A US appeals court reversed on Tuesday a ruling that said Microsoft did not infringe a Uniloc patent designed to prevent software piracy, but upheld a ruling that the infringement was not willful.
The US Court of Appeals for the Federal Circuit also allowed a new trial on damages, saying the "jury's damages award was fundamentally tainted."
A Rhode Island jury had awarded Uniloc US$388 million in damages.
Uniloc successfully sued Microsoft in September 2009 in the District Court of Rhode Island, only to have the decision overturned by a judge during an appeal.
The original jury verdict against Microsoft centered on the vendor's use of Uniloc's patented anti-piracy activation processes that Uniloc claimed was used within Windows XP and Office.
The activation method was patented in the 1990s by Australian inventor, Ric Richardson.
(additional reporting by Liam Tung)