The US appeals court yesterday rejected the $520.6 million Eolas patent infringement judgement against Microsoft and ordered a new trial in the dispute brought by Eolas Technologies.

In the case, Eolas and the University of California accused Microsoft of improperly including technology in the Internet Explorer Web browser that allows interactive content to be embedded in a Web site, a common practice on the Internet. Eolas sued Microsoft in 1999; the university later joined the suit.

A jury in August 2003 ruled against Microsoft and ordered the company to pay $520.6 million in damages. Judge James Zagel at the US District Court for the Northern District of Illinois in Chicago upheld the jury verdict in January last year.

The ruling triggered an outcry from experts, who argued that the patent should be invalid because of prior art, or examples of the technology's use before the patent was issued. Tim Berners-Lee, director of the World Wide Web Consortium (W3C), urged the US Under Secretary of Commerce for Intellectual Property to invalidate the patent.

Microsoft appealed to the US Court of Appeals for the Federal Circuit in Washington, DC. The case was heard in December. On Wednesday the appeals court reversed the lower court's decision against Microsoft and ordered a new trial, Microsoft said.

"Today’s appeals court decision overturning and remanding the district court verdict in the Eolas patent case is a clear victory not only for Microsoft, but for Internet users as well," Microsoft said in the statement. "We have maintained throughout this process that the Eolas patent is not valid and today’s ruling is a clear affirmation of our position."

Representatives for Eolas and the University of California were not immediately available for comment.