A US Federal Court yesterday reversed an earlier ruling that Microsoft's product activation technology infringed on a patent held by a US-based technology firm founded in Australia in 1992, overturning a US$388 million verdict in the case.
In a ruling on Tuesday in the US, the court vacated the earlier decision and decided the case in Microsoft's favour. "We are pleased that the court has vacated the jury verdict and entered judgement in favour of Microsoft," Microsoft spokesperson Kevin Kutz said in a statement.
Tuesday's ruling is the latest twist in a case that has had plenty of them. Microsoft initially won a summary judgement ruling, which would have ended the case in its favour, but Uniloc appealed that ruling and a Federal Appeals Court last year ruled that the case needed to go to trial with regard to two counts.
The victory in the Uniloc case comes as Microsoft is awaiting the result of an appeal in another patent case in which the custom XML feature in recent versions of Word was found to infringe on patents held by Canada's i4i. If it fails in its appeal bid, Microsoft faces damages of more than US$200 million in that case as well as an injunction that would halt sales of word with the infringing feature.
I wonder whether Microsoft deliberately chooses which patents it violates, balancing the potential value of the patent, the likelihood of being successfully sued, and the cost of its legal defense against the suit.
Suppose for that hypothesis that Microsoft violates ten patents having a realizable value of $500M, the total cost of legal defence being $100M, the probability of Microsoft losing each of the lawsuits (and paying their value) being typically 50%, then with an opportunity value of $500M and an expected risk value of $350M (100+250), the profit margin is $150M, representing a 30% margin and thus a commercially viable patent violation scheme.
All that remains then is for Microsoft's lawyers to carefully estimate the probabilities when the company selects which patents it violates and which patents it reluctantly but calculatingly respects.