Reports by Special Master in Veritas v. Microsoft Patent Litigation May Narrow Issues for May 2008 Trial

Reports by special master Gale R. Peterson were recently unsealed by the Court in the aging dispute between Microsoft and Veritas Software (now owned by Symantec Corp.) concerning the parties' decade-old joint development of storage management software. The ill-fated business relationship between Microsoft and Veritas began in 1996, when they entered into a development and licensing agreement "whereby Veritas promised to provide Microsoft with the source code for its volume management technology, called Logical Disk Manager (LDM), to be embedded in the next version of the Windows NT operating system, Windows NT 5.0, later renamed Windows 2000." According to a recent order in the case "Veritas’ express objective in entering the Agreement with Microsoft was 'to build a Windows NT Add-on products business[.]'" In other words, "Veritas planned to develop and market to Windows customers certain volume management-related features, or increased capabilities, that were not included in the base LDM to be embedded in Windows 2000."

Well, things apparently did not go as planned, and suit was filed by Veritas in May 2006 alleging breach of the joint development agreement by theft of confidential information, and infringement of U.S. Patent No. 5,469,573. Microsoft fired back in the form of counterclaims, seeking invalidity of the '573 patent, and its own claims for breach of the agreement, as well as infringement of its own patent, U.S Patent No. 5,588,147.



Trial is set for May 2008, and both parties filed for Summary Judgment on a variety of contract and patent claims. The special master's reports (more than 300 pages in length, and in several parts, attached below) recommends that the Court grant Microsoft's motion for invalidity of the '573 patent, and that there is no evidence of direct infringement of that patent by Microsoft's customers. The reports also recommend that the court enter summary judgment of no infringement by Veritas of Microsoft's '147 patent as to certain claims and that certain other claims are invalid for anticipation.



Motions for summary judgment on the contract claims were also pending and recently decided by Judge Coughenhour. In two separate orders, Judge Coughenhour held that Veritas' contract claims survive summary judgment, but that damages will be capped at $4,000,000. Microsoft's claims for breach were dismissed in view of a forum selection clause in the agreement.




In summary, this looks to be a pretty big victory for Microsoft, having damages on the contract claims capped and what looks like a pretty strong recommendation from the special master that there should be no liability for patent infringement. Microsoft may lose its '147 patent to a ruling of invaldidity, but something tells me this won't hurt Microsoft too badly. Of course, the parties have an opportunity to object to the special master's report and recommendations. The Judge is in no way bound to agree with these findings. Realistically, I think the parties will have a hard time convincing the Court to make a ruling in conflict with the special master's recommendation.



As an aside, this is apparently not the first time the W.D. of Wash. has used Gale R. Peterson as a special master in a patent case. Mr. Peterson's bio states that he served as special master in a patent case, Precor v. Life Fitness (W.D. of Wash.), the majority of which was pending before Judge Coughenhour (95-cv-00066, 97-cv-00250, 94-cv-01586, 98-cv-00694).

VeritasReport%20by%20SepcialMaster.pdf
veristasreportbbyspecialmasterpart2.pdf
VertiasReportspecialmaster%20on%20invalidity573.pdf
veritasreportyspecialmasteron147claimpart1.pdf
vertiasReport%20by%20SepcialMaster147part2.pdf
VeritasOrderSealedMPSJ.pdf
veritasOrderonMPSJ.pdf