@devnull
They are not patenting XML, they are patenting very specifically using XML to do a specific task as applied to word docs.
They came up with this tech, they sold it as their main product and were an MS partner for ages. MS looked at what they were doing, thought it was interesting, and stole the idea. Since MS did not steal the code, rather re-implemented it, copyright would not apply.
They are simply fortunate they applied for a patent on this process, (which is no more stupid than patenting a "business method,") and now have a club to beat MS with. MS is 100% in the wrong on this, and it's nice to see someone feeding them their own dogfood. (MS holds many software patents, a large number of which are overly broad. They have used many of these to beat competition about the ears and force them out of business.)
Now, if you want to argue that SOFTWARE PATENTS IN GENERAL are a terrible idea, I would agree with you 100%. So are "business method" patents, and the bloody lot of them should be thrown out. That said, as far as software patents go, this is not one of the bad ones. It's actually reasonably specific. For a software patent, it's positively narrow in focus. (Seriously, go read some of MS or Apple's software patents.)
i4i is quite simply not a patent troll. They are a legitimate business that once saw a need in the MS Office ecosystem, took advantage of that by innovating and creating a product, then got their entire business taken away from them on a whim by Microsoft. This is completely different than a company that buys up a patent that is overly broad/generic and goes after everyone they can as a source of revenue.
So let me reiterate: software patents in general (and business method patents) are a terrible, horrible, and fantastically stupid idea. Accepting that they do exist, however, i4i's patent is not an overly broad one, and the actions they took against Microsoft were not an offensive strike, but purely a defence...Microsoft struck first.