Uniloc claims it had demonstrated its software to Microsoft in 1993, but that instead of licensing it Redmond went on to develop an almost identical product. Microsoft has consistently claimed it used a different activation method, and furthermore argues that Uniloc's patent is invalid because the technique was obvious.
This is the third ruling in the Uniloc-Microsoft patent dispute and basically puts the companies back were they started six years ago. Microsoft originally won a summary judgment on the dispute in 2007, but Uniloc appealed that decision which resulted in the now nullified $388 million award. Uniloc can appeal the current verdict and, if it wins, Microsoft would have the right to a new trial.
The Uniloc case is just one of two major patent battles Microsoft is currently facing. They are also being hounded by a lawsuit filed against them by Canadian software maker i4i to the tune of $200 million, which centers on Microsoft's use of custom XML tags in Word 2003 and Word 2007.