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Microsoft loses round one in latest patent infringement case in East Texas

By | March 16, 2010, 4:30pm PDT

VirnetX won the initial round in its patent-infringement case against Microsoft over VPN technology.

A Texas jury on March 16 recommended Microsoft pay VirnetX $105.75 million for willfully infringing on two VirnetX networking patents which VirnetX claims Microsoft used without licensing. VirnetX said Microsoft has used the VPN technologies in question in Windows Server 2003, XP, Vista, Live Communications Server, Windows Messenger, Office Communicator and various versions of Office.

Microsoft is appealing the verdict. Here’s the statement from Kevin Kutz, Director of Microsoft Public Affairs:

“We are disappointed by the jury’s verdict. We respect others’ intellectual property, and we believe the evidence demonstrated that we do not infringe and the patents are invalid. We believe the award of damages is legally and factually unsupported, so we will ask the court to overturn the verdict.”

The U.S. District Court in East Tyler, Texas, has been the scene of many a patent lawsuit against not just Microsoft, but other tech companies as well. Patent cases brought against Microsoft there include the Eolas Z4 cases. McKool Smith, the law firm representing VirnetX is the same one that represented i4i, which won a $200-million-plus patent-infringement verdict against Microsoft. Judge Leonard Davis, the same judge who presided over the i4i case, was also the judge in the VirnetX matter.

VirnetX had sought $242 million in its case against Microsoft.

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Mary Jo has covered the tech industry for more than 25 years for a variety of publications and Web sites, and is a frequent guest on radio, TV and podcasts, speaking about all things Microsoft-related. She is the author of Microsoft 2.0: How Microsoft plans to stay relevant in the post-Gates era (John Wiley & Sons, 2008).

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Mary-Jo Foley

Freelance journalist/blogger Mary Jo Foley has nothing to disclose. WYSIWYG (what you see is what you get). I do not own Microsoft stock or stock in any of its partners or competitors. I have no business ventures that are sponsored by/funded by Microsoft or any of its partners or competitors.

Biography

Mary-Jo Foley

Mary Jo Foley has covered the tech industry for 25 years for a variety of publications, including ZDNet, eWeek and Baseline. She has kept close tabs on Microsoft strategy, products and technologies for the past 10 years. In the late 1990s, she penned the award-winning "At The Evil Empire" column for ZDNet, and more recently the Microsoft Watch blog for Ziff Davis.

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RE: Microsoft loses round one in latest patent infringement case in East Texas
jackson1984-24316069205748857739440257893812 10th Oct
Marvelous information, I would thank to creator becaus i've recognized a whole lot of thrilling data. I am going to subscribe nfl wholesale to this running a blog internet site. Favored needs happy
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software patents are BS
frankenstone 16th Mar 2010
software patents are bu**sh**. I'm for MS on this one, just on principal. Not because I like MS.

And the patent system in general is starting to look like a broken idea.
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One has to wonder...
jasonp@... 17th Mar 2010
if you're against Microsoft every time they go after someone for the exact same thing. And if so, one would have to question whether you would simply accept this as a case of the bully getting his nose busted on the schoolyard for messing with the wrong kid. MS won't hesitate to put a company out of business over IP disputes, so I generally cheer when they get smacked upside the head.
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I generally cheer when...
exolon 17th Mar 2010
...software patent infringement cases are dismissed. Every case won just increases the chance of future cases winning and encourages extortive behaviour by companies like Eolas who do nothing other than game the system.

And how did they arrive at a damages figure of over $200M, or even the $100M recommended by the jury in this case? I see that VirnetX apparently actually produce real products, but can they really have lost anything like that amount?

The minefield of stupidly over-broad, obvious software patents does nothing good - it's just legal extortion and a massive chilling effect which stifles innovation. Certainly Microsoft are guilty of abusing this same system, just like Apple who think they own multi-touch (just like when they litigated against Digital Research for copying their desktop GUI in GEM, when actually Apple had copied it from Xerox - someone got sued and had to cripple their product for all the wrong reasons).
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Usually
Rick_K 17th Mar 2010
And how did they arrive at a damages figure of over $200M, or even
the $100M recommended by the jury in this case? I see that VirnetX
apparently actually produce real products, but can they really have lost
anything like that amount?


It is for the willful infringement part. That is saying that the issue
was brought to the offenders attention, and the offender said, ?Screw
off?. At least that is what I am reading it to say. So the judge will often
add additional penalties to the amount a jury awards. The plaintiff will
enter seeking a specific amount, the judge is free to modify that amount
either up or down.
it's called the treble award, from my limited recollection of business law.

Willfull infringement certainly starts at the point a person or company is aware or existing patents on something they are doing, but not all cases where patents were known turn into willfull infringement.
There are a lot of variables and how you or your lawyer or lawyers handled things up front.

Like anything else it's not cut and dry and certainly you are going to the extreme in saying it means they were told about it and said "screw you".

Apple was saved by the statute of limitations after unsuccessfully going after Microsoft on IP MS was licensing...I never understood that suit....and Xerox sued Apple after it sued MS but it was too late. They had a strong case. It's a wonder some companies survive that go about business and not patenting everything under the sun.
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Principal?
781lc 17th Mar 2010
And what would that be? No one, since the beginning of the digital age, has plagiarized, copied or used properties of others so completely in disregard of Principal.

All this nonsensical stuff about Apple that gets the juveniles so riled up ... where do you think Windows came from. Even windows 7 copies the Dock from the Mac. One of the richest men on earth has proven that you can get away with about anything you are brazen enough to do and then defend with money.
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so what?
John N. 18th Mar 2010
Apple runs stupid, smug little annoying commercials, they never even mention any of their own products! I have never heard the words "Snow Leopard" on telivision EVER! HUH? Microsoft is kicking their ass with their "Windows7 was MY idea", and other such positive spots. So, at least in finding advertizing people who know wtf's up, Microsoft wins... Apple has had their chance to rule, but then priced themselves out of most people's minds... the pc will always rule, on Win7 or Linux. imho
Most Software are not valid and for small companies like i4i and VirnetX is it just a way to get free money. They cannot make it on their own so take it from someone everyone hates. Talk about redistributing the wealth. Something is also wrong with the fact the same judge that has already ruled against MS got this case (there is no bias there, right).

If this patent was valid why did they not pursue this when XP came out, Windows Server 2003 (both these product are so old they are at end of life. But it does not come out until 2 OS later (Win7) and 2 server later (Windows 2008). My theory is the political/judicial climate was not right to win it earlier because it was such a weak case, but now MS is an easy target and judges seem more than willing to take from MS and give to these small companies.

MS should dig into their patent library and come up with their own counter-suits against i4i and VurnetX. Chances are very good they can make a good case for a least a few of the patents they own being improperly used and get their money back.
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Yes, Look at the History ...
laplatakid 17th Mar 2010
XP came out in 2001. That's nine years ago. Figure it took a year to identify and document the patent violation(s) if VurnetX started looking immediately. That brings us to 2002 and 8 years. It's likely that if they then filed a lawsuit immediately the discovery process, various delaying motions, and so on took another several years to complete. Then the actual trial, somethating that was undoubtedly long and complex.

I don't think it's particularly surprising that the jury just reached a verdict.
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You're right!
914four 17th Mar 2010
Microsoft should counter-sue them for using the page up /page down keys which they patented in, uh, 2008?

"Nothing requires less information, education or accomplishment than saying that everything's wrong." - P.J. O'Rourke
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About i4i and VirnetX
Grayson Peddie 16th Mar 2010
http://www.i4i.com/overview.htm
http://www.virnetx.com/company.php

If you go to virnetx.com, the Adobe Flash content contains audio.
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Everything Microsoft has be a rip off of someone else hard work.
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^^^ Troll above. Ignore ^^^
Hallowed are the Ori 17th Mar 2010
nt
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Don't Know Your History!
R.T.F.M. 17th Mar 2010
You think Microsoft wrote NT? You need to study history. Microsoft "bought" NT and then made a mess out of it when they tried to recode it to work on Intel CPUs!!! Win 7 is a descendant of NT and Microsoft is still trying to "get it right."
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I thought that
medezark@... 17th Mar 2010
The NT Kernel was outsourced to DEC programmers to work through a hardware abstraction layer in order to allow it to run on multiple different CPU's but with a specific emphasis on the intel I860, but because of inherent flaws in the I860 Risc archetecture it was targetted agains I386 cpu's.
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Well...
zkiwi Updated - 17th Mar 2010
Wikipedia's version is about as close to the truth that it makes no difference, and they say...

"Meanwhile Microsoft continued to develop Windows NT. The main architect of the system was Dave Cutler, one of the chief architects of VMS at Digital Equipment Corporation (later purchased by Compaq, now part of Hewlett-Packard).[2] Microsoft hired him in August 1988 to create a successor to OS/2, but Cutler created a completely new system instead. Cutler had been developing a follow-on to VMS at DEC called Mica, and when DEC dropped the project he brought the expertise and around 20 engineers with him to Microsoft. DEC also believed he brought Mica's code to Microsoft and sued.[3] Microsoft eventually paid US$150 million and agreed to support DEC's Alpha CPU chip in NT."
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Windows NT and IBM OS2
Rick_K 17th Mar 2010
Were the branch offs of a collaboration, between the two companies.
Each wanted different thing from the new OS, IBM continued to develop
its version of OS2 which was know as OS2 Warp. OS2 Warp was better
than NT, but the better product does not always win.
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I disagree.
914four 18th Mar 2010
Warp was NOT better than NT, NT 3.1 blew OS/2 2.x away in terms of availability and stability. I could get into the reasons but this is not the forum for it. (Any collectors out there want to buy the NT 3.1 beta SDKs?)
OS/2 Warp (3.x) was an improvement over the 2.x stream, but NT 3.1 was still far superior. The reason that Warp eventually became a better product was because Microsoft released NT 3.5/3.51, which was a huge step backwards in availability in favor of better performance. By the time Warp 4.0 came out (late 1996), NT 4.0 had been released and NT had reached it's lowest point in terms of availability and stability. Sure it was faster, but by then I think Warp had become the better OS.
Microsoft "devolved" to NT 4 because it's target was Netware (anyone remember MS visine? The Netware migration tools that "get the red out") which was both fast and stable. If they had continued on the track of NT 3.1 (stayed the DEC path) cpus would have eventually caught up and they would have had a much better product. But customers said "Novell is faster" so Billy said "make it so" and the rest is history.

Of course this is just my opinion, I could be wrong.
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Not a bad paraphrase...
zkiwi 19th Mar 2010
Kudos to you for doing that quite succinctly.
four layers which they wanted to do with NT but they couldn't due to being DEC IP so they created a 2 layer system with only user and kernel mode.
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Nope, not ignore
still not nice 17th Mar 2010
Sounds like he speaketh da truth..
Good article, I hope Apple wins as well...

{Apple's filed suit against HTC, that is infringing 20 patents
"related to the iPhone's user interface, underlying
architecture, and hardware}
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It isn't necessarily a loss
ctcjim@... 17th Mar 2010
According to my lawyer it's only a loss if MS's council
made less than VirnetX's happy
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Hmmm, must be a weekday.
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Not another troll surely...
johnmckay 17th Mar 2010
Is someone going to add something meaningful or is it just the usual Linux / Mac trolls writing today?

Personally I thank MS for bring computing to the masses. If they have to pay then so be it... but I think steal is a strong term in the murky world of software patents. There's probably millions or more, and nobody can possibly say what they're doing hasn't been done before. Let's get real. If payment is due I'm sure it will be paid. MeantimeI'll continue to enjoy MS and th myriad of companies involved in bringing my media etc to the PC.
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I'm sure you will
still not nice 17th Mar 2010
And make sure you ask your handlers for a bonus for the day for saying that.

lol... grin
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Microsoft has a long history of ?partnering? with smaller companies;
gaining access to the smaller company?s code, copying it, and
including it into windows. With larger companies (like Sun) Microsoft?s
tactic was to license software, modify it with windows specific add
ons, and distribute it. The effort was to "wrest control? of the original
vendors software. THis was done so often the practice was named
Embrace, Extend, and Extinguish (EE&E).

Microsoft also has a history of including ?non-assertion of patents?
clauses in their OEM licenses. This would allow Microsoft to freely take
the patented Intellectual Property of any OEM seeking licenses to
distribute windows, with their hardware. Is it right? No. But that is the
way Microsoft has been doing business for so long, it has become
accepted.
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That's why the law should be changed
still not nice 17th Mar 2010
Either break up Micro$oft in smaller pieces, or turn them into a public utility that's heavily regulated, heavily controlled.
Apple's history has been to use Open source, promising them an OS, then shutting them off after they've done the work Apple wanted, e.g. GCD and openDarwin team. Jobs crapped all over them and they quit in 2006 completely and publically disgusted at Apple. Others picked up the project under a different name but it will never be a full version. Jobs kills all competitors one way or another.

Apple's other main strategy besides using open source to create the code they patent:
1. Watch for markets heating up and the best innovation therein that has not been patented.

2. Patent said innovation as Apples before the company that created it does

3. Then create product based on stolen innovation.

4. Sue company that Apple stole the innovation and patented it from in the first place.

Yes, Steve Jobs and company is a love bunch of fellows.
At least Microsoft properly licences what it uses unless what it's doing does touch on one of thousands of vague patents in which case the patent is invalid.

It's funny how Apple tried to sue Microsoft over "stolen IP" only for the court to find that Microsoft was legally licensing said code.
Are Apple's lawyers that flippin' stupid?

Apple has never created a piece of technology by themselves without first stealing all of the ideas for it from others. Jobs says so himself.

http://www.skuggen.com/?p=1982

Look at that crooked smirk from a very crooked man.
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Once again, 9% vs. 90%
still not nice 20th Mar 2010
When it becomes inescapable that I have to use an Apple (at home or work), then I'll be crybabying about it to mommy, too.

In the meantime, bend over for Ballmer. I hear tell he awaits...

lol.. grin
most of the way there.

And you do bend over for Jobs if you own an iphone of itouch or ordered an ipad since you have to buy their content and nobody elses.

And people always talk about MS lockin, which is stupid. MS shops store data on SQL Server, which I can get the data from anytime I like and migrate it to Linux or any other system w/o a problem. The Data IS the system.

But go ahead and limit yourself, free mp3s being blocked for download by your "system" is so sweet. I'm sure you love Jobs for making up your mind for you. Don't worry much though, women that have been with Jobs say he's not packing much.
Microsoft is just a big bully and willingly steals code and gives nothing back, all of the time. It's good to see that companies are winning these cases against Microsoft. Unfortunately, I don't think Microsoft has any plans to stop this type of activity. They've done it for years, and it seems to keep happening time and time again. If you buy Microsoft software, you are essentially contributing to this cause.

Software patents are very harmful though. We need to get rid of them once and for all. Microsoft owns so many software patents that I bet they can't even list them all. They use them to further bully companies to pay them royalties (like Amazon a few weeks ago). Just bad all around.
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If the underdog is in the right...
chas_2 17th Mar 2010
East Texas (and I say this living in Houston) is not exactly a tech-savvy capital in this state. I could see the plaintiffs bringing the case to East Texas simply because they figured (correctly) the legal system there would be sympathetic, and anti-big-business. If Microsoft legitimately didn't infringe on any patents, and got the book thrown at them for no other reason than their size, that's not justice. That's piling on.

I'm with others, though, that feel software patenting is a bad idea. There are only so many ways any particular problem can be solved, and one mega-corporation should never own them all.
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East Texas has a long, long, long history of being the place to file patent (and other) lawsuits due to the jury system there being very generous to awarding hugh damage awards.
"The Tyler courthouse is the main office for the Eastern District of Texas, which is viewed as a favorable venue for patent suits. For instance, according to data cited in a 2006 Technology Reviewarticle headlined "A Haven for Patent Pirates," plaintiffs prevail in patent lawsuits that go to trial in the district's Marshall courthouse 88% of the time, vs. 68% nationwide. " this is from an Aug 2008 article in Computerword. Nothing has really changed since then.
As a proud East Texan, I must point out that the article says the case was tried in "East Tyler, Texas". The location, is actually Marshall, Texas (somewhat east of Tyler), known as one the nation's prime places to try patent cases. We who live around Marshall are sensitive to such slights. We suffer because even Google Maps knows nothing of our region. Sorry.
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When is Kutz's funeral?
nottheusual1 17th Mar 2010
I'm sure he was struck dead by lightning after that fibberoony and I'd like to send flowers.
But he's alive and well. Why not send him flowers anyway with just a little 'love ya' note attached to make sure he knows your feelings....
So Microsoft dropped a couple of hundred million in fines for deliberately stealing i4i's tech and "innovating" it into Windows, now they drop another hundred million $$$ for the same offence against a different company, no problem at all, just screw the Windows gravy train for more cash!

Microsoft use this MO so regulalrly it almost defines them.

1. Steal somebodies intellectual property
2. "Innovate" the stolen tech into Windows
3. Try to destroy the victims in court through extended, expensive litigation

http://www.groklaw.net/staticpages/index.php?page=2005010107100653
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Wah.
Hallowed are the Ori 17th Mar 2010
Want some nice cheese to go with that whine?
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Does it have...
still not nice 17th Mar 2010
holes in it like yours does?

lol... grin
Apple operates like this, to paraphrase another poster.

1. Patent troll for innovative ideas in markets that look to be heating up
2. Steal those ideas and patent them as Apple's IP.
3. actually implement those innovations
4. Sue the company from which they stole the ideas.

It's amazing you can keep talking trash about MS all this time with your fondness for Apple and their openly admitted business practice of stealing everyone else's ideas as their own.
They don't admit that is what they patent, but it obviously follows. Maybe a little change here or there, but not enough to ethically file for a patent.
If what you say is true about MS, at least they don't steal, patent, use then sue the company they took it from to add insult to injury. Only Apple takes things that far kitty kat.

http://www.skuggen.com/?p=1982
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you are.
xuniL_z 22nd Mar 2010
And that's what matters.

thanks for your continued support!
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RE: Microsoft loses round one in latest patent infringement case in East Texas
jackson1984-24316069205748857739440257893812 10th Oct
Marvelous information, I would thank to creator becaus i've recognized a whole lot of thrilling data. I am going to subscribe nfl wholesale to this running a blog internet site. Favored needs happy

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