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Microsoft Settles VirnetX Patent Case for $200 Million

Microsoft announced today that it has settled a patent infringement case with California-based VirnetX Holding Corp. for $200 million.

According to a joint announcement, Microsoft will make a one-time payment to VirnetX and also license the company's intellectual property for use in Microsoft's products. No additional information about the settlement and license was disclosed.

The agreement on patents owned by VirnetX follows three years and two lawsuits. VirnetX's patents describe methods for establishing a secure communications link, as well as transparently creating a virtual private network (VPN).

VirnetX first sued Microsoft in February 2007 in the U.S. District Court for the Eastern District of Texas. The company claimed that Microsoft willingly infringed two of its patents by including VPN technology in Windows and Office Communications Server products.

VirnetX cited several Microsoft products in that suit, including Windows Server 2003, XP, Vista, Live Communications Server, Windows Messenger, Office Communicator and other versions of Office, according to an account by veteran Microsoft watcher Mary-Jo Foley.

The settlement comes after a jury had awarded VirnetX a $106 million verdict, announced on March 16, 2010. Microsoft officials had initially indicated that they would appeal that ruling, with Microsoft spokesperson Kevin Kutz saying at the time that the damages were "legally and factually unsupported." But VirnetX sued again. On the following day, March 17, 2010, VirnetX filed a second lawsuit, claiming that Windows 7 and Windows Server 2008 violated the same patents. Those products had not been released in 2007 when VirnetX filed the first lawsuit.

With today's announcement, the two companies have settled both lawsuits. Tom Burt, Microsoft's corporate vice president and deputy general counsel, said that Microsoft was pleased with resolving the matter.

The Texas court that heard VirnetX's lawsuit was the same venue that landed Toronto-based i4i a victory over "custom XML" technology used in Word and Office. i4i was awarded $200 million for willful patent infringement by Microsoft and the judge added an additional $90 million in penalties and interest. Microsoft indicated last week that it is considering its legal options after i4i's patent was upheld by the U.S. Patent and Trademark Office.

McKool Smith, the law firm representing VirnetX, also represented i4i, and the two cases had the same East Texas judge, Foley noted.

About the Author

Natasha Watkins is a New York-based freelance writer specializing in technology and business topics.

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