Friday, March 12, 2010

VirnetX vs. Microsoft : Trial in Progress - VirnetX (AMEX:VHC) - $6.10 - 242M (MarketCap)

Court proceedings on the Microsoft patent infringement case continued this week, and if this week is any indication of how this case will settle Microsoft may be in a bit of trouble. This case will have effects on a few stocks we are covering here at World Market Media, specifically Modavox Inc (MDVX.OB) $1.12 63M (MarketCap)
which has a parallel patent suit against AOL for infringement..so I am laser focused on how this case is resolved.

Just to recap the situation - VirnetX claims that Microsoft has infringed upon two of its patents. Microsoft has claimed that the patents are invalid, reasoning that the technologies behind the patents are too obvious.

Microsoft may have dug its own grave with this one, not because the source code was blatantly copied or because of obvious infringement but rather an action Microsoft took prior to this whole mess.

VirnetX’s legal team was able to show that Microsoft tried to patent the VPN technology and was rejected by the U.S. Patent and Trademark Office. The USPTO cited VirnetX’s 135 patent as pre-existing technology. And this is where the problem lies for Microsoft…begging the question…why would Microsoft try to patent a technology they claimed to be so obvious? This action shows they believed this technology to be valuable, hence the patent. So for them to now claim that VirnetX’s technology is obvious, which is their main defense, will be difficult to hold up with a scrutinizing Judge who has ruled against Microsoft in previous cases.

Furthermore, in order for one to infringe on a patent they only have to violate one claim; VirnetX contends that Microsoft violated 3 claims and this is only the first patent that Microsoft allegedly infringed upon. Court recessed before talk on the 180 patent could get started.

Transcripts have not been released for Wednesday and Thursdays activates, however, expert witnesses have said “hearings are going well for VHC.” More follow up on this case will be forthcoming as it comes across my desk.

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