Microsoft to pay $200 M to VirnetX to make future patent suits go away

Two months ago, VPN builder VirnetX was awarded $105.75 million by a Tyler, Texas jury, for Microsoft's infringing upon its patented tunneling protocol for private networks. Realizing that this could actually be the first home run by VirnetX in the same turn at bat, Microsoft has opted to pay $200 million to VirnetX as a settlement for this and all future lawsuits.

The technology that triggered the initial award was a way for VoIP phones to conduct communications on secure channels, without the phone user having to log in using some kind of keyboard. What Microsoft wanted for its Unified Communications suite was a way to keep the same "dialtone" when a user picks up a voice receiver and dials a recipient, and yet keep the channel between the parties secure using VPN technology.

VirnetX definitely held a patent on something meeting that general description, though Microsoft's challenge was that the basic innovation behind VirnetX's twist on tunneling wasn't much of a twist. After its fifth-of-a-billion-dollar payout, Microsoft will not be appealing that argument.

Instead, VirnetX will be putting its newfound revenue to use by funding something it calls the Secure Domain Name Initiative. Launched just last month, the company claims it will be utilizing the two patents it holds -- the two upon which the jury said Microsoft infringed -- to develop a system it describes as enabling always-on communications security between DNS endpoints, presumably using encrypted traffic. Imagine an HTTPS connection (or perhaps something more secure) where the browser doesn't have to create the session key, and where all traffic is encrypted by default.

To get to a Web where that's the case, apparently engineers will have to go through VirnetX's channels; and that $200 million payout doesn't just pave the way, but puts up guardrails, fences, and gates as well.

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