B&N asks DOJ to investigate Microsoft

Barnes & Noble accused Microsoft of using patent infringement claims to drive up the prices of its competitors.
Written by Jay Green, CNET News, Contributor

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.

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