VirnetX Holding and Microsoft said Monday that the companies have agreed to settle two patent-infringement cases as part of an out-of-court deal under which VirnetX will receive nearly twice the amount a Texas jury recommended in March. Both VirnetX lawsuits pending against Microsoft will be dismissed, the companies said.
A Texas jury ruled March 16 that Microsoft willfully infringed on two VirnetX patents pertaining to the use of secure communication links between computing devices. The jury recommended to the U.S. District Court that VirnetX be awarded $105.75 million in damages.
Then on March 18, VirnetX filed a new lawsuit alleging that Microsoft's Windows 7 and Windows Server 2008 R2 infringe on the same patents cited in the original lawsuit. The move was "a tactical and procedural post-trial action to ensure and protect our property rights as we proceed to final resolution with Microsoft," said VirnetX CEO Kendall Larsen at the time.
As part of the settlement announced Monday, Microsoft will license VirnetX's patents for use in its products in return for a one-time cash payment of $200 million. Though the other terms of the settlement agreement were not disclosed, it's clear that another benefit for Microsoft is the termination of all court proceedings, including VirnetX's request for injunctive relief.
Injunctive relief was also on Microsoft's mind when it asked the U.S. Patent and Trademark Office earlier this year to reexamine the i4i patents that ultimately led to Microsoft being enjoined from licensing the ability to open Microsoft Word documents containing custom XML. However, the U.S. Patent and Trademark Office ruled last week that i4i's patents are valid.
Microsoft issued a work-around patch for custom XML in January so the software giant could continue to sell its Office productivity suite. However, Microsoft continues to face a jury award amounting to more than $290 million as i4i's compensation for past infringements of patents pertaining to the use of custom XML in Office.
Secure Private Domains
VirnetX believes that its settlement with Microsoft demonstrates that there is a real marketplace need for the company's secure domain-name registry as well as other related technologies based on the company's patents. For example, VirnetX's Gabriel Connection technology -- which combines industry standard encryption protocols with the company's patented techniques for automated DNS lookup mechanisms -- promises to enable users to create a protected communication link based on the use of secure domain names, the company said.
"We believe that this successful resolution of our litigation with Microsoft will allow us to focus on the upcoming pilot system that will showcase VirnetX's automatic virtual private network technology," Larsen said. "We look forward to our continued work with our Secure Domain Name Initiative partners in that effort."
The goal is to showcase the company's technologies for automatically encrypting the data that enterprises, organizations and individuals need to transmit between multiple devices, networks and operating systems. VirnetX says the secure private domains, or SPDs, that its technology creates will support IM, VoIP, mobile services, streaming video, file transfers, and remote desktop operations in a secure environment.