Microsoft and Proclarity Settle Patent Suit with Timeline

One day before a scheduled jury trial in its long-running patent dispute with Timeline, Inc, Microsoft and its Subsidiary, ProClarity Corporation entered into a binding settlement agreement. The following is from Timeline's form 8-K filed today with the SEC.

"Pursuant to the Settlement Agreement, the parties agreed to dismiss, with prejudice, their respective claims and counterclaims against each other asserted in the Actions. The parties further agreed to release and discharge each other from any claims existing as of the effective date with respect to the Actions or related to the facts and circumstances asserted in the Actions. In addition, Timeline agreed to release and discharge customers of Microsoft and ProClarity for liability for patent infringement, to the extent set forth in the Patent License Agreement. The Settlement Agreement is not an admission of liability by any party with respect to the Actions.
Under the Settlement Agreement, Microsoft agreed to pay Timeline a one-time payment of $5 million within 14 days as consideration for entering into the Settlement Agreement and the Patent License Agreement. The net proceeds to Timeline from this amount will be reduced by payment of its 45% contingent attorneys' fees and other expenses of the litigation."

As explained in Timeline's SEC filing, Microsoft was granted a worldwide license to Timeline's patents that were the subject of the Actions (including U.S. Patent Nos. 5,802,511, 6,023,694, 6,026,392, 6,625,617 and 6,631,382) "for use in connection with Microsoft's products and services."

Exclusive Enterprise Licensee Lacks Standing to Sue for Patent Infringement According to Federal Circuit

Yesterday, the Federal Circuit decided that an "exclusive enterprise license" (an amalgam of an exclusive territorial license and an exclusive field of use license) does not confer standing to sue for patent infringement under 35 U.S.C. 281 (link to precedential opinion here).

Plaintiff International Gamco, Inc. owns rights under U.S. Patent No. 5,324,035 which claims a gaming system network configured to allow multiple players to engage in games drawn from a finite and centrally controlled pool of game plays, including predetermined numbers of winning and losing plays. Technology claimed in the '035 patent covers many state lottery games, including video poker and other such games. Gamco had originally owned the '035 patent by way of an assignment. Subsequently, Gamco assigned the '035 patent to International Game Technology, the well-known manufacturer of gaming products and systems with headquarters in Reno, Nevada. In its assignment of the '035 patent to IGT, Gamco reserved certain rights in the "New York State Lottery Market." In its opinion finding that Gamco lacked standing to sue for alleged violations of its reserved rights, the Federal Circuit characterized its own statements in a prior case, Textile Products, inc. v. Mead Corp., 134 F.3d 1481, 1484 (Fed. Cir. 1998), as "dicta." The Textile opinion contains broad language regarding exclusive "fields of use" licenses, suggesting that a licensee with exclusive "fields of use" under a patent would have standing to sue for infringement under section 281.

Note: This opinion marks a significant deviation between patent and copyright law (at least in the Ninth Circuit). In copyright law, an exclusive licensee of any exclusive right under 17 U.S.C. 106 may sue for infringement. See Silvers v. Sony Pictures Entm't, inc. 402 F.3d 881, 885 (9th Cir. 2005) ("'the owner of' the particular exclusive right allegedly infringed" may sue for infringement).