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Tuesday, August 22, 2006 - Page updated at 12:00 AM

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Patent penalty against Microsoft increased $25 million

Times technology reporter

Microsoft willfully infringed on the patents of a small Michigan company and engaged in litigation misconduct in its effort to defend itself, a federal judge ruled Friday.

U.S. District Judge Leonard Davis upped a jury's award against Microsoft by $25 million, plus nearly $2 million in legal costs. He cited several instances of misconduct and "ample circumstantial evidence" that Microsoft viewed the patent-holder, closely held z4 Technologies, as "a small and irrelevant company that was not worthy of Microsoft's time and attention, even if Microsoft was potentially infringing its patents."

The case centers on patents held by z4 founder and President David Colvin for "product activation" technology, designed to limit software piracy. z4 alleged Microsoft Office products infringed on its patents beginning in 2000; the alleged Windows operating system infringement began in 2001.

z4 sued in September 2004 and won a jury verdict of $115 million from Microsoft and $18 million from another defendant, Autodesk, the computer-aided design software maker. The judge added $322,000 in z4 legal costs to Autodesk's penalty.

In addition to granting z4's motions seeking enhanced damages Friday, Davis also rejected motions by the defendants for a new trial and other judgments.

"I'm very gratified that the process works," Colvin said Monday. "... It's certainly good news to me and really good news to all the small companies and independent inventors alike in this country."

Microsoft plans to challenge the decision at the U.S. Court of Appeals.

"Obviously, we're disappointed," Microsoft spokesman Jack Evans said in an e-mail. "We believe that the facts in this case clearly show that Microsoft and others developed their own product activation technologies well before z4 Technologies claims to have created this technology."

Autodesk did not return calls for comment.

Davis admonished Microsoft and Autodesk for misconduct around the trial.

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The defendants marked 3,449 exhibits, but only admitted 107 of them at trial. "The Court concludes that Defendants attempted to bury the relevant 107 exhibits ... in a massive pile of decoys," Davis wrote.

He cited several examples in which the defendants failed to fully and promptly disclose evidence, calling one instance "an intentional attempt by Defendants to mislead z4 and this Court."

In sum, Davis wrote that the court was "greatly disturbed by the repeated instances where Defendants actions go beyond what can be dismissed as a mere appearance of impropriety and collectively appear to represent a pattern which is of disappointment to the Court and a disservice to legitimate advocacy."

Benjamin J. Romano: 206-464-2149 or bromano@seattletimes.com

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