How Microsoft Could Win By Losing

(MoneyWatch)  A lot has been made (including by me) about the suit Microsoft lost to i4i over a patent covering use of XML to create customized templates in Word. Opinions have largely fallen into two camps: those who, like me, believe that i4i is a legitimate software vendor that Microsoft jobbed out of its market by stealing its invention and then dominating the markets i4i could have occupied, and those, like Steven J. Vaughn-Nichols and Alexander Wolfe, who think i4i is a patent troll hoping for a windfall, and that its victory is yet another sign that our patent system needs reforming.

But there's another way of looking at this, and that's as a backhanded victory for Microsoft. Here are three ways Microsoft could win from losing:

• Microsoft wins sympathy points. As Wolfe notes, "Microsoft holds some seemingly applicable XML patents of its own." How come it doesn't get the benefit of that? And Vaughn-Nichols, a noted Microsoft-basher in his own right, actually writes that "Microsoft doesn't deserve this kind of punishment."
• Microsoft could strip out the offending custom XML and then turn around and try to enforce its own XML patents against the likes of ODF, Open Office and perhaps, who knows, even Apple and Google (as my colleague Erik Sherman theorized last week).
• Finally, Microsoft could agree to license custom XML from i4i with the understanding that i4i will also enforce its patent against other vendors using custom XML, which would both allow Microsoft to continue using its applications as written while wounding its competition (with the added benefit of looking innocent).

It's too easy to dismiss patent suits because they've been abused by many, and I think i4i actually has a leg to stand on. It would be nice to see i4i win its case, and to go on to win more business as a result, if for no other reason than because this could open the door to more competition in markets currently unfairly dominated by Microsoft. But the more likely result is that Microsoft will somehow either prevail thanks to much greater financial resources, or find a way to turn this to its advantage. However it shakes out, the result will likely have as much of an impact on Google, Apple and other productivity application vendors as it will on Microsoft itself.

[Image source: John Linwood via Flickr]