Sept. 4 (Bloomberg) -- Microsoft Corp., the world’s biggest software maker, won’t have to immediately alter its Word program or halt sales because of a patent-infringement case it lost.

A U.S. appeals court yesterday put on hold an order imposed last month that would have limited Microsoft’s ability to offer some features in Word. The order won’t take effect until an appeal of the underlying patent case is resolved. Oral arguments on the appeal are scheduled for Sept. 23 in Washington.

Closely held I4i LP of Canada won a $200 million verdict - - since increased to $290 million -- on a claim that Word uses its patented invention related to customizing extensible markup language, or XML, a way of encoding data to exchange information among programs.

“We are happy with the result and look forward to presenting our arguments on the main issues on Sept. 23,” Kevin Kutz, a Microsoft spokesman, said in a statement.

Microsoft was under an Oct. 10 deadline to “to redesign its flagship Word software to remove an obscure functionality,” or be “compelled to stop distributing Word and the popular Office software suite,” Redmond, Washington- based Microsoft has said in court papers.

Office Sales

The company said it wouldn’t be able to complete the work by that deadline. Word is part of Microsoft’s Office software, which is used by more than 500 million people. The unit that sells Office is Microsoft’s biggest, with $18.9 billion in sales in the year ended June 30.

In granting the request to put the order, called an injunction, on hold, the U.S. Court of Appeals for the Federal Circuit in Washington said it was acting “without prejudicing the ultimate determination of this case.”

I4i Chairman Loudon Owen said the company is confident the appeals court will rule that the lower court case “was the correct decision and that I4i will prevail on the appeal.”

“Microsoft’s scare tactics about the consequences of the injunction cannot shield it from the imminent review of the case by the Federal Circuit,” Owen said today in a statement.

XML is a common way of encoding data, and nothing in the lower court ordered would have prevented Microsoft from continuing to offer that feature in Word, or for allowing customized XML when it’s used in plain text. The disputed feature is one used by large companies to add special data to Word files, such as information in forms submitted by customers.

Key Feature

Customized XML is a key feature of the software and services sold by Toronto-based I4i, Owen has said. Customers including drugmakers Merck & Co. and Bayer AG use I4i’s software to make sure that people get the correct and most up- to-date information on the labels of their medicine, he said in an interview last month.

The two sides agreed that Microsoft wouldn’t have to pay the money until the appeal is resolved, since there’s no question Microsoft would have the money if it lost.

Microsoft rose 51 cents to $24.62 in Nasdaq Stock Market trading. The shares have climbed 27 percent this year.

The case is I4i LP v. Microsoft Corp., 2009-1504, U.S. Court of Appeals for the Federal Circuit (Washington). The lower court case is I4i LP v. Microsoft Corp., 07cv113, U.S. District Court, Eastern District of Texas (Tyler).

To contact the reporters on this story: Susan Decker in Washington at sdecker1@bloomberg.net; William McQuillen in Washington at bmcquillen@bloomberg.net.

Last Updated: September 4, 2009 16:11 EDT