A Providence jury hears all about the "Smart Tag" technology at the center of the lawsuit filed against Microsoft.

01:00 AM EDT on Thursday, September 16, 2004

BY TIMOTHY C. BARMANN
Journal Staff Writer

PROVIDENCE -- Jurors for the Microsoft patent-lawsuit trial in U.S. District Court got an earful of computer jargon yesterday.

They heard lawyers and an expert witness bandy about arcane terms such as "compiler," "source code" and "dynamic-link libraries."

The four-man, four-woman panel is being asked to decide whether Microsoft Corp.'s popular line of Office products, including Word and Excel, infringe on a patent held by a small, Cayman Islands software company.

Arendi AS and its Providence-based subsidiary, Arendi USA, contend that Microsoft's "Smart Tag" technology infringes on Arendi's patent number 6,323,853, issued three years ago.

A patent protects an inventor by excluding others from making, selling or using the invention. It's a temporary right issued by the U.S. Patent and Trademark Office that generally expires 20 years after the application is filed.

Smart Tags are key features found in the current versions of Excel, Word, Powerpoint and Access. These programs are packaged together as Microsoft Office.

Essentially, Smart Tags simplify the task of inserting information, such as a person's address, into a document.

For example, while writing a letter in Word, a user types in a person's first and last name. Word automatically underlines the name, and offers the option of looking it up in the user's address book stored in Outlook, another Microsoft program that manages names and addresses.

If the name is found, the feature lets the user insert the address with a mouse click.

Arendi's president, Atle Hedloy, devised similar technology in 1997 that could be added to a number of different programs, including Microsoft Word and the once-popular word processing program, WordPerfect.

The case appears to be important to Microsoft. One of its top executives, Steven Sinofsky, has been attending the trial, sitting next to the lead attorneys. He is expected to testify.

Sinofsky, a 15-year veteran of the software giant, is the senior vice president in charge of the company's Office products.

The Office collection of programs is a major part of Microsoft's business. The "Information Worker" division that makes Office had revenues of $10.8 billion in fiscal year 2004, which ended June 30, according to the company's annual report, filed with securities regulators Sept. 1. That represented about 30 percent of Microsoft's total revenues for the year of $36.8 billion.

Microsoft is a frequent target of patent-infringement lawsuits, and is currently facing about 30 such claims from various companies, the company said.

The annual report cited four of those cases, including the Arendi suit. Microsoft warned that if it loses some of the pending cases, it could suffer "significant monetary damages or injunctive relief against us, adversely affecting distribution of our operating system or application products. The risks . . . may result in material settlements."

The arguments presented yesterday delved into the often confusing and arcane world of computers and programming.

Jurors had to sit through a wide range of testimony -- from the basic to the highly technical.

David Klausner, a computer consultant hired by Arendi, said he had examined several Microsoft Office products, as well as the computer programming instructions used to make them, and concluded that they infringed on seven aspects of Arendi's patent.

In getting to that conclusion, his testimony sounded like a brief lesson in computer science. It included the obvious, such as what a CD-ROM looks like.

But it also contained highly technical explanations, such as how one can write a customized Smart Tag DLL using certain programming tools.

The jury appeared attentive throughout the testimony, often bending forward in their seats to view evidence presented on flat-screen monitors in the jury box.

In an interview after the testimony, Arendi lawyer Paul Hayes said that expounding on the technical details of the case cannot be avoided.

"The problem with all of these cases is you have to go through all this technical stuff for appeal purposes," he said. "You can't short-cut it.

"I think the jury will clearly comprehend" the issues, he added. "You heard the testimony. It's pretty clear."

The case is being heard before chief District Court Judge Ernest C. Torres. It is taking place in Providence because Hedloy, the inventor, filed the patent challenge in U.S. District Court here in July 2002.

He testified that he opened an office in Providence a couple of months earlier in order to file the suit against Microsoft in U.S. courts. The company's only line of business right now is pursuing the suit, Hedloy testified yesterday. He and his wife are the sole owners of Arendi, he said.

Timothy C. Barmann covers technology, utilities and telecommunications. He can be reached at tbarmann [at] projo.com