Earlier this month, I wrote about Internet Services, LLC, or ISLLC—that's the patent-holding company that Immersion Corp. approached about out-sourcing its patent litigation in the adult games and "teledildonics" market but now says Immersion owes it some dough from its $82 million patent infringement verdict against Sony. Update on that: an Oakland federal judge threw out ISLLC's claim on summary judgment on May 16.
While reviewing Immersion's recent SEC filings for another story (coming this week), I noticed that there is a much bigger fish than little ISLLC that wants a piece of the patent-infringement booty Immersion won from Sony—namely, Microsoft, which settled with Immersion for $26 million but signed an agreement that it would get a big piece of any settlement between Immersion and Sony. After all, Microsoft knew what Immersion needed the money for: to pay its very expensive Irell & Manella legal team to keep fighting a patent battle against Sony. And why just settle when you can switch sides?
Between the $82 million verdict, interest, and future agreements, Immersion ultimately collected almost $130 million from Sony, according to Immersion's recent SEC filings. But it avoided calling any of that a "settlement" and has refused to pay Microsoft; last year, Microsoft sued Immersion in Seattle federal court asking for at least $27.5 million; it raised that to $35.6 million after a failed mediation in December.
There wasn't much coverage of this remarkable agreement; the Seattle P-I's Microsoft reporter had a couple good blog posts last year on the lawsuit and the business strategy backdrop of the Microsoft settlement.
But Microsoft lawyers goofed when they filed their June complaint against Immersion, disclosing some confidential terms of the Immersion-Sony agreement: namely, they noted that Sony had an option to get licenses for non-PlayStation games, and disclosed the price: $10 million and a royalty of 25 cents for each game sold.
Microsoft filed a new complaint without the confidential price information, and the original was sealed 10 days later. But Microsoft's PR people had already emailed the original complaint to both Seattle newspapers, as well as CNET and Ars Technica (and it's still available). Immersion filed a counter-claim for breaking the confidentiality agreement in September; Microsoft has moved to throw that out on summary judgment, and a decision is pending.