Microsoft Tells Device Makers, We'll Foot Your Legal Bills

Amid a legally charged environment for makers of mobile computing devices, Microsoft said Thursday it would expand the protections against intellectual property lawsuits it offers to manufacturers who make devices that run Windows.

Microsoft lifted caps on the amount of legal fees it would reimburse to makers of embedded devices that are sued for intellectual property infringement as a result of licensing Microsoft code. The amount had previously been capped based on Microsoft's volume of business with a device maker that licensed its embedded operating systems. Microsoft also said it would indemnify device makers against trade-secrets lawsuits, in addition to patent, copyright, and trademark suits. The software company also expanded its indemnification program for licensees of its embedded operating systems to all countries, including China and India.

"In the past, we were conservative," says David Kaefer, Microsoft's director of business development for IP and licensing. Now, "if a partner is sued, we're picking up the full defense cost tab." Last June, Microsoft removed caps on legal fees it would reimburse to PC makers that were the subject of intellectual property lawsuits resulting from their use of Microsoft software.

Makers of mobile computing devices are closely watching two patent infringement cases in their market. NTP Inc., a patent holding company in Virginia, has sued wireless E-mail device maker Research In Motion for allegedly infringing on seven of its patents, threatening to shutter RIM's popular BlackBerry E-mail service in the United States. The U.S. Patent and Trademark Office last week rejected all of NTP's claims, but a hearing with a federal judge in Richmond, Va., to consider an injunction on the service is scheduled for Feb. 24. "After the BlackBerry [case] happened, so many companies have gone back to the drawing board to renew their patents," says Siddharth Mehta, an associate at Menlo Park, Calif., law firm Orrick, Herrington & Sutcliffe, who works on U.S.-India transactions and venture funding.

Two weeks ago, mobile E-mail vendor Visto Corp., sued Good Technology charging it infringed on at least four of its patents for synchronizing business data with mobile devices. Visto also sued Microsoft in December.

According to Microsoft's Kaefer, stricter requirements for companies to disclose risks related to their intellectual property portfolios under the Sarbanes-Oxley Act has contributed to CIOs' heightened attention to managing intellectual property. Microsoft's expanded indemnity for device makers also positions Windows more favorably in the market against Linux and other embedded operating systems, Kaefer says.

In other news Thursday, Microsoft said it acquired FutureSoft Inc.'s DynaComm i:filter product for blocking employees' access to Web sites that contain pornography, gambling, and spyware from corporate PCs. Microsoft chairman Bill Gates is scheduled to speak at a computer security conference in San Jose, Calif., next week.