Judge slaps Microsoft with $25m fine top-up

Says 'no' to retrial

By Gavin Clarke in San Francisco, 24th August 2006

Microsoft has been ordered to pay an additional $25m to a tiny digital rights management company for "litigation misconduct" during a patent case with fellow defendant Autodesk.

A US judge has found Microsoft guilty of acting in bad faith during its case with z4 Technologies, by "burying" vital evidence that could have helped z4, and of attempting to overwork the court and potentially mislead the jury. Microsoft's actions indicated it felt z4 was a "small and irrelevant company that was not worthy of Microsoft's time and attention," the judge said. Microsoft must now pay z4 $140m - Microsoft's second highest patent penalty (Eolas is first on $521m).

A jury in April found Microsoft and Autodesk had violated two of z4's patents, and ordered they jointly pay $133m. Microsoft was found to have infringed on the patents in Microsoft Office and Windows XP and fined $115m in damages plus $2m in fees.

The extra $25m is a double slap in the face to Microsoft, as the company had been asking the court for a new trial arguing z4's patents were unenforceable.

While rejecting the call for a new trial, district judge Leonard Davies outlined four areas where he said Microsoft had engaged in misconduct. Among the four, an attempt to overwhelm the court and the litigant with an "unprecidented" 3,499 exhibits that resulted in a 283 page exhibit list and took up 30 lineal feet of space. However, at trial, defendants admitted just 107 of the exhibits.

"The court concludes that defendants attempted to bury the relevant 107 exhibits admitted at trial in its voluminous 3,449 marked exhibits in the hope that they could conceal their trial evidence in a massive pile of decoys," Davies wrote. "This type of trial tactic is not only unfair to z4, but creates unnecessary work on the court staff and is confusing and potentially misleading to the jury."

Microsoft was also pulled up for withholding an unfavorable email that surfaced only during deposition, for misrepresenting data, and for a "highly questionable" declaration surrounding a "read this first card" that was presented to prove z4 knew of Autodesk's IP policy and that - in light of other instances of litigation misconduct - Davies considered an intentional attempt to mislead z4 and the court.®

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