone, you never give it to anyone, and you never use it again, that's abandonment."

Later versions of Viola, including a version released about three weeks after Wei's meeting with Sun, didn't include the embedded applications functionality, Lueck told the judges. But Rader questioned why the district court judge didn't even allow the jury to consider Viola as so-called prior art, an example of the technology's use before the patent was granted.

The Eolas lawsuit against Microsoft, filed in 1999, prompted an outcry from several Web experts, including Tim Berners-Lee, director of the World Wide Web Consortium. The US Patent and Trademark Office late last year agreed to re-examine the patent and in March rejected it. The Regents of the University of California, holder of the patent, is appealing that decision.

Microsoft lawyer Trela argued that Wei continued to develop Viola after the May 1993 meeting with Sun, even corresponding with Doyle about it. Wei did show the embedded application functionality to Sun engineers even if it was on a stand-alone computer, he added. "If there was some feature that wasn't demonstrated, it was obvious," he said.

The district court judge erred in not allowing the jury to examine the Viola functionality, Trela added. "The jury never got the chance to consider," he said.

Trela also argued that the district court mistakenly allowed the judgment against Microsoft to include products sold outside the US. Previous court cases established that products assembled overseas with non-U.S. parts do not violate a US patent even if a design created in the US does violate a patent.

Operating system code shipped overseas on a so-called golden master disk, used as a master copy of the operating system software, doesn't constitute a component in a computer assembled overseas, which patent law requires, Trela said. Instead, the golden master disk included a type of instruction to the computer, he argued.

Microsoft's golden disk argument could potential reduce the patent infringement award by about two-thirds, because about two-thirds of its products are sold outside the US, said Andy Culbert, associate general counsel for Microsoft.

But Trela faced several questions from the judges on that argument. Rader questioned if computers can function without the operating system code. "That's computer technology," Rader said. "All it is, is instructions. All it is, is X's and O's." But Judge Daniel M. Friedman suggested software code could be viewed as an instruction that can be written on paper, instead of shipped on a master disk.

Eolas lawyer Lueck disagreed with Trela's assessment, saying that the patent infringement happened in the US. Even if the patent law wording cited by Trela doesn't specifically call software a component of a computer, US law allows software to be patented, he said.

The judges will rule on the case at an unspecificied later date.