Microsoft to pay $200 million in patent dispute

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Microsoft will pay VirnetX Holding $200 million to settle a patent dispute over VPN technology in Windows, the companies announced Monday.

As part of the settlement, Microsoft will also obtain a license to use VirnetX technology in Microsoft products.

VirnetX first sued Microsoft in 2007, claiming the software giant had violated two of its VPN (virtual private network) patents through the use of the technology in Windows XP and Vista. A U.S. District Court ruled in VirnetX's favor in March, determining that Microsoft had willfully infringed on the VPN patents in question and ordering the company to pay VirnetX damages of $105.75 million.

Just a few days after the verdict was handed down, VirnetX filed another lawsuit against Microsoft, claiming that the same patent-violating technologies were also in Windows 7 and Windows Server 2008 R2.

VirnetX asserted that Microsoft had violated U.S. patents 6,502,135 and 7,188,180, which both cover specific ways to secure IP-based communications through VPNs and similar technologies.

As part of the settlement, the lawsuits will be dismissed. Although the final $200 million in damages is almost double the $105.75 million that Microsoft was first ordered to pay, that amount could have tripled had the companies not come to an agreement, according to Reuters.

Other aspects of the settlement were not revealed. The companies released a joint statement, although VirnetX mainly took the opportunity to note its new Secure Domain Name project.

For its part, Microsoft kept it brief. "We are pleased to work with VirnetX to bring these cases to a successful resolution through this settlement," Tom Burt, deputy general counsel for Microsoft, said in a statement. "We look forward to VirnetX's continued progress as it develops its technologies."

VirnetX makes software to aid communications over the Internet but hasn't done well financially--until now. Reuters noted a May 7 regulatory filing showing that VirnetX had lost $40.59 million from its initial launch through March 31 and had taken in royalty revenue totaling $255,685.