Microsoft wards off voice-data lawsuit

The U.S. Court of Appeals for the Federal Circuit said in a 2-1 ruling on Tuesday that Multi-Tech Systems' patents were not violated and "we conclude that the district court did not err" in its earlier ruling that sided with Microsoft.

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In February 2000, Multi-Tech Systems, a Mounds View, Minn.-based company that sells modems, routers and Voice over Internet Protocol (VoIP) gateways, began to file a flurry of patent lawsuits. At first, it targeted Compaq Computer, Dell and Gateway; and then, a week later, it filed suit against 10 Internet telephony companies, including Net2Phone and Vocaltec Communications. At the time, Multi-Tech's attorney told CNET News.com that "there are probably a hundred computer companies out there, and we didn't want to sue 100 companies, but the rest of the industry will be hearing from us."

Software patents have become an increasingly divisive issue in the technology community, with Microsoft becoming a target of patent infringement suits. Last August, Eolas Technologies won a $521 million lawsuit against the software maker after a federal judge found Internet Explorer ran afoul of its patents.

Multi-Tech claimed that four of its patents broadly cover the use of computers to transfer data, voice or video, in packet form through dial-up modems or high-speed connections to the Internet, including VoIP conversations. The linchpin patent, numbered 5,452,289 and granted in 1995, says that "a personal communications system is described which includes components of software and hardware operating in conjunction with a personal computer."

A review of court decisions since February 2000 indicates that Multi-Tech has not prevailed in a single patent case it filed since that date, though it did settle some out of court.

In its ruling this week, the appeals court did not conclude that Multi-Tech's patents were entirely invalid or unenforceable. Rather, the ruling written by Judge Alan Lourie was narrow and focused on whether the patents covered Internet traffic and whether Microsoft had violated them. In addition, it cleared Internet phone service provider Net2Phone, also a party to the case, of patent infringement.

Multi-Tech lost both of its arguments against Microsoft. The communications gear maker had claimed the patents covered Internet voice communications, but the appeals court said "an examination of the...patent's prosecution history confirms that Multi-Tech viewed its inventions as being limited to communications over a telephone line." The appeals court also concluded that because the definitions of terms in the patents like "multiplexing" and "digitizing" favored Microsoft, it would uphold a district court's ruling from October 2002.

A dissent by Judge Randall Rader, however, said that Multi-Tech's patents do "not foreclose use of the Internet."

"This court today asserts that the language in the specification regarding 'over' and 'through' a telephone line somehow requires the claims to cover only those communication networks where nothing but a telephone line lies between the two end sites," Rader wrote. "To my eyes, that leap in logic is akin to Evel Knievel jumping the Snake River Gorge on a motorcycle. Like Mr. Knievel, this court's conclusion falls short."

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Paul Kraska, a spokesman for Multi-Tech, said "we don't have a comment right now." Microsoft did not immediately respond to a request for comment.

This is not the first time that Multi-Tech has been enmeshed in a hotly contested patent suit. In the early 1990s, Multi-Tech filed a lawsuit claiming that a Hayes Microcomputer Products' patent over escape characters used in modems was invalid and unenforceable.

Since it launched its lawsuits in February 2000, Multi-Tech has announced that it has been granted a patent for remotely upgrading the firmware of modems. As of last summer, the company claimed to have been issued 61 patents.

Multi-Tech's latest legal tussle started in February 2000, when Net2Phone was one of the firms Multi-Tech accused of patent infringement. Apparently worried about whether it might run afoul of those patents as well, Microsoft sued Multi-Tech in a procedural move that it intended would lead a court to clarify the situation. Multi-Tech responded by accusing Microsoft of patent infringement.