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Originally published Thursday, April 9, 2009 at 12:00 AM

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Microsoft told to pay $388 million over piracy patent

Microsoft (MSFT) was told by a federal jury to pay $388 million to a Singapore company, Uniloc Singapore Private, for infringing a patented invention used to deter software piracy.

Bloomberg News

Microsoft was told by a federal jury to pay $388 million to a Singapore company for infringing a patented invention used to deter software piracy.

The jury in Providence, R.I., deliberated less than two days before finding Wednesday that Microsoft violated a patent owned by Uniloc Singapore Private and Uniloc USA. Uniloc claimed Microsoft wrongfully used its security technology to earn billions of dollars.

Uniloc's lawsuit, filed in October 2003, targeted Microsoft's Windows XP operating system and some Office programs. Microsoft argued that it used a different method for registering software and that Uniloc's patent was obvious.

"We are very disappointed in the jury verdict," David Bowermaster, a Microsoft spokesman, said in an e-mail. "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."

The $388 million equals about eight days of profit for the company, based on fiscal second-quarter net income of $4.17 billion on sales of $16.6 billion.

Microsoft's Windows software runs about 95 percent of the world's personal computers. Windows Vista, the company's current operating system, wasn't part of the case.

The verdict is the second-largest in the U.S. this year, and the fifth-largest patent jury award in U.S. history, according to data compiled by Bloomberg. Four of the six largest patent verdicts have been against Microsoft.

They include the biggest patent verdict ever, $1.52 billion awarded to Alcatel-Lucent in 2007 over digital music technology. A judge later threw out the verdict and was upheld. Microsoft is appealing a $368 million verdict won by Paris-based Alcatel-Lucent in another case.

In the Uniloc case, the jurors found that Microsoft's infringement was willful, or intentional. That means the judge could increase the award by as much as three times the amount set by the jury of six women and four men.

Uniloc's patent, first issued to Australian Ric Richardson for work done in the early 1990s, covers a software registration system. Richardson was working to eliminate "casual copying," where a person installs a program on more computers than permitted, according to court filings.

About 35 percent of software programs installed globally in 2007 were unauthorized copies, according to the Business Software Alliance, the trade group for Microsoft and other software makers.

Uniloc claimed Richardson showed his program to Microsoft in 1993 under a pledge that Microsoft wouldn't try to break down the code to duplicate it. Uniloc claimed that Microsoft did that and, in 1997 or 1998, began pilot programs with similar software.

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Microsoft countered that it developed a system that works differently from Uniloc's. A Microsoft lawyer told jurors that the company's engineers evaluated Richardson's software before deciding it was of no use to them.

The Rhode Island trial began March 23. Microsoft initially won the case in 2006, when U.S. District Judge William E. Smith ruled that the software maker used a different type of encryption technology from that covered by Uniloc's patent.

An appeals court overturned the judge, saying there was a "genuine issue of material fact" and Smith shouldn't have decided the case without hearing from a jury.

Copyright © 2009 The Seattle Times Company

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