Patent Lawsuits Crowd Microsofts Horizon

While Microsoft Corp. has reached a $440 million settlement with InterTrust Technologies Corp. around digital rights management patents, it is far from clearing the slate of patent-infringement claims against it.

Microsoft, the worlds largest software maker, remains a major patent target. It is battling between 30 and 35 ongoing patent cases that cover everything from the automatic starting of an application in Windows to the sending of Web alerts. And it is facing more patent claims against it than in the past. Just 18 months ago, it had 20-some patent cases against it, company spokesman Jim Desler said.

"Theres been an increase for Microsoft but also an industrywide increase," Desler said. "We think part of that is the phenomenon that many companies that did not survive the burst of the dot-com bubble were left with nothing but a portfolio of patents" from which to make money.

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While fighting claims that it views as frivolous or invalid, Microsoft also has followed a strategy of settling claims when it believes the patent is valid or that the litigation is hurting its moves into a new market, said Matt Rosoff, an analyst at Directions on Microsoft in Kirkland, Wash.

InterTrust is the most recent example: The settlement made sense for Microsoft because the company wants to aggressively expand its DRM offerings and DRM features in Windows, Rosoff said.

"InterTrust was the biggest one," he said of the patent-infringement cases. "Its in a very important area and an increasingly important one to Microsoft. … When Microsoft announces a new digital rights management initiative, it wants to make sure that all the uncertainty is taken away."

Microsofts willingness to settle also points to its increasing focus on turning once-bitter rivals into partners, Rosoff said. Take the companys $1.6 billion antitrust and patent settlement with Sun Microsystems Inc., which both companies said would allow the two competitors to collaborate and cross-license each others patents.

Microsoft also has focused more closely on patent issues in recent years. Last year, it hired former IBM executive Marshall Phelps as its corporate vice president and deputy general counsel for intellectual property. Rosoff said he expects the company to increasingly try to make money by licensing its intellectual property, as it did in December with its file allocation table (FAT) file system and ClearType font-rendering technologies.

Read more here about how Microsoft is pulling together its patent arsenal.

But the Redmond, Wash., software maker will remain in the courtroom over patent issues. Among the 30-some cases pending are a $521 million verdict against it in a Web browser patent case as well as at least two cases headed to trials.

"We believe many of the cases against us are without merit," Desler said. "In the case of InterTrust, this was an issue where we understood the broadness of the patent portfolio, understood the importance it played in the future of digital rights management and understood the uncertainty it was creating for ourselves and our customers. So, we felt it was appropriate to settle the case and take an IP license to show that we stand behind our products."

Next Page: Four cases that could be high priorities for Microsoft.