[ISN] Microsoft's Patent Problem

From: InfoSec News (isnat_private)
Date: Thu Jul 24 2003 - 00:56:34 PDT

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    By Roger Parloff 
    July 22, 2003 
    Last month, when Microsoft announced its bellwether decision to award
    employees restricted stock instead of options, it also made news in a
    federal courtroom - the kind of news you keep quiet about.
    Microsoft suffered utter defeat at a crucial pretrial hearing in what
    appears to be the highest-stakes patent litigation ever - one in which
    a tiny company called InterTrust Technologies claims that 85% of
    Microsoft's entire product line infringes its digital security
    patents. (See Can This Man Bring Down Microsoft?) [1]
    InterTrust's engineers developed and patented what they say are key
    inventions in two areas: so-called digital-rights management and
    trusted systems. The technologies are essential to the digital
    distribution of copyrighted music and movies, and to maintaining the
    security of e-commerce in general. At its prebubble height, InterTrust
    (founded in 1990) employed 376 people and marketed its own software
    and hardware products; today it consists mainly of a patent portfolio,
    30 employees, and this lawsuit. An investor group led by Sony Corp. of
    America and Royal Philips Electronics bought the company in January
    for $453 million, hoping to convince consumer electronics and tech
    companies—beginning with Microsoft—of the need to license its patents.
    Microsoft argued in court that crucial phrases in InterTrust's patents
    were too vague to be enforceable, and that others required such narrow
    interpretation that they would have been hard for Microsoft to
    infringe. But in her July 3 ruling, an Oakland judge resolved 33 of 33
    disputed issues against Microsoft and rebuked the company's lawyers
    for wasting her time by promising proof that never materialized—legal
    vaporware, in essence.
    "This is simply another step in a long legal process," says a
    Microsoft spokesman, putting the best face on it. "Microsoft will
    continue to defend itself against what we believe are groundless and
    overbroad claims."
    As agreed before the hearing, the parties now enter a round of
    settlement talks. Though InterTrust declines to place a pricetag on
    the suit, it's hard to imagine the company settling now for any sum
    that does not have a "B" in it. InterTrust claims that its inventions
    cover technologies that Microsoft has been weaving into its Windows XP
    operating system, Office XP Suite, Windows Media Player, Xbox
    videogame console, and .NET networked computing platform, to name just
    a few. If settlement talks fail and InterTrust prevails in court, it
    would be entitled to a court order halting sales of all those
    products. InterTrust CEO Talal Shamoon asks rhetorically, "How much
    would that be worth to Microsoft?"
    [1] http://www.fortune.com/fortune/technology/articles/0,15114,400412,00.html
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