A panel of judges on Thursday is scheduled to hear Microsoft's appeal against the $520.6 million fine it faces in settlement of the controversial Eolas patent.

Microsoft was ordered to pay damages after a court declared that Internet Explorer (IE) infringed on that patent. Eolas Technologies and the University of California accused Microsoft of improperly including technology within Internet Explorer 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 last year 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.

Prior art denies patent

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.

The US Patent and Trademark Office (USPTO) late last year agreed to reexamine the patent and in March rejected it. The University of California, holder of the patent, is appealing that decision.

With the process at the USPTO still underway, the US Court of Appeals for the Federal Circuit in Washington DC is scheduled to hear the Eolas case on Thursday. Microsoft plans to question the validity of the patent, spokesman Jim Desler said.

"One of our main points is going to be over the question of the validity of the patent and that the jury was prevented from hearing and considering evidence related to important prior art during the course of the trial," Desler said.

Half a billion dollar dance goes on

The University of California and Eolas are confident of their case, said Trey Davis, director of special projects and new media for the university.

"The patent was appropriately issued to the university and consistent with the jury's finding that Microsoft infringed upon the patent, Microsoft owes us in excess of half a billion dollars," Davis said.

The University of California was issued the patent in November 1998. The technology covered in the patent was developed by researcher Michael Doyle, who went on to found Eolas. The patent describes in part "a system allowing a user of a browser program to access and execute an embedded program object." Eolas has exclusive rights to use and license the patent.