Lost in same Texas court that made it pay i4i nearly $300M and banned Word sales

May 17, 2010 (Computerworld)

Microsoft today said it will pay communications software maker VirnetX $200 million to settle a three-year-old patent infringement case.

In the original February 2010 lawsuit, Scotts Valley, Calif.-based VirnetX claimed Microsoft used its patented virtual private networking (VPN) technologies in Windows XP and Vista, Windows Server 2003, Live Communications Server, Windows Messenger, Office Communicator and Microsoft Office from the 2003 edition on.

VirnetX added Windows 7 and Windows Server 2008 to the list of Microsoft's infringing products in a second lawsuit filed in March 2010.

A Texas federal jury awarded VirnetX $106 million last March to end the first lawsuit. At the time, Microsoft said it planned to appeal the verdict.

In a joint statement Monday, VirnetX and Microsoft announced that both lawsuits would be dismissed as part of the $200 million settlement. Microsoft will also license the VirnetX patents, the companies said.

All other aspects of the settlement will remain confidential.

"We are pleased to work with VirnetX to bring these cases to a successful resolution through this settlement," said Tom Burt, Microsoft's deputy general counsel, in the joint statement.

"We believe that this successful resolution of our litigation with Microsoft will allow us to focus on the upcoming pilot system that will showcase VirnetX's automatic Virtual Private Network technology," said Kendall Larsen, VirnetX Holding Corp.'s CEO.

Microsoft is no stranger to the Tyler, Texas court where VirnetX won its jury verdict. That venue was also the scene of a nearly-$300 million verdict against Microsoft in August 2007, when a jury held that Microsoft illegally used Canadian developer i4i's XML editing technology in the popular Word line of word processing software.

The case attracted attention because U.S. District Court Judge Leonard Davis, who also heard the VirnetX case, issued an injunction that barred Microsoft from selling Word as of Oct. 10, 2009. Davis' injunction was later postponed after Microsoft threatened that sales chaos would result, and several major computer makers, including Hewlett-Packard and Dell, stepped forward to say the same.

In January 2010, Microsoft stripped the custom XML tagging technology from Word 2007 to meet Davis' delayed deadline. Word 2010, which was officially released to businesses last week, does not include the technology.

Last week, the U.S. Patent and Trademark Office confirmed i4i's patent.

An appeals court has refused to hear Microsoft's appeal on the injunction, but the company is still considering taking the case to the Supreme Court. "There remain important matters of patent law at stake, and we are considering our options to get them addressed, including a petition to the Supreme Court," said Microsoft spokesman Kevin Kutz on Monday.

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer or subscribe to Gregg's RSS feed . His e-mail address is gkeizer@ix.netcom.com.