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November 17, 2007

Infringing Activation

Serial patent infringer Microsoft, who bitches mightily about having to pay patent "taxes," got nailed $115 million in damages, plus a $25 million kicker for doing it when they should have known better, and attorneys fees, for willfully infringing z4 patents that cover Microsoft's product activation feature, used in both Office and Windows. Microsoft was denied JMOL, which it appealed.

z4 v. Microsoft and Autodesk (CAFC 2006-1638)

z4 sued Microsoft in the Eastern District of Texas for infringing 6,044,471 & 6,785,825.

In the litigation, z4 alleged that Microsoft’s “Product Activation” feature, as implemented in its “Office” group of software applications and its “Windows” operating system, infringed each of the asserted claims, beginning in 2000 and 2001, respectively. Microsoft countered that it did not infringe z4’s patents, that the ’471 and ’825 patents were invalid for anticipation and obviousness, and that both patents were unenforceable due to inequitable conduct by Colvin. In particular, Microsoft contended that it had developed its own technology to reduce software piracy, called the Licensing Verification Program (“LVP”), which it implemented in its 1998 Brazilian Publisher (“BP 98”) software product. Because this product was released prior to the filing date of z4’s patents, Microsoft alleged that it constituted a prior invention sufficient to invalidate the asserted claims.

After losing at trial, Microsoft repeatedly cried JMOL, an acronym meaning "juicy money obligation lament," though lawyers slyly insist it means "judgment as a matter of law." JMOL motions went to non-infringement on construction of three claim limitations, its supposedly invalidating Brazilian Publisher '98 product, and damages out of whack in view of its Supreme Court win in Microsoft v. AT&T (where it was found infringing, but escaped from paying for worldwide infringement because the Supreme Court possesses a grotesque bias against software patents).

The smartest lawyers Microsoft money could buy were all over this one. Surely z4 was about to be shown what's what.

CAFC review of the claim construction left the district court ruling tweaked, but infringement intact. The phrase "we find Microsoft’s claim construction arguments to be without merit" appeared in the CAFC decision, along with "even under Microsoft’s proposed construction, its sole non-infringement argument is artificial at best."

The first version of any Microsoft software is about as tasty as raccoon-flavored dog food. And so it was as Microsoft bandied Brazilian Publisher 1998 (“BP 98”) as § 102(g) prior art.

Microsoft argues that the LVP feature of its BP 98 software product anticipates the asserted claims under section 102(g)(2). That section provides that a patent is invalid if “before such person’s invention thereof, the invention was made in this country by another inventor . . . .” 35 U.S.C. § 102(g)(2). “This court has interpreted § 102(g) to provide that ‘priority of invention goes to the first party to reduce an invention to practice unless the other party can show that it was the first to conceive the invention and that it exercised reasonable diligence in later reducing that invention to practice.’” Monsanto Co. v. Mycogen Plant Sci., Inc., 261 F.3d 1356, 1362 (Fed. Cir. 2001) (quoting Mahurkar v. C.R. Bard, Inc., 79 F.3d 1572, 1577 (Fed. Cir. 1996)).

“In order to establish an actual reduction to practice, the inventor must prove that: (1) he constructed an embodiment or performed a process that met all the limitations . . . and (2) he determined that the invention would work for its intended purpose.” Cooper v. Goldfarb, 154 F.3d 1321, 1327 (Fed. Cir. 1998). “Testing is required to demonstrate reduction to practice in some instances because without such testing there cannot be sufficient certainty that the invention will work for its intended purpose.” Slip Track Sys., Inc. v. Metal-Lite, Inc., 304 F.3d 1256, 1267 (Fed. Cir. 2002). Because the necessity and sufficiency of such testing are factual issues, see id. at 1268, substantial evidence in the record supporting a finding that Microsoft’s LVP software did not work for its intended purpose will suffice to support the jury’s verdict that z4’s patents are not invalid for anticipation...

The CAFC opinion rumbled through BP '98's inadequacies in failing anticipation of the z4 patents. Further, Microsoft was sanctioned for withholding an email, produced only the day before trial began, exposed in a last-minute deposition, that showed the BP '98 was worthless as prior art.

Microsoft improperly withheld the document because it was harmful to the positions it has taken in this case.

Microsoft requested a new trial because of allegedly improper jury instructions and damages determination. The CAFC blew those a raspberry.

District court "pay the man" verdict fully affirmed. The king of corporate arrogance plays the sport of kings and rolls snake eyes.

Posted by Patent Hawk at November 17, 2007 5:02 PM | Litigation

Comments

You didn't mention that the district court refused to enter an injunction...

Posted by: DJF at November 18, 2007 1:12 AM

Perhaps the most important fact about this case is that it was one of the first cases tried after MercExchange vs. EBay SCOTUS decision.
By denying injunction to the patent holder the court saga continued for quite some time instead of being quickly settled out of court..
But of course, even the threat of injunction wasn't enough for some tech bullies like RIM - they would rather nuke themselves than pay measly couple millions bucks (as initially requested by patent holder)
Well, in the aftermath of the EBay decision we have more, not less, litigation

Posted by: angry dude at November 18, 2007 11:39 AM

Even without SC eBay, no court in its right mind would halt selling Windows or Office for infringing what is essentially a non-functional feature, from consumer viewpoint. Like it or not, those products are core to this nation's economy, and, niggling aside, hats off to Microsoft for producing such fine products.

z4's injunction request was intended to create a bargaining chip; they never expected to win one.

angry dude is however prescient that an injunction threat would have focused the collective arrogance that is Microsoft to settle.

Also, keep in mind that the damages numbers are for past infringement; they do not cover ongoing infringement. License - that's the next number to take one's breath away, or result in the next z4 sally, if Microsoft fails to pony up. z4's attorneys fees are nothing if Microsoft continues, willfulness unabated.

That injunction was left by the boards was not newsworthy, and hence went unmentioned in the posting.

Posted by: Patent Hawk at November 18, 2007 12:30 PM

Well, functional or non-functional doesn't really matter, does it ?
What really matters is validity of a patent and the willfullness of infringement.
How is it possible for a big public company committing a willful act of stealing to hide behind "consumers" ?

If it's really insignificant feature then MS can easily remove this feature from future versions and be done with it - no threat of unjunction, just past damages to be argued about.

Big infringers tend to bundle a lot of technology within a single but humongous product (like Windoze) and then argue insignificance of each separate patent claim brought against them.
This is the precise intention of the damage apportionment provision of the current "patent reform" - to help the likes of MS or Intel escape justice by integrating huge number of separate technologies and features (some of them stolen) in their consumer products.

Posted by: angry dude at November 18, 2007 1:57 PM

And M$ and all of the other BSA thieves then make "moral arguments" against software piracy that "copying is theft" and "is wrong."
Stealing is only OK when carried out by a rich moneyed corporation that has enough $$$ to bribe congress to change rules.

Posted by: AnotherAngryDude at November 18, 2007 11:27 PM

Yep

You got it right, dude

You can get yourself in trouble for dowloading some piece of software or music from the internet, but the executives of the multi-billion dollar corporations ALWAYS get away with stealing other people's inventions.
Capitalism at work, dude

Posted by: angry dude at November 19, 2007 6:25 AM