Will Microsoft's Latest IP Loss Stick?

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A Rhode Island federal jury put Microsoft Corp. in a familiar place Wednesday: on the hook for hundreds of millions for infringing patents. The question is, will the software giant actually pay or, as it often does, escape on appeal?

The jury found Microsoft guilty of infringing Uniloc's software security patents and ordered the company to pay $388 million.

It was a huge win for Uniloc's lawyers, Paul Hayes and Dean Bostock at Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, who'd taken the case on contingency. The loss went to a Fish & Richardson team led by Frank Scherkenbach.

The Mintz lawyers said it was the fifth-largest patent infringement verdict in history -- and Microsoft is on the list more than once.

The software company set the record when a San Diego jury ordered it to pay $1.53 billion for infringing on Alcatel-Lucent's patents for MP3 digital audio technology. It was hit for $512 million in another case with Alcatel-Lucent. And Eolas Technologies Inc. won a $521 million verdict against it.

But appeals courts have been kinder than juries to the software company. The $1.53 billion award was tossed last year. Microsoft appealed the $521 million verdict and ultimately settled with Eolas for $30.4 million in 2007. The $512 million award is currently on appeal. Fish & Richardson has represented Microsoft against Alcatel-Lucent in both cases, at trial and on appeal.

"Microsoft has certainly seen some large verdicts against it in the last few years," observed Stephen Akerley, a patent litigator with O'Melveny & Myers who wasn't involved with this week's case. "However, there are always appealable issues in these cases. And if you look back, Eolas ultimately settled, Alcatel-Lucent is still going on -- it's impossible to tell where this case will end up."

Mintz Levin's Hayes took the case in 2003 for small, Irvine, Calif.-based Uniloc after launching a contingency fee practice. His gamble paid off big when the jury found that a Uniloc patent for detecting software piracy was valid, and that Microsoft willfully infringed it.

"It was a good day," said Hayes, whose previous biggest win was a $55.2 million verdict against ConocoPhillips Co. on behalf of a small research company.

In an e-mail statement, Microsoft said, "We are very disappointed in the jury verdict. We believe that we do not infringe, that the patent is invalid, and that this award of damages is legally and factually unsupported. We will ask the court to overturn the verdict."

Hayes said that he won the Uniloc assignment via a beauty contest in which he told the company, originally based in Australia, about his long experience trying patent cases. (He declined to reveal details about the contingency arrangement.) He filed Uniloc's infringement suit in Rhode Island, mostly because it was a convenient forum for his six-lawyer, Boston-based team, but also because he thought he'd get a trial date faster there than in Boston. "Plus, they have pretty smart judges here," he said.

He said that Microsoft consistently outspent Uniloc and Mintz Levin. "They stayed at the Westin, we stayed at the Marriott," he said. "They rented out the Civic Center as a war room. We had two rooms at the Marriott."

But at trial, Hayes said, Microsoft was undermined by discrepancies between contemporaneous statements in its technical manuals and the testimony of its witnesses. "The issue was credibility, based on inconsistencies with prior documents," Hayes said.

As Bloomberg reported, Uniloc asked the jury for up to $600 million in damages, but Hayes said the $388 award was about what he expected.

And he's plenty happy to have gotten it. "It was a big risk on our part," he said.

A Fish & Richardson spokesman said the firm had no comment.

Zusha Elinson is a reporter for The Recorder. Alison Frankel writes for The American Lawyer, a Recorder affiliate.