The crisp poppa bringin’ drama like soap operas
Texas-based Vertical Computer Systems Inc. accused Microsoft of violating Vertical’s patent on so-called SiteFlash technology that the company said was copied by Microsoft in .NET. The companies settled with terms as yet unannounced, but Vertical definitely won since Microsoft is buying a license to the patent in question. It’s nice for Vertical that Microsoft settled, but sharp legal minds (far sharper than mine) were surprised. Microsoft isn’t in the habit of settling these suits early if at all and the U.S. Supreme Court’ KSR decision from April, 2007 has shifted the advantage in such lawsuits to companies with large patent portfolios (that would be Microsoft) and away from their smaller adversaries (that would be Vertical). The importance of this decision (and its dire effect on small inventors) has gone right over the heads of most people, but it is rapidly changing the way IP is handled in the tech world.
So if Microsoft normally doesn’t settle suits like this early and the legal terrain has actually improved for Microsoft since the suit was originally filed, what the heck are they doing settling the suit and presumably paying millions that could probably have been avoided? (…)
I think Microsoft settled quickly and quietly with Vertical to avoid going to court because a trial might have exposed Redmond to far more risk than one might expect from a little patent infringement suit. That’s because of something that happened in an earlier case I covered extensively several years ago – Burst v. Microsoft.
For those who don’t remember or never knew the sad story of Burst v. Microsoft, it was a complicated suit involving not just patent infringement but also anti-trust, restraint of trade, and breach of contract. The smoking gun in the Burst case was that Burst lawyers caught during discovery a pattern of apparent destruction of e-mail evidence on the part of Microsoft. Microsoft claimed it was “too hard” to search for the lost e-mails (Burst had copies from its side so many of the messages were known to have existed) but Judge Frederick Motz finally ordered Microsoft to do whatever it took to dig up the tapes and find the e-mails. Fortunately for Redmond, the case settled (for $60 million) before Microsoft actually had to produce anything.
Months after the Microsoft/Burst settlement I received e-mail from a former Microsoft contractor:
Now that Burst v. MS has moved out of the courts, I thought that I might add a little to what you know about this case. Back about two years ago when the judge told MS to cough up the rest of the emails that was supposed to have floated around between MS execs that discussed the Burst relationship, the team that I was on (Corporate tape backups) was asked to gather all together all of the tapes that were used during that time. Even though there was a corporate policy in place that any *.pst was to be excluded from backup capture, the effort failed. Not only did the Backup Exec software fail to filter out those pst files, but some of the involved blue badges (Microsoft employees) intentionally disguised their mail files so that they would not be recognized and included in the nightly backups. This last effort was even prohibited by policy from the VP level. As I was the one tasked to gather the tapes together from Arcus/Iron Mountain, I know exactly how many tapes were recalled for the involved servers. They filled several 240 tape trunks and were stored in the Building 11 tape vault.
Several months after all of the tapes were gathered, MS legal started asking for restores of any pst files captured, the tapes ‘mysteriously’ went missing. Now because our team was a managed service vendor, we were held directly accountable and responsible for the loss. I can think of a lot of reasons that the tapes were removed by someone blue. It is also possible that someone on our team performing a standard purge of old media mistakenly pulled them and sent them to the shredder and even though the tapes were stored in a special section specifically marked “Do Not Touch” taped across them I find it highly unlikely.
In case you aren’t familiar with this case let me put this guy’s statement in some context. Microsoft was saying in court that it couldn’t find the tapes and that it would take millions of man-hours to search for them when in fact the several trunks full of tapes were apparently easily gathered and already stored in the Building 11 tape vault.
At the time Microsoft lawyers were claiming the tapes would be impossible to find, THEY HAD ALREADY BEEN FOUND.
It would be interesting to know if Microsoft’s lawyers were aware of this. They should have been, but this may have been one of those instances when it was to their advantage NOT to know.
And then THE TAPES DISAPPEARED. Funny we never heard about that, either.
To my knowledge, Microsoft never presented this “the dog ate our tapes” story, most likely because they may not have wanted to acknowledge that there even WERE such tapes. The fact that there were tapes and then there weren’t probably SHOULD have been mentioned, since I’m guessing not doing so violated a court order. Certainly it should probably have at least been mentioned in the discovery materials given to Burst.
Why, if the tapes were found, did they sit for months in a special tape vault in Building 11 rather than be examined for the missing messages? And then there is the big question about what happened to the messages at all — messages that were in a locked vault and labeled “Do not touch” — how did they get thrown away and by whom?
The former Microsoft contract employee who contacted me on this issue did not do so anonymously, by the way. I know his name and how to reach him. We have talked on the phone more than once. He did not hesitate to name names:
“…Calvin Keaton, the blue badge who managed the team, made the appropriate loud noises about the loss to HP services, although I never saw any public disclosure about it…. Just glad I never had to depose for the issue. Can’t imagine that it would have done my career any good.”
So the outside vendor was Hewlett-Packard, one of Microsoft’s hardware OEMs, which is to say Microsoft’s bitch.
The tape disappearance was blamed on HP, which reportedly accepted the blame, and the employees directly involved kept expecting there to be repercussions, especially legal ones. They expected to be deposed by Burst lawyers. But it never happened.
This was, for Microsoft, a perfect ending. The damning tapes were lost in a way that could be blamed on a contractor — a contractor over which Microsoft had great power — power greater than just a services contract. The contractor “accepted” responsibility though there was no real evidence they had done anything wrong. It could just as easily have been a Microsoft employee who destroyed the tapes. It is possible that Microsoft never revealed to the court either that the tapes had been found or that they had later gone missing. This admission would have had to have taken place at the spoliation hearing that was scheduled for the week Microsoft instead settled with Burst for $60 million.
I contacted both Burst and Burst’s lawyers last year and they could not recall any aspect of this incident having been revealed to them by Microsoft or by the court. It was news to them. But of course by that time the case had been long settled.
Microsoft’s legal behavior in this is consistent — consistently bad — and the only intersting aspect of that part is that it is logical to assume Redmond would have paid ANYTHING to avoid that spoliation hearing and its need to either come clean about evidence destruction or to commit perjury by not coming clean. $60 million was nothing to Microsoft. Burst could probably have got a lot more money had they known what was actually going on. (…)
But since the Burst settlement there have been at least a couple more Microsoft lawsuits that may also have been affected by the lost evidence in Burst v. Microsoft. The people of Iowa cited it, I’m told, in their anti-trust case against Microsoft that settled pre-trial last year. It may have been known, too, to Vertical in this most recent case. Any claimed pattern of deception on Microsoft’s part would be dragged-up in similar cases.
If these claims are true, what Microsoft allegedly allowed to happen and then did not disclose (along with the suspicious timing of all of it) was illegal in a stop-the-presses, all-capital-letters way. You just don’t do that to Federal judges. So Microsoft is paying and paying and paying again not just for intellectual property licenses in these subsequent cases, but also for this earlier information to be kept out of court. And for lawyers who understand such issues, it strengthens their hand substantially.
