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Microsoft Assigns Six Patents to Patent Troll Vringo -- Is This an Antitrust Issue? ~pj Updated
Saturday, June 01 2013 @ 02:36 PM EDT

Is Microsoft's motto 'Always Be Evil'? Look at this report from Joe Mullin at ars technica on Microsoft's latest patent scheming:
Some days $30 million seems like a lot of money, and other days it's just a bit of a letdown. Vringo is a once-upon-a-time ringtone company that's now basically a holding company for search patents dating back to the Lycos days, and it used those patents to sue Google. In November, a federal jury found that the patents were infringed, but Google should pay just $30 million, far less than the nearly $700 million it was seeking.

Investors had big dreams for Vringo, but that too-small payday, combined with an assurance of a lengthy appeal by Google, has left the stock price disappointingly stagnant.

In January Vringo unveiled its wholly predictable backup plan—sue the one other viable search engine, Microsoft's Bing. Now that case has settled for $1 million, plus five percent of whatever Google ultimately pays, according to a Vringo regulatory filing yesterday...

The five percent addendum is an interesting twist to this early settlement. One has to wonder if Microsoft really fought very hard. The company has effectively paid $1 million for an "option" to see its chief competitor hurt 20 times as bad as it is.

The settlement also provides for Microsoft to transfer six patents to I/P engine, the patent-holding subsidiary of Vringo. "The assigned patents relate to telecommunications, data management, and other technology areas," stated Vringo in its filing.

Of course Google is appealing the verdict. Now this ploy by Microsoft. Now, why would it assign patents to Vringo? Maybe because Vringo's dreams of destroying Google with its Lycos patents didn't come true? Is it time for some prior art searching? How about some antitrust investigation of companies outsourcing to trolls to ding a competitor?

A couple of things about this Vringo affair. First, Mark Cuban -- who set up the chair at EFF to fight against stupid patents -- also bought a 7% interest in Vringo, back when they were dreaming their Big Dreams. Blech. Gambling on litigation. That's what patents are being used for, and that's only part of what's wrong with the US patent system.

Speaking of stupid patents, Google has also asked the USPTO for reexamination of the patents, and some of the claims were already preliminarily rejected. And with Google's record in patent cases, these greedy Vringo folks saw that they might just be put out of the patent lawsuit business.

Enter Microsoft, transferring to Vringo some more patents to do more damage with. What a coincidence. You think?

You can find directions to find the USPTO office action on the two patents in suit -- 6,314,420 and 6,775,664 -- here if you'd like to track it, and if you know of any prior art, sing out. If any of you find out what the six patents transferred to Vringo are, let me know and we'll do some prior art searching on them also.

Vringo investors stated that their goal was multiple billions in both damages and royalties from Google, and that dream has now died as far as the old patents and Google are concerned, and they also predicted that they'd send Google's stock to zero. What kind of malevolent dream is that? Talk about There Oughta Be a Law. They imagined, when counting their imaginary riches, that Google would settle. I would call that the Darl McBride Pipe Dream, in his case billions from Linux. When he was asked in a deposition if he ever modeled what he expected to gain for SCO Group from litigation against Linux, this is what he said:

Oh, we had -- usually I would sit down and go through it on the white board with Chris or Bob Bench. You know, guys on the finance side. We would kind of lay out what the number of units of Linux were that were in the marketplace against what our list price was for the SCOsource license, reduced by any kind of discounts that we might give for volume or for being an early adopter. And it was usually a pretty big number that we were talking about.... I remember that the models were showing -- we would look at IDC numbers, and there were X millions of servers and growing at a certain rate. And I remember specifically 4 million servers going to 6 million servers over some time frame. I'd have to go back and refresh what the time frames were, but I remember bracketing if you've got 4 million servers against our list price of $700, you multipy that out, you get $2.8 billion. If you go up to the full list -- or the list price against the 6 million then you are talking about $4.2 billion. So it was always -- it's a ridiculously big number. So okay. I guess we could get finite on whether the number is $5 billion or $1 billion or $6 billion. The point is it was a lot of money for the company, and the size of company that we were.
Microsoft suffers from the same dream, of course, billions from Linux, which is what their patent war is all about. And Vringo did lots of public modeling of what they hoped to generate too. But Google knows how to fight, and if you look at their record, Google tends to win in the end.

And to regulators out there, where are you? You are worrying about patents related to standards. Good. Fine. But what about plots going on to use patents not for their stated purpose but for anti-competitive ends? Everyone is joining together in gunning for Google, and you stand by and do nothing? Is it now legal for companies to plot together to destroy a competitor? You tell me.

You know what I'd like to know? Was the lawsuit against Microsoft just a cover to enable the transfer of the six patents to Vringo?

What is that sound I hear in my imagination? Paper being shredded like mad? And what's that I see? Emails being furiously deleted? Kidding.

Sorta.

But I'm serious as a heart attack that regulators need to do their job and look into this scheme of companies outsourcing to trolls to do their dirty work for them, trolls who are willing to do it because they are out to make money the Quick and Dirty way even if it hurts valid companies and the public's interest. Google, Red Hat, Blackberry and Earthlink just asked the FTC and DOJ to investigate the antitrust implications of such outsourcing:

II. Patent Transfers To PAEs Create Additional Perils

An accelerating phenomenon threatens to exacerbate the above-described harms and poses additional perils to competition and innovation. Although operating companies have consistently raised concerns about PAEs,53 some such companies increasingly employ PAEs as patent enforcement surrogates. These operating companies sell or assign pieces of (or entire) patent portfolios to PAEs that then assert the acquired patents against the transferring company’s rivals. Put differently, although operating companies previously funded certain PAE activities and served as a well-spring for patents PAEs enforce,54 operating companies are increasingly employing PAEs to strategic ends in new and evolving relationships.

And here's Microsoft popping up right on cue with what appears to be Exhibit A.

Update: In 2012, Vringo also bought over 500 patents from Nokia, also an alleged conspirator with Microsoft. The plot thickens.


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