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31 May 2013Patents

Microsoft and Vringo shake hands in $1 million patent deal

Microsoft will pay US tech company Vringo $1 million plus further damages based on a separate lawsuit in a deal that ends a four-month patent dispute.

Vringo subsidiary I/P Engine sued Microsoft in January this year, alleging it infringed two patents covering the way search engines filter and place high-quality adverts. The patents were bought from search engine Lycos.

Since the suit was filed, at the US District Court Southern District of New York, the companies had been in settlement talks, according to court documents.

A Vringo press release on Thursday, which redirected to a US Securities and Exchange Commission filing, says Microsoft has agreed to pay $1million within 15 business days and has “assigned six patents to I/P Engine” that are directed to telecoms, data management and other technology.

A Microsoft spokesman confirmed that the filing was accurate, but said there was no further comment.

The filing said Microsoft will pay a further five percent of any damages that Google pays Vringo for infringing the two patents, following a separate lawsuit. Vringo was awarded damages worth $30 million last year for Google’s (and others’) infringement of the patents but continuing post-trial motions are trying to settle the final damages award.

Google is trying to invalidate the patents at the US Patents and Trademark Office.

In the latest deal, Vringo said Microsoft’s liability will be capped but this sum “would not impact the company (Vringo) unless the amounts received from Google substantially exceed the judgment previously awarded”.

That seems to mean, according to Rodney Sweetland, partner at Duane Morris LLP, that Microsoft’s current 5 percent fee of Google’s $30 million damages is “immaterial to Vringo” but a substantially raised amount would be significant.

Sweetland said it is uncommon to tie part of one settlement to a separate case but that “it makes sense” in this instance.

What is most interesting, he added, is that Microsoft is increasingly becoming a so-called privateer – a relatively new phenomenon – and the latest deal seems to fit that pattern. This term refers to situations in which companies assign patents to non-practising entities (NPEs) in return for a payment.

“It’s pretty controversial because you can engage in patent competition without exposing yourself to counterclaims,” Sweetland said of the ‘privateering’ practice.

“It’s a good strategy,” he added, noting that Microsoft has penned similar deals in the past with Canadian NPE MOSAID Technologies.

Commenting on the Microsoft-Vringo deal, Sweetland said while the current $1 million award – a lower seven figure sum – is typical in patent settlements, it is still a significant amount.

“And if you add the patents Vringo has achieved, this a substantial settlement. More patents mean more money in the jukebox, and it keeps the music playing.”

“This is a very balanced settlement,” he added.

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