Xerox patent action over Palm Pilot casts cloud on IPO

Patent Office interlude now over, apparently

A legal action over Palm's alleged violation of a Xerox patent for handwriting input technology is heading back to court, after a delay caused by a re-examination of the patent by the US Patents and Trademark Office at the request of 3Com, which now owns Palm. A recent 10Q filed with the SEC by 3Com has revealed that the PTO had issued in mid-December a notice of intent to issue a re-examination certificate, and that there would be no changes in the patent specification. 3Com has evidently decided not to pursue a legal challenge to the decision, since it immediately asked the District Court for the Western District of New York to lift the stay on the action that had been granted last June pending the PTO decision. Xerox had started the litigation in April 1997. Xerox claims that the Palm Pilot Graffiti product is breaching a patent developed at its Palo Alto research centre and used in the Palm Pilot. At PARC, the technology was rather unimaginatively called "unistrokes". Xerox indicated it would be prepared to reach a settlement over the matter, but the timing is unfortunate for 3Com in view of its forthcoming IPO for Palm Pilot. Less than 20 per cent of the shares are likely to be offered, with the remainder of the shares being distributed to 3Com shareholders (subject to a favourable tax ruling) about six months later. The Xerox litigation is likely to cast a shadow over the offering unless it is settled quickly, since in the event that Xerox prevails, as now seems likely, there will be a back claim for royalties on more than five million Palm Pilots. ®

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