The Prior Art

Supreme Court Rules Against Microsoft in i4i Case

By Andrew Goldberg

In a unanimous decision that won't be well-received by tech industry heavyweights, the U.S. Supreme Court ruled this morning against Microsoft in the closely watched Microsoft v. i4i case, rejecting the software giant's argument to lower the evidentiary requirement to invalidate a patent.

The decision, which upholds the $290 million verdict against Microsoft won by the small Toronto-based i4i software company in the Eastern District of Texas, solidifies existing precedent and leaves intact the 28-year-old standard applied by the Federal Circuit in patent infringement cases.

"Congress specified the applicable standard of proof in 1952 when it codified the common-law presumption of patent validity," Justice Sonia Sotomayor wrote for the Court. "Since then, it has allowed the Federal Circuit's correct interpretation of §282 to stand. Any recalibration of the standard of proof remains in its hands." [ Download Microsoft v. i4i Supreme Court Decision]

Thomas  G. Hungar, a partner in the Washington, D.C. office of Gibson, Dunn & Crutcher, argued the case for Microsoft.  Seth Waxman, a partner in the Washington, D.C. office of Wilmer Cutler Pickering Hale and Dorr represented i4i, which was represented at trial by McKool Smith and before the U.S. Court of Appeals for the Federal Circuit by Finnegan, Henderson, Farabow, Garrett & Dunner. Microsoft was represented at trial and before the Federal Circuit by Weil, Gotshal & Manges.

Microsoft, along with such heavy-hitting amici as Google, Apple, Verizon, and HP, had advocated for the adoption of the lower preponderance standard in patent cases, arguing that the heightened standard insulated "bad patents" from invalidity challenges and stifled innovation. The Obama administration backed i4i, which warned that a lower standard would too easily allow juries to overturn the wisdom of the experts at the PTO. Lower the standard for invalidating a patent, Microsoft and its allies argued, would level the playing field to give patent infringement defendants a fairer shake in litigation.

But the Supreme Court said it was up to Congress to weigh such considerations. "We find ourselves in no position to judge the comparative force of these policy arguments," wrote Sotomayor, adding, "Congress has amended the patent laws to account for concerns about 'bad' patents, including by expanding the reexamination process to provide for inter partes proceedings. Through it all the evidentiary standard adopted in §282 has gone untouched."

The legal battle between the world's largest software maker and i4i (which stands for "infrastructures for information") began in 2007 when i4i sued Microsoft for infringing its patented XML editing feature in Microsoft Word. Microsoft, the jury found, willfully infringed i4i's patent when it installed its own XML editing features in Word 2003. The six-day trial in Tyler, Texas resulted in a $290 million verdict for i4i, which, like the company's patent, was later upheld by the Federal Circuit.

Microsoft, which was also permanently enjoined by the district court from selling versions of Word that infringed i4i's patent, has since removed the disputed features from its software. Now, the software giant will have pay the damages.

 

 

 

 

 

 

Microsoft Joins Article One's New Preemptive Troll-Fighting Service

By Andrew Goldberg

Article One Partners, a New York-based startup that crowdsources the search for prior art by rewarding researchers who find evidence that can be used to invalidate questionable patents, announced last week that Microsoft Corporation has signed on to its latest initiative to thwart patent suits by non-practicing entities (NPEs).

 The new service, called Litigation Avoidance, is designed to help companies target poor quality patents before find themselves contending with them in court as a result of litigation launched by NPEs, which are often perjoratively as patent trolls. Previously, Article One and its global network of scientists and technologists focused on assisting companies once they'd already been sued.

Microsoft, the first official member of the new preemptive patent protection program, will pay Article One an undisclosed fee to participate in Litigation Avoidance.

"NPEs continue to actively target large technology companies and often with portfolios of questionable quality,” said Bart Eppenauer, Chief Patent Counsel at Microsoft, in a statement. “Litigation Avoidance gives businesses another tool to address patent quality issues prior to litigation to reduce risk and potential litigation cost.”

The software giant is a frequent target of trolls. For instance, Eolas, a patent-holding company, won a $521 million jury verdict against Microsoft in a 2003 patent suit over Internet Explorer plug-ins, before the case was remanded and the parties reached an out-of-court settlement. Last year, NTP, which extracted a $612 million settlement from Research in Motion, targeted Microsoft in another patent infringement suit. That suit has been stayed until the Patent and Trademark Office resolves the validity of the smartphone patents at issue. 

According to reporting by Reuters’ Alison Frankel, Article One will select the patents that it chooses to study in one of two ways: In one scenario, member companies can request ten specific studies of patents. In the other, Article One--based on its own analysis of when the certain patents were acquired, which NPEs purchased them, and how likely they are to be asserted--will decide which patents to ask its network of purportedly more than 1 million researchers to investigate.

Article One’s crowdsourcing initiative is one of several new business models aimed at neutralizing NPEs at a time when companies are exploring various ways to shore up their patent defense capabilities. RPX Corporation-- a self-styled defensive patent aggregator that caters to companies concerned about becoming troll targets--went public last month. RPX  buys up patents to keep them away from NPEs, then licenses them to clients for an annual subscription fee. Microsoft is also an RPX customer.

Article One, a privately held company which won the Silicon Alley Insider 2009 Best Startup contest, has raised more than $8 million in venture funding. So far, it has paid out more than $1.3 million to members of its patent research community in individual awards of $5,000 to $50,000.

The company's crowdsourcing initiative isn't the first of its kind in the patent realm. For instance, the PTO, in cooperation with New York Law School’s Peer to Patent project, has even launched its own modest, one-year pilot initiative to crowdsource the search for prior art that might not otherwise be found during the patent examination process.

Recent Patent Litigation Weekly Columns

 

Much of the patent news that was published on this blog has been moved to the IP Insider section of the Corporate Counsel website. Here's a list of the last several Patent Litigation Weekly columns—

 

Oct. 25, 2010: Big Patent-Licensing Deals Push Acacia Earnings to a Stunning High

No one has filed more patent lawsuits against corporate America than Acacia Research. But Acacia CEO Paul Ryan says corporations are embracing, not rejecting, his business — and the company's new numbers prove it.

 

Oct. 18, 2010: Call it the Canadian Bilski

Citing U.S. patent laws, rejecting the European view, and opening the door to a potential rush on business-method patents up north, a Canadian judge says Amazon's controversial 'one-click'

 

Oct. 4, 2010: NPE Makes Offer Some Companies Can Refuse

Offered the chance to cough up $80,000 apiece to license a patent once held by Intellectual Ventures, drugmaker Novartis and auto parts manufacturer Tenneco decided to fight back instead.

 

Sept. 27, 2010: Uniloc Keeps Filings Software Suits, and NPE Patents Fare Poorly at Trial

Undeterred by its district court loss to Microsoft — and waiting on a Federal Circuit appeal in any case — Uniloc sues dozens of companies for 'software activation.' Plus, a new study shows that troll patents don't hold up at trial.

 

Sept. 20, 2010: Skyhook Takes a Shot at Google

This week: The search giant faces a new kind of patent lawsuit — one brought by (imagine!) an actual competitor in an increasingly important space — smartphones

 

Sept. 13, 2010: Costco v. Omega — The Patent Angle

The world's largest chipmaker hopes to use a Supreme Court case about Omega watches to 'correct' the Federal Circuit's rules on international patent exhaustion

 

Aug. 30, 2010: Inside Google's Second Patent Trial

Earlier this month, lawyers from Google and Yahoo dismantled a notorious Spangenberg patent. That leaves Google's perfect troll-fighting record intact.

 

Patent Litigation Weekly: So What Do E.D. Texas Jurors Really Think?

This week: The Prior Art returns after its winter blogging break. As Microsoft gets set to scrap software found to infringe a Canadian company's software, The Prior Art discusses the case with three of the eight jurors whose verdict helped put the software giant in this predicament.

As of Monday—thanks to a permanent injunction issued in August by Judge Leonard Davis of the Eastern District of Texas and upheld last month by the Federal Circuit Court of Appeals—Microsoft Inc. must stop selling any version of Microsoft Word 2007 or Microsoft Office 2007 that includes a custom XML editor found to infringe a patent held by a small Canadian software company called i4i, Inc.

It’s not every day that such a well-known product has to be modified—or possibly removed from store shelves—because of a patent dispute. Indeed, the U.S. Supreme Court made getting such an injunction in a patent case extremely difficult with its landmark eBay v. MercExchange ruling in 2006.

Microsoft isn’t giving up the court fight over the patent at issue just yet. On Friday, the company’s legal team, led by Matthew Powers of Weil, Gotshal & Manges, filed a petition with the Federal Circuit asking for a rehearing en banc. Powers didn't return calls for this story. Earlier coverage on i4i's trial win, post-trial action, and Federal Circuit win is available from the AmLaw Litigation Daily.

Patent Litigation Weekly: E.D. Tex Unkind to Tech; PubPat's Other Suits

This week: A big win for a Canadian company in E.D. Tex, a smaller but significant win for Acacia Research; and the false marking suits that came before the big gene patent battle.

X-M-L Spells Extra Major Loss for Microsoft

i4i Limited Partnership v. Microsoft Corporation
07-cv-00113, E.D. Texas (Tyler), filed 3/8/2007.

The Eastern District of Texas has been operating at a breakneck pace over the last month: four patent trials have gone to a verdict, with three resulting in plaintiff wins; and the CSIRO cases settled mid-trial.

Of the four trials to play out recently, Texas-based McKool Smith was involved in three and won two.

The firm’s most recent victory, for i4i, a small software firm based in Toronto, Canada, came on Wednesday, and it was massive: a $200 million willfull infringement verdict against Microsoft, a favorite target of competing software makers (such as i4i) and patent trolls alike.

"I feel great," McKool Smith partner Doug Cawley, i4i’s lead trial lawyer, told The Prior Art. Cawley says that, prior to the verdict, i4i officials were "understandably nervous about whether an American jury would be willing to grant a verdict for a Canadian company." They got their answer when the jury—after deliberating for about three hours—came back with the answer they wanted.

I4i, which stands for "Infrastructures for Information," markets various software products geared toward pharmaceutical and health care companies, as well as a product called x4o, which enables an XML editing feature in Microsoft Word. That product, priced at $249 and covered by the patent-in-suit, No. 5,787,449, became a lot less valuable to i4i when Microsoft installed its own XML editing features in Word 2003.

The jury's award was at the low end of a high, yet narrow range—$200 million to $207 million—suggested by i4i's expert witness. That range was calculated by multiplying a rather high royalty rate of $98 times the small fraction of Microsoft Word users—just 1.8 million—that i4i estimated had used Word to edit XML.

While disputing that the software giant had infringed the Canadian company’s patent, Cawley says, Microsoft’s expert witnesses argued that the jury should award damages in the $2–$5 million range if it found that there had indeed been infringement. Microsoft plans to appeal the verdict, according to Bloomberg.

Cawley says that i4i demonstrated its product to Microsoft in 2001. Instead of buying it, i4i contended, Microsoft proceeded to simply incorporate a similar function of its own (i4i did not accuse Microsoft of copying its code or product).

What does Cawley think won the case for i4i? "Probably Microsoft's internal e-mails showing they knew about i4i's patent and chose to make i4i's product obsolete," he says.

Key witnesses for the plaintiffs included company founder and named inventor Michel J. M. G. Vulpe, as well as co-inventor Stephen P. Owens.

Microsoft was defended by Matt Powers of Weil, Gotshal and Manges. Powers didn't immediately respond to a request for comment from The Am Law Litigation Daily on Wednesday.

Jury: Yahoo Got Too Creative

Creative Internet Advertising Corporation v. Yahoo! Inc Et Al
07-cv-00354-JDL, E.D. Texas (Tyler), filed 7/26/2007.

Creative Internet Advertising is a subsidiary of Acacia Research Corp., a large publicly held patent-holding company based in Newport Beach, California. Over the past few years, Acacia has filed patent infringement suits on behalf of dozens of subsidiaries like Creative. (At last count, SEC filings showed more than 70 of these offspring; there may be more, but Acacia stopped listing its litigations last year.) Nearly all of the suits have ended in confidential settlements.

On May 15, a jury in Magistrate Judge John Love's Tyler courtroom ruled that Yahoo's messenger program with IMVironments had infringed Creative Internet Advertising patent No. 6,205,432. The jury awarded damages of $6,625,584; according to Michael Smith. That was the sum sought by the plaintiff, and represents a royalty on the product of about 20 percent.

The patent-in-suit describes a "background advertising system." (Acacia had also named America Online as a defendant in the suit; AOL settled last year.)

In the wake of the verdict, Yahoo may be feeling a little less confident about its prospects for taking infringement suits to trial: SEC documents show that on Monday, Yahoo quietly arranged a confidential settlement with another Acacia outfit, Performance Pricing Inc. That case was one of four additional trials the search company was scheduled to face this year. As previously reported by sibling publication The Recorder, the Creative suit was the first one Yahoo has taken to trial in four years.

Acacia CEO Paul Ryan declined to comment on the victory, and a call to Acacia's outside counsel at The Simon Law Firm (formerly Simon Passante) in St. Louis was not immediately returned. Acacia was represented locally by two E.D. Tex heavyweights: T. John "Johnny" Ward Jr. and Eric Albritton (the two lawyers who sued Troll Tracker blogger Rick Frenkel when he was unmasked in February 2008). Yahoo was represented by San Francisco-based Howrey partner Henry Bunsow, and locally by Otis Carroll of Ireland Carroll & Kelley.

This case is the second TPA is aware of that Acacia has taken to trial in E.D. Texas. In the first, in November 2007, Weil, Gotshal's Powers knocked Acacia's patents out of commission on behalf of Microsoft (a more successful outcome than Powers achieved for Microsoft in the i4i litigation). That case delivered a serious blow to Acacia's business model. The company's stock dropped about 70 percent in the wake of the trial, and has never fully recovered. The stock price jumped about 20 percent to $5.48 per share shortly after it announced its victory. By Friday, it was down to $5.11.

Not So Sweet?

Public Patent Foundation, Inc v. Cumberland Packing Corp, 09-cv-04360. S.D.N.Y., filed 5/6/2009.

Public Patent Foundation, Inc v. Iovate Health Science Research Inc et al, 09-cv-04361. S.D.N.Y., filed 5/6/2009.

Last week, TPA reported on a major lawsuit brought by the ACLU and the Public Patent Foundation (PubPat). The suit, it turns out, was just the third that the six-year-old PubPat has ever filed. The first two, filed a week earlier, on May 6, are interesting in their own right.

Those suits allege "false marking" against Cumberland Packing Corp., which manufactures Sweet’N Low sweetener, and against Iovate Health Science Research, a dietary supplement company that recently ran afoul of the Food and Drug Administration.

The lawsuit against Cumberland includes the remarkable note that the company has continued to stamp a patent number on the Sweet’N Low’s iconic pink packets—even though that patent expired more than 20 years ago. The suit against Iovate claims the company promoted its products as protected by patents ("patented triple-action technology!"), even though those patents read on compositions with high levels of caffeine—compositions that have nothing to do with the products actually marketed by Iovate.

The statute that allows false marking suits is similar to law governing "qui tam" whistleblower suits, in that a victorious plaintiff is required to split any damage award with the government. The statute allows for $500 in damages "per offense," but does not clearly define what qualifies as an “offense,” according to Fish & Richardson partner Brett Johnson. Some judges have interpreted the false marking of an entire product line to constitute a single offense, says Johnson, who recently won a false marking suit against software maker McAfee.

No surprisingly, Dan Ravicher, of PubPat, thinks it's "pretty clear” that the damages should be applied to every packet of Sweet’N  Low sold since the patent expired, although he acknowledges that it's within the judge's discretion to decide whether or not $500 is the proper amount. Depending on the outcome, the case could produce a pretty sweet payday for the public interest law group. Ravicher says, though, that the suit isn't about money—it's about protecting the public against misleading patent claims.
 
"False marking is a harmful thing," says Ravicher. "That's not what I think, that's what Congress thinks. But they don’t have the manpower to enforce it themselves."

Photos: W. Pate / S. Isaacs / Flickr

 

TPA Reading for the Week

A TPA extra edition--our mix of IP-related notes from this week:

• PatentFreedom, the patent defense consultancy run by Dan McCurdy, first talked to us about its database of NPEs (patent trolls) when the firm launched almost a year ago. Now, PatentFreedom is offering some of the basics from its database to the public--interesting stuff. Take a look, via Against Monopoly.

• French reject "three-strikes" law that would ban copyright infringers from the Internet. Lots of artists and content-side lawyers thought this one was going to pass. Not this time. Via Wired.com.

• Big Verdict: Mintz Levin won a $388 million patent infringement verdict against Microsoft for a case brought on behalf of a small California outfit, Uniloc. But will it stick?

• Big Verdict II: W.L. Gore & Associates (of Gore-Tex fame) must pay out $410 million to medical device company C.L. Bard. Via The Am Law Litigation Daily. Gore will appeal.

• Big Verdict III: A U.S. Court of Federal Claims judge has ordered NASA to pay a 1.25 percent royalty to Boeing because an aluminum alloy it used to build the space shuttle infringes Boeing patents. Damages still being briefed but looks like 9 digits. Seattle Times via IPO News, and The Am Law Daily.
  

• EFF senior attorney Fred Von Lohmann asks if President Obama violated copyright law when he gave an iPod to Queen Elizabeth.

• U.K. newspaper The Guardian showcases 15 years of anti-piracy videos.

Photo: L. Hine / Wikimedia

 

Challenges to the Google Book settlement, and a connection to Microsoft

The New York Times noted Friday that some challenges are being raised to the Google Book settlement; my colleagues at The Recorder are more interested in the fact that some of the opposition is funded by Google's rival, Microsoft. One of the New York Law School professors whose research is funded by Microsoft is James Grimmelmann. I've never spoken to him, but his lengthy analysis of the Google Book settlement, published in November, is the most insightful thing I've read about it. After reading the post, it really struck me how important this settlement will be to the future of reading as we know it.

Grimmelmann is also a former Microsoft employee, and wrote a great essay about working for the company back in 1997. The law professor made it clear to the NYT that he doesn't believe he or his colleagues' work has been influenced by Microsoft. He generally supports the settlement but also noted that he had concerns about antitrust and consumer rights, and suggested:

The Week in Patent Litigation (March 16-20)

This week: the lawsuit against Amazon you have heard about, and the lawsuit against Amazon nobody has heard about. Plus, defendants launch retaliatory lawsuits against a small software company and the world's largest software company; an Oregon lawyer-inventor creates a new batch of litigation; a Scott Harris suit moves to the defendant's home turf; and the bell rings on yet another round in Blackboard v. Desire2Learn's patent spat over educational software.

Going After Amazon, Part I (or Throw the e-Book at 'Em)

Discovery Communications Inc. v. Amazon.com Inc., 09-cv-00178, D. Delaware, filed 3/17/09.

This one has been well-cover covered: see MarketWatch, WSJ, and CNET, among others; see also Discovery's press release. The CNET story includes Discovery's non-response to Greg Sandoval's question: even if it wanted to, is there a Discovery Communication unit that could even build an e-reader to compete with the Kindle? ("We are only focused on the Kindle at this time," says Discovery.) Discovery Communications has been on the receiving end of a few patent lawsuits over the past decade, but has never before filed as a plaintiff. Discovery is represented by Michael Jacobs of Morrison Foerster, the San Francisco IP lawyer best known for pummeling SCO on behalf of Novell. 

Going After Amazon, Part II (or, Please make a donation. Really. We insist.)

The Tobin Family Education And Health Foundation et al. v Amazon.Com, Inc., 09-cv-00160, M.D. Florida, filed 3/17/09. 

Rembrandts: out of the attic! attack! attack!

Patent consultancy Ocean Tomo wants to convince big companies that its patent auctions will help them deal with the problem of patent trolls, or at least lower the cost. Might be a tough sell right now, though, since a patent bought at Ocean Tomo has just been used to demand royalty payments from 13 companies that use—drum roll—social recommendation systems. "If you like X, you might like Y," and don't forget to send a check to Quito Enterprises, LLC. What?

• Quito Enterprises LLC bought patent 5,890,152 at last April's Ocean Tomo patent auction for $1.07 million. Quito, a company that maintains a Delaware address that seems to include a few different law offices, used that patent to file an infringement lawsuit against 13 companies on Dec. 30. All defendants are companies that offer some type of social recommendation system. The patent, filed in 1996 and issued in 1999, describes a system of offering users media files based on their personal tastes and preferences.  Defendants accused of infringing the '152 patent include old-school media companies, Internet heavies, Internet radio sites, and one pure social recommendation engine: Netflix, Amazon, Yahoo, RealNetworks, last.fm, Pandora Media, Slacker Inc., Veoh, Hulu, NBC Universal, CBS, News Corp., and Strands, Inc. Quito filed suit in Miami and is represented by Florida personal injury lawyers Philip Holden and Alex Alvarez, Heninger Garrison & Davis of Birmingham, as well as John Ward and David M. Hill from the very active New York patent shop of Ward & Olivo, likely a key player here. Who exactly is Quito Enterprises? Not to give anyone ideas, but some state record offices are not as transparent as they should be... But I look forward to learning more about Quito shortly. Quito Enterprises, LLC v. Netflix, Inc. et al, 08-cv-23543, S.D. Florida. [complaint on Justia]

"Patent Hawk" lawsuit was an inside job, says Microsoft

Patent consultant Gary Odom, who blogs and does business as "Patent Hawk," used to help Microsoft defend itself against patent lawsuits. But in August, Odom slapped his former client with a patent lawsuit of his own. On his blog, Odom took a quick break from denouncing patent reform to announce his new project, in an understated post titled "Tool Groups."

Odom gamely admitted that Microsoft had been his client for years. "They had every opportunity for friendly discussion," he wrote.

New documents filed in the case reveal much more about Odom's relationship with his client-turned-target. Not only did Gary Odom work for both Microsoft and one of its outside law firms over a period of several years—he actually signed contracts in which he agreed not to file his own patent or IP lawsuits, and agreed to disclose his own patent activity. 

But Odom broke those promises many times over, say Microsoft lawyers. He secretly acquired his own patents, ultimately asserting one in this lawsuit, claiming it covers features of Microsoft Office 2007.

Zilka & Kotab, a.k.a. Aloft Media, file patent lawsuit against Google's Chrome browser; the latest of many.

I'm back from Texas, where I was able to watch a patent trial (almost) in its entirety, which was a very educational experience. That case, Mass Engineered Design v. Ergotron, will be part of an upcoming feature story in the January print edition, and I'll share some of my thoughts and observations about what I saw and witnessed in Marshall here on The Prior Art.

Now it's time to return to a subject I visited in the October issue, when I focused on IP lawyers who have acquired their own patents, and then used them to sue companies, and sometimes entire industries, for patent infringement. The topic is far from exhausted.

Today I'll focus on two San Jose patent lawyers who have sued at least 20 companies in the past several months: Dominic Kotab and Kevin Zilka, the principals of Zilka-Kotab P.C., and at least three patent-holding companies—Aloft Media, LLC; Stragent, LLC; and Azure Networks, LLC.

Hawk Attack

Gary Odom is an Oregon patent consultant who also blogs as Patent Hawk. Now he's sued his former client, Microsoft, in the Eastern District of Texas, saying the software company infringes his patent with its Office 2007 toolbar.

In the comment section of his four-line post, Odom writes that "Microsoft was a Patent Hawk client for years. They had every opportunity for friendly discussion. The words 'patent tax' were used, and Microsoft chose a path consistent with their corporate culture."

Odom's litigation spurred a sharp response from libertarian writer and attorney Stephen Kinsella, who wrote about the case on the Against Monopoly blog:

Patent Prospector implies that there's something wrong with viewing such a threat as a "tax". There's not. That's exactly what it is. Odom threatens his former client with severe financial damage by the state's thugs, and they call it a "tax." Hey, unfair! They are supposed to just pay their former attorney! ...

I think I just may start asking patent attorneys my company hires to include a little clause in the retainer agreement: "and we promise not to sue you, our client, for patent infringement in the future."

(On his website, Odom identifies himself as a consultant providing a variety of patent-related services, not an attorney; Kinsella's post was updated accordingly.) Odom is represented by Susman Godfrey, a Texas firm whose patent work is mostly on the plaintiff's side these days.

This via Patently-O, where Dennis Crouch notes that Office 2007 users "might check to see whether your Microsoft click-through license includes indemnification." Um... I actually don't know whether that's a joke or not.

Photo: Flickr/Major Clanger

Monday Patent Notes: "Patent Elves," Naked Cowboys, and a big Microsoft verdict

• Did you know patent litigation actually increases competition? (Also, night is day, black is white, and 2+2=5, all to be addressed in future posts.) Who thinks more lawsuits are good for the economy? File that under "not surprising": Two consultants from litigation-support company LECG, joined by a partner from Howrey LLP. (Wait, isn't that the "no trolls" law firm? Hmm...) Read their new paper, which seems to suggest that so-called "patent trolls" should be renamed "patent elves." Reported Friday by IPlaw360 (subscribers only). 


• File this under "even less surprising." Not reported by IPlaw360 is the company that paid for the discovery of this new math: Qualcomm, a big-time patent licensor. (The authors did the right thing by disclosing this fact in a front-page footnote.)

• Today, an April jury verdict for Alcatel-Lucent and against Microsoft was upped from $358 million to $512 million, the AP reports. That makes this the biggest patent award of 2008 so far, even bigger than both massive verdicts against Boston Scientific. Microsoft will appeal.

• The Naked Cowboy, a New Yorker who claims M&M/Mars stole his outfit idea for an advertisement, still has hope, reports the WSJ law blog. A judge threw out his privacy claim but his trademark infringement claim lives on...

 

Guess who else wants some of Immersion's patent victory cash? Microsoft.

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.