Intertrust to screw Microsoft? Big time.

[Paul]

http://www.fortune.com/fortune/technology/articles/0,15114,466180,00.htm

Microsoft's Patent Problem
In the biggest patent case ever, the tech giant is getting trounced.
FORTUNE
Tuesday, July 22, 2003
By Roger Parloff


Last month, when Microsoft announced its bellwether decision to award employees restricted stock instead of options, it also made news in a federal courtroom—the kind of news you keep quiet about.

Microsoft suffered utter defeat at a crucial pretrial hearing in what appears to be the highest-stakes patent litigation ever—one in which a tiny company called InterTrust Technologies claims that 85% of Microsoft's entire product line infringes its digital security patents. (See Can This Man Bring Down Microsoft?)

InterTrust's engineers developed and patented what they say are key inventions in two areas: so-called digital-rights management and trusted systems. The technologies are essential to the digital distribution of copyrighted music and movies, and to maintaining the security of e-commerce in general. At its prebubble height, InterTrust (founded in 1990) employed 376 people and marketed its own software and hardware products; today it consists mainly of a patent portfolio, 30 employees, and this lawsuit. An investor group led by Sony Corp. of America and Royal Philips Electronics bought the company in January for $453 million, hoping to convince consumer electronics and tech companies—beginning with Microsoft—of the need to license its patents.

Microsoft argued in court that crucial phrases in InterTrust's patents were too vague to be enforceable, and that others required such narrow interpretation that they would have been hard for Microsoft to infringe. But in her July 3 ruling, an Oakland judge resolved 33 of 33 disputed issues against Microsoft and rebuked the company's lawyers for wasting her time by promising proof that never materialized—legal vaporware, in essence.

"This is simply another step in a long legal process," says a Microsoft spokesman, putting the best face on it. "Microsoft will continue to defend itself against what we believe are groundless and overbroad claims."

As agreed before the hearing, the parties now enter a round of settlement talks. Though InterTrust declines to place a pricetag on the suit, it's hard to imagine the company settling now for any sum that does not have a "B" in it. InterTrust claims that its inventions cover technologies that Microsoft has been weaving into its Windows XP operating system, Office XP Suite, Windows Media Player, Xbox videogame console, and .NET networked computing platform, to name just a few. If settlement talks fail and InterTrust prevails in court, it would be entitled to a court order halting sales of all those products. InterTrust CEO Talal Shamoon asks rhetorically, "How much would that be worth to Microsoft?"

Looks like Intertrust has MS by the balls, either they pay the obviously huge settlement or MS has a good chance of being royally screwed.

 

[DemoCoder]

These idiotic patents will be either overturned, or Microsoft will simply remove the security and DRM infringing pieces of their products and ship new versions. Then Intertrust will have to find someone else with deep pockets to pick on.

Hollywood/RIAA/MPAA are the ones that want DRM, not Microsoft, so they are not going to tolerate tremendous damages to their company for a technology that others want. I predict MS will just abandon the trusted computing initiative if required.

As for Intertrust's claims on digitally signed code (ActiveX controls, XBox boot sectors, etc), those will surely be overturned as the techniques were widely published in academic literature before Intertrust's patents.

Software and algorithm patents need to go.

 

[Saem]

These idiotic patents will be either overturned, or Microsoft will simply remove the security and DRM infringing pieces of their products and ship new versions.

I'm not abreast on all the details, but... I believe the judge tossed out all of MS' arguments and said stop wasting the courts time. MS, thus far, is in trouble. Mind you this is hearsay as I haven't followed the story personally -- a friend told me in the computer lab.

 

[Vince]

Then Intertrust will have to find someone else with deep pockets to pick on.

I really don't think so, regardless of the outcome of this litigation. AFAIK, Intertrust is owned by Sony/Philips who have their own agenda for the IP (and have those deep pockets you spoke of). I think your comment, which struck me as almost Rambus-esque in nature, is a bit misplaced in this case.

 

[DemoCoder]

Not misplaced because I am against software patents. I have never seen a software patent that wasn't obvious to anyone who was a computer programmer and told to develop a technique to solve the same problem.

The courts are not really equipped to deal with these cases, hell, the USPTO isn't even equipped to review patent applications in these areas. (patent on XOR cursor anyone?)

Software patents represent a tax. To avoid being sued, software companies must patent every last detail of what they are doing (a costly expense) as a defense measure against being sued by competitors in the future.

If Intertrust wins, MS will simply remove DRM (which they aren't making any money on) from their products. This means Hollywood Spyware won't be in your operating system and applications which is a good thing for consumers anyway.

I'm sick and tired of failed companies disolving and turning into law firms whose only product is to sue other people. Intertrust IS Rambus now, but worse. Rambus atleast still produces new technologies. Intertrust went from 300+ employees to 30. It is now an intellectual-property-only firm, which means most of those 30 employees are full time lawyers building cases against deep pocketed companies.

Sony is just going to shoot themselves in the foot. DRM will be the next Betamax unless MS and other companies can use it for next to nothing.

Mpeg-4 almost died for the same reason.

 

[RussSchultz]

I'm a bit undecided about software patents.

Sure, after the fact they appear obvious, but somebody had to have come up with the idea.

On the other hand, its easy to accidentally stumble upon a software (or any) patent when working on the solution to a problem. And yeah, many times the problem is obvious.

Though, when it comes down to it, if my company is going to pay me 2k per patent, well...I'll file them.

Hrm, that paints me to be a money grubbing bastard, doesn't it? *shrug* Shoe, meet foot.

 

[DemoCoder]

My company pays me $4k per patent, but I still find the majority of them quite obvious and non-original.

The RSA patent is an example of something that your average CS major isn't going to discover, perhaps even with years of work. On the other hand, patenting a virtual machine sandbox for DRM is not only obvious, there is loads of prior art.

Or patenting a "shopping cart" for online buying, patenting URL based caching, patenting encrypted bootloaders (which even the Commodore 64 was using!) All nonsense.

If you're got money, you can force any patent through the USPTO by simply revising your claims until it gets through one of the examiners.

I'd say that maybe a small minority of software patents are truly deserving, because they represent non-obvious new discoveries. I'd say the vast majority of them are bad and shouldn't be granted.

Remember, a patent shouldn't be obvious to a practicioner in the field.

 

[diarrhea_splatter]

My company pays me $4k per patent

Not misplaced because I am against software patents.

Is your patent a software patent?

 

[DemoCoder]

I haven't patented anything at this company, I just said, they offer $4k per patent.

When I owned my own company, I owned patents, but only for *defense purposes* since software patents force you to either patent something, or be sued by someone else.

Like I said, software patents are a tax. They force you to pay money to lawyers to get patents on trivial ideas so that you can't be sued by others.