B&N asks DOJ to investigate Microsoft

B&N asks DOJ to investigate Microsoft

Summary: Barnes & Noble accused Microsoft of using patent infringement claims to drive up the prices of its competitors.

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Barnes & Noble is asking the Department of Justice to investigate Microsoft's patent-licensing tactics, accusing the software giant of trying to thwart competition with flimsy infringement claims.

"Microsoft is attempting to raise its rivals' costs in order to drive out competition and deter innovation in mobile devices," Barnes & Noble lawyer Peter T. Barbur wrote in an October 17 letter to Gene I. Kimmelman, the Justice Department's chief counsel for competition policy in its antitrust division. "Microsoft's conduct poses serious antitrust concerns and warrants further exploration by the Department of Justice."

Barnes & Noble's Nook e-readers run on Google's Android mobile operating system, which has been under attack from Microsoft patent lawyers. Microsoft has convinced several device makers--including HTC, Wistron, and Compal--to pay it licensing fees for every device they sell that uses Android.

Barnes & Noble refused to pay the fee, leading Microsoft to sue it in March, accusing the bookseller of patent infringement. In its response a month later, Barnes & Noble countered that Microsoft was misusing patent law to slow down rivals.

In the letter to Kimmelman, first reported by Bloomberg today, Barnes & Noble is asking regulators to probe the company's tactics.

"Microsoft is embarking on a campaign of asserting trivial and outmoded patents against manufacturers of Android devices," Barbur wrote.

The letter is part of the litigation between the two companies before the U.S. International Trade Commission. Microsoft declined to comment on the filings.

Several exhibits released as part of the litigation paint a picture of increased hostility between the companies that once partnered on electronic book technology a decade ago.

Another letter, from Barnes & Noble's general counsel Eugene V. DeFelice to James J. Tierney, chief of the Justice Department's Networks and Technology Enforcement Section in the Antitrust Division, details Microsoft's method of pushing for a patent-licensing deal. DeFelice wrote that Microsoft accused Barnes & Noble of infringing on six patents at a July 2010 meeting.

"When Barnes & Noble asked Microsoft for more detailed information related to these patents, Microsoft refused, claiming that the information was confidential and could not be shared unless Barnes & Noble first executed a non­disclosure agreement," DeFelice wrote.

Barnes & Noble declined because, DeFelice wrote, the patents and the Nook are both public. Five months later, the companies met again, and this time, Barnes & Noble agreed to a "very narrow" non-disclosure agreement limited to discussions about "claim charts" Microsoft produced at this single meeting in order to "move the process forward."

A month later, according to DeFelice's note, Microsoft proposed a license that would cover Barnes & Noble's use of Android in existing electronic book devices. But the deal was structured in a way that would have given Microsoft's patents dominance over others in Android, limiting or even eliminating Barnes & Noble's ability to upgrade the Nook, DeFelice wrote. He encouraged the Justice Department to subpoena a copy of the proposed licensing agreement, and resist claims by Microsoft that the proposed deal is proprietary.

"Microsoft's assertion of confidentiality is simply a means to cloak its oppressive and anticompetitive licensing proposal and is another element in Microsoft's larger scheme to restrict competition in the mobile operating systems market," DeFelice wrote.

The Barnes & Noble lawyer did spell out the fees that Microsoft was seeking for the patent licenses. But the company redacted those numbers in the documents released publicly. (In a separate exhibit, a Power Point presentation laying out its claims, Barnes & Noble cites "news reports" that Microsoft asked Samsung to pay $15 for every Android handset it sells.)

"It is Barnes & Noble's understanding that these licensing fees that Microsoft demands for use of the Android (operating system) are the same, or higher, than the licensing fees that Microsoft charges for its own Windows Phone 7--despite the fact that Microsoft only claims ownership of only trivial and nonessential design elements in Android-based devices, as opposed to an entire operating system," DeFelice wrote.

When Microsoft filed its suit, it alleged violation of only one of the six patents it originally claimed that Barnes & Noble infringed upon, DeFelice wrote. It added four other patents that were never discussed between the companies, he wrote. And he added that none of the features that are allegedly covered by patents drive consumer demand for the Nook.

DeFelice also complained to Tierney about the acquisition of Novell patents this Spring by a consortium that includes Microsoft. He argued that it would help the software giant "monopolize the mobile operating systems market and suppress competition by Android and other open source operating systems" by giving it patents that it could use to demand "oppressive" licensing terms.

About Jay Greene
Jay Greene, a CNET senior writer, works from Seattle and covers Microsoft, Google and Yahoo. He's the author of the book, Design Is How It Works: How the Smartest Companies Turn Products into Icons (Penguin/Portfolio). He started writing about Microsoft and technology in 1998, first as a reporter for The Seattle Times and later as BusinessWeek's Seattle bureau chief.

Topics: Mobile OS, Android, Google, Hardware, Legal, Microsoft, Mobility, Security, Smartphones

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59 comments
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  • RE: B&N asks DOJ to investigate Microsoft

    What a surprise. MS won't disclose the patent info without a NDA. Nothing says "Our patents are worthless and un-enforcable" like an NDA.
    anothercanuck
    • Actually, this is the telling line

      @anothercanuck
      [i]And he added that none of the features that are allegedly covered by patents drive consumer demand for the Nook[/i]

      So what B&N is claiming is that since the consumer can't see them, they are free for the taking. You can't take that line anyway else.

      MS is is the right here to ask for a signed NDA, it's their patents, not B&N's
      William Farrell
      • RE: B&N asks DOJ to investigate Microsoft

        @William Farrell

        They won't go public in case a proper prior art or obviousness challenge gets conducted.

        Instead they should try making a mobile/tablet OS that doesn't stink.
        Alan Smithie
      • RE: B&N asks DOJ to investigate Microsoft

        @William Farrell<br>1) If the patent is for some obscure thing, MS is not being damaged by B&N using it, which is the basic requirement for any patent suit. The patent holder MUST prove their business has been damaged. No Damage=No award. <br>2) MS wanted B&N to sign the NDA before telling them what the patents are. Kind of like going to Best Buy, paying them $200, then they get to tell what you bought. If you were stupid enough to do that, they would most likely hand you one 1.44Mb floppy disk, and since you agreed to NDA when you paid $200, you cannot tell anybody about how they ripped you off.
        anothercanuck
      • RE: B&N asks DOJ to investigate Microsoft

        @William Farrell Why would you need an NDA to discuss publicly accessible information? To me, the most likely case seems to be that that the patents are trivial at best and would be easy to work around.

        The fact that MS has stopped claiming infringement on most of the original patents in this suit is a pretty good indication that they're grasping for straws. They should concentrate more on creating products that consumers want rather than trying to earn their keep through litigation.
        K B
      • M$ must face the music

        @William Farrell
        and be forced to open up its patents for free because its monopolistic position.
        LlNUX Geek
      • RE: B&N asks DOJ to investigate Microsoft

        @anothercanuck @K B I see it more, that they don't want B&N signing from the rooftops over the deal they made. As I said above, most companies will insist on an NDA if you sue them and you settle out of court. They want to keep the exact terms of the deal secret, so that it doesn't influence other cases.

        It is frustrating for the general public, but seems to be "standard practice" in most law shows you see on TV.

        If B&N could somehow do some hard bargaining and get the price down to $2 per handset, those that signed deals for $10 would be a little upset...

        If B&N are using Android and Android does infringe on MS patents, they should pay up. If they think the patents are frivilous, they should challenge them and get them revoked...
        wright_is
      • RE: B&N asks DOJ to investigate Microsoft

        @wright_is This NDA has nothing to do with the settlement. It's only about finding out what about the B&N product could be potentially infringing on an MS patent.
        K B
      • Correct me if I'm wrong

        But if I (just saying) am not told what patent I am abusing, am I supposed to guess? To trust that I'm wrong and the accuser is right without any evidence. Sounds as dodgy as a haddock being offered cheap off the back of a lorry.
        ego.sum.stig
      • RE: B&N asks DOJ to investigate Microsoft

        @William Farrell
        Right on! Right on! Right on! And the price charged is whatever the market will bear. That's Capitalism 101!
        eargasm
      • RE: B&N asks DOJ to investigate Microsoft

        @William Farrell I'm sorry but how can you claim Patent infringement but not let the other party know what the patents are? They only want the NDA so B&N can't tell others its a BS shakedown.
        piiman
      • Wait now....let me get this straight...

        @William Farrell

        "You owe us damages which we cannot, in any reasonable manner, quantify because the alleged infringements are not apparent to, nor critical for, the end user's purposes. Furthermore, we refuse to tell you which patents we refer to unless you promise not to tell anybody else anything having to do with these Beartraps we put out so they might avoid having to pay the toll to cross this bridge..."

        Sounds to me like Gates learned a lot of nifty tricks from Janet Reno and company back when they were shaking him down in the 90's, this is almost like some "Insurance" shakedown from an old mob movie...
        ReadWryt (error)
    • RE: B&N asks DOJ to investigate Microsoft

      @anothercanuck I thought NDAs were pretty much standard practice. Most insurance companies make claimants sign an NDA, if they settle out of court.
      wright_is
      • RE: B&N asks DOJ to investigate Microsoft

        @wright_is
        When somebody accuses you of a crime you have to know the crime and the accuser. Same here. NDA can be exercised in case of a settlement to hide the financial part, but you know what you are accused of and who is accusing you.
        kirovs
      • RE: B&N asks DOJ to investigate Microsoft

        @wright_is <br>If they settle, then yes. But in this case MS is telling B&N that they are infrigining their patents (patents are public information) but won't tell them how. So how can B&N avoid infringing without that information? The answer is simple, they can't. So the easy thing to do is give in to MS and pay the extortion fee.
        PhillyIT
  • RE: B&N asks DOJ to investigate Microsoft

    How does B&N view illegal downloading of content that they would otherwise sell? If B&N offer a book that isn't selling well and not helping with customer demand then I should steal it?
    TKR1
    • RE: B&N asks DOJ to investigate Microsoft

      @TKR1 But in that case B&N can claim you would have bought the book, and they have lost money (their business has been damaged). If MS has patented some trivial thing like the blue color they use as a default background, and B&N used the same blue color, it is really difficult for MS to prove damages unless they can prove people buy e-readers based on the default background color, for example.

      Since MS refuses to release public info like the patent number to the companies they want license fees from, much less the general public, they must be worried about something. In other words, MS knows these patents will never stand up to objective inspection.
      anothercanuck
      • RE: B&N asks DOJ to investigate Microsoft

        @anothercanuck Why does the general public have a right to know? This is a dispute between two entities... If B&N think it is unreasonable and took it to trial, the whole thing would be laid bare.

        But it is stnadard practice to keep negotians under wraps, until there is no other possible solution, than to go to court.

        We have to sign NDAs all the time, when dealing with other companies. It can be frustrating, especially when it cover specific employees, that means I can't even discuss a lot of things internally, with my colleagues!
        wright_is
      • RE: B&N asks DOJ to investigate Microsoft

        @wright_is

        All patents filed are public information. What MS ISN'T telling is what patents are being violated. They want up-front money to tell B&N what patents are being violated. Why can't they just say "Patent #x and Patent #y are being violated" and then use the NDA so that B&N doesn't tell anyone else their license agreement cost? THAT would be reasonable. What MS wants now is NOT reasonable.

        This reeks of McCarthyism. "I have in my hand a list of Communist sympathizers!!!" And what he had in his hand was a paper with who knows what on it... maybe his grocery list?
        benched42
  • RE: B&N asks DOJ to investigate Microsoft

    I'm missing something...So why do you need an NDA about discussions around a patent? Isn't the purpose of a patent to protect the inventor so that they can make the patent 'public'... and isn't it public by it's very nature? Which is why some companies choose NOT to file a patent, and instead opt to keep it a 'trade secret'.

    From Wikipedia:
    In accordance with the original definition of the term "patent," patents facilitate and encourage disclosure of innovations into the public domain for the common good. If inventors did not have the legal protection of patents, in many cases, they would prefer or tend to keep their inventions secret. Awarding patents generally makes the details of new technology publicly available, for exploitation by anyone after the patent expires, or for further improvement by other inventors. Furthermore, when a patent's term has expired, the public record ensures that the patentee's idea is not lost to humanity.
    mlarter