The US District Court for the Northern District of California has ruled that Microsoft cannot ship a networking feature in the next version of Windows--codenamed Longhorn--because it infringes on a start-up company's patents. The technology, codenamed Chimney, offloads networking tasks from a system's processor, leaving more power for applications. Microsoft was also planning to ship Chimney as part of its Scalable Networking Pack for Windows Server 2003, which has yet to materialize but was due late last year.

According to court documents, a San Jose start-up named Alacritech claims ownership of two patents for what it calls TCP (Transmission Control Protocol) offloading technology. Alacritech shared this information with Microsoft in 1998, hoping to license it to the software giant. But Microsoft broke off talks and then announced a surprisingly similar technology, Chimney, in May 2003. Alacritech offered Microsoft a license at that time, but was rebuffed, so it filed a lawsuit in August 2004.

"After Alacritech discovered that Microsoft Chimney is based on intellectual property that we developed, patented and own, we offered Microsoft a license," Alacritech CEO Larry Boucher says. "Microsoft rejected licensing terms that would be acceptable to us. We were forced to sue Microsoft to stop them from continuing to infringe, and inducing others to infringe, on our intellectual property rights."

In November 2004, Alacritech filed a motion for preliminary injunction, to prevent Microsoft from shipping the technology as part of its Scalable Networking Pack for Windows Server 2003. This week, that injunction was granted, and Microsoft has 21 days to appeal. A Microsoft spokesperson says that Chimney was developed independently by developers at the software giant.