A federal appeals court this morning upheld an injunction against Microsoft that -- barring settlement or further appeal -- will prevent the company, as of Jan. 11, from selling copies of Microsoft Word in the U.S. containing XML technology found to infringe on a patent held by i4i Inc., a small Toronto company.

Microsoft has integrated XML-based file formats deeply into the word-processing program, and the larger Office suite, but the company indicated in a statement this morning that the specific feature found to infringe on the i4i patent is more narrow. Microsoft said it's prepared to comply with the terms of the injunction by selling versions of Word and Office with the technology in question removed.

"With respect to Microsoft Word 2007 and Microsoft Office 2007, we have been preparing for this possibility since the District Court issued its injunction in August 2009 and have put the wheels in motion to remove this little-used feature from these products," said Kevin Kutz, a Microsoft spokesman, in the statement. "Therefore, we expect to have copies of Microsoft Word 2007 and Office 2007, with this feature removed, available for U.S. sale and distribution by the injunction date. In addition, the beta versions of Microsoft Word 2010 and Microsoft Office 2010, which are available now for downloading, do not contain the technology covered by the injunction."

The statement noted that Microsoft is also "considering our legal options, which could include a request for a rehearing by the Federal Circuit Court of Appeals en banc or a request for a writ of certiorari from the U.S. Supreme Court."

In its ruling, (PDF, 48 pages) the U.S. Court of Appeals for the Federal Circuit also upheld the jury verdict of $200 million against Microsoft, and another $40 million in "enhanced damages" levied against the company by the court.

Loudon Owen, the chairman of i4i, said in a statement that the ruling is "both a vindication for i4i and a war cry for talented inventors whose patents are infringed." He added, The same guts and integrity that are needed to invent and go against the herd, are at the heart of success in patent litigation against a behemoth like Microsoft."

Microsoft had warned in earlier court filing that the injunction would cause "massive disruption" for its business, hindering sales not just of Word but of the entire Microsoft Office suite. In response, i4i had said that Microsoft's incorporation of the infringing technology into Word had essentially ruined its business.

The Redmond company noted that the ruling doesn't affect copies of Microsoft Word or Office sold in the U.S. prior to the Jan. 11 injunction date.