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

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

Summary: VirnetX won the initial round in its patent-infringement case against Microsoft over VPN technology. A Texas jury recommended Microsoft pay VirnetX $105.75 million for willfully infringing on two VirnetX networking patents which VirnetX claims Microsoft used without licensing. Microsoft is appealing the verdict.

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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.

Topics: Telcos, Microsoft, Networking, Operating Systems, Software, Windows

About

Mary Jo has covered the tech industry for 30 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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43 comments
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  • software patents are BS

    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.
    frankenstone
    • One has to wonder...

      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.
      jasonp@...
      • I generally cheer when...

        ...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).
        exolon
        • Usually

          [i]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?[/i]

          It is for the [b]willful infringement[/b] 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.
          Rick_K
          • Not always the case for "willfull". And 3 times award is top court can go.

            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.
            xuniL_z
    • Principal?

      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.
      781lc
      • so what?

        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
        John N.
  • RE: Microsoft loses round one in latest patent infringement case in East Texas

    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.
    smehaffie
    • Yes, Look at the History ...

      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.
      laplatakid
    • You're right!

      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
      914four
  • About i4i and VirnetX

    http://www.i4i.com/overview.htm
    http://www.virnetx.com/company.php

    If you go to virnetx.com, the Adobe Flash content contains audio.
    Grayson Peddie
  • Microsoft steals because they can't code anything

    Everything Microsoft has be a rip off of someone else hard work.
    Randalllind
    • ^^^ Troll above. Ignore ^^^

      nt
      Hallowed are the Ori
      • Don't Know Your History!

        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."
        R.T.F.M.
        • I thought that

          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.
          medezark@...
          • Well...

            Wikipedia's version is about as close to the truth that it makes no difference, and they say...

            [i]"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."[/i]
            zkiwi
          • Windows NT and IBM OS2

            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.
            Rick_K
          • I disagree.

            Warp was [i]NOT[/i] better than NT, [b]NT 3.1 blew OS/2 2.x away[/b] 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, [b]but by then I think Warp [i]had become[/i] the better OS. [/b]
            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 [i]and[/i] 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.
            914four
          • Not a bad paraphrase...

            Kudos to you for doing that quite succinctly.
            zkiwi
          • No, Cutler came to MS from DEC. They had to settle for 2 layer OS...VMS had

            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.
            xuniL_z