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IP, Patent, Risk Mangement

Questionable Strategy Employed Against Microsoft Patent Assertion

Microsoft’s recent round of patent assertions has been viewed as a proxy battle against Google, due in large part to Microsoft’s focus on the Android operating system.  (For background, see Google: Battlefield Opponent Or Sitting Duck? Android Patent Assault Continues).  The current assertion against Barnes & Noble is no exception.

Further, IP weaknesses in the Android technology have been noted by other court watchers (See Infographic: 37 Android-related patent lawsuits (since 2010)), and Microsoft itself has claimed that its patent licensing program is the answer to “Android Patent Infringement.” Of course, there’s the lingering question of why Microsoft doesn’t just sue Google, to which the obvious answer might simply be that Google isn’t actually infringing the patents Microsoft has identified.

First, infringement is highly fact intensive, and often requires affirmative activities, rather than the mere fact of creating a technology implementation.  Interestingly, however, a close inspection of Microsoft’s patent assertions also may suggest that the actual infringement has little to do with Android itself.  The patents Microsoft is asserting typically have more to do with user interfaces, visualizations and features than with core processes.  Android’s involvement might be limited to the mere coincidence that Microsoft’s licensing target selection has exclusively focused on companies adopting the Android platform, and that has Barnes & Noble crying foul.

When Barnes & Noble was initially sued, Microsoft’s General Counsel said:

Together with the patents already asserted in the course of our litigation against Motorola, today’s actions bring to 25 the total number of Microsoft patents in litigation for infringement by Android smartphones, tablets and other devices. Microsoft is not a company that pursues litigation lightly. In fact, this is only our seventh proactive patent infringement suit in our 36-year history. But we simply cannot ignore infringement of this scope and scale.

To help companies address Android’s ongoing infringement, we’ve established an industry-wide licensing program. … Unfortunately, after more than a year of discussions, Barnes & Noble, Foxconn and Inventec have so far been unwilling to sign a license, and therefore, we have no other choice but to bring legal action to defend our innovations.

via Android Patent Infringement: Licensing is the Solution (emphasis added)

Barnes &  Noble, answering Microsoft’s allegations, fired back, saying:

The [patents asserted by Microsoft], however, do not cover, claim, or disclose the Android™ Operating System.  Instead, they claim five insubstantial and trivial features, including what Microsoft has itself described as (1) the “display of a webpage’s content before the background image is received, allowing users to interact with the page faster,” (2) the “superimpos[ing of] download status on top of the downloading content”, (3) “easy ways to navigate through information provided by their device apps via a separate control window with tabs”; (4) “[p]rovid[ing] users the ability to annotate text without changing the underlying document”; and (5) “[p]ermit[ing] users to easily select text in a document and adjust that selection.”

via Barnes & Noble’s Answer To Microsoft’s Complaint (emphasis added)

This is just a snippet of a 50-page response Barnes & Noble has filed with the Federal Court in Seattle, the totality of which exhibits a foolish waste of its (shareholder’s) resources, and a lack of sophistication with IP licensing and patents in general.  Barnes & Noble is incapable of “fighting fire with fire” since it has no substantial portfolio of its own to use.  A search of patents assigned to Barnes & Noble reveals two (probably useless) design patents, and three published applications.  The company also chose to mount an expensive and ill-conceived “patent misuse” defense, suggesting that Microsoft’s selective enforcement against companies adopting the Android platform renders the patents unenforceable.

Microsoft’s pre-litigation licensing efforts are also characterized in detail.  Although much of Microsoft’s conduct appears to be SOP in the patent licensing world, Barnes & Noble does its best to characterize the process as a series of shady meetings, misrepresentations, and  unreasonable demands.  While calling Microsoft’s proposed licensing arrangement exorbitant, unreasonable and “shockingly high,” the filing does not disclose the royalties Microsoft requested, nor does it disclose any details about the “unreasonable” restrictions Microsoft sought to impose.

Barnes & Noble also took issue with Microsoft’s repeated requests to enter into a non-disclosure agreement, despite the fact that this is entirely common in licensing negotiations, even in a post-litigation context.  In fact, the failure to secure adequate confidentiality terms can have negative consequences for your overall campaign.  While both the patents and the products at issue are independently a matter of public record, the specific accusations and reasons why certain features are believed to evidence infringement of specific patent claims involve opinions, work product and know-how not in the public domain.

As to the merits of the patent misuse defense, the allegations are strikingly vague.  Misuse is a defense rooted in antitrust laws, typically used to prevent patent owners from artificially extending their patent term through licensing and other contractual arrangements.  Following through with this type of defense is going to be expensive for both parties, given the need to aggressively take discovery and consult antitrust attorneys (who can usually give patent attorneys a pretty good run for their money when it comes to hourly rates).

This represents a horrendous waste of resources.  For far less than the legal bills Barnes & Noble will rack up on its patent misuse defense, it could instead purchase a substantial patent portfolio with enough firepower to inflict far more damage on their opponent.  Despite their recent aggression in the patent space, Microsoft remains highly vulnerable to patent assertions, demonstrated by its defense of the i4i case (where damages exceeded $200 Million) including a trip up to the US Supreme Court to try to make patents easier to invalidate.

Granted, this wouldn’t be the first time Barnes & Noble wasted money on lawyers instead of adopting a more reasonable and effective strategy.  More than ten years ago, Barnes & Noble copied, and then fought over the right to use Amazon.com’s “one click” patented e-commerce method, including a trip up to the court of appeals, likely incurring millions in legal fees in the process.  The simple, efficient solution? Add a second click, differentiating its sales process from Amazon’s.

The Barnes & Noble Answer:

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