Microsoft used software activation without a license, jury finds

In a unanimous and complete decision by a Rhode Island US District Court jury yesterday, Microsoft was found guilty of willfully infringing upon an inventor's 1996 patent for a continual software activation and licensing system -- effectively saying that Microsoft stole the technology for preventing users from stealing its technology. The inventor -- an Australian named Richard B. Frederickson, III, of Uniloc Private, Ltd. -- was awarded $388 million USD, or more than half a billion Australian dollars.

The records on Frederickson's suit, dating back to 2005, are too old for public online availability, otherwise we'd do our usual citation of the original suit. But the single patent that Frederickson was defending was for a system that only enables software to run at any time at all, only if the licensing mechanism lets it do so. It's the software activation scheme that has become one of Windows' and Office's trademarks -- the very system that Microsoft first introduced to Betanews in 2001. At that time, the company emphasized the discovery it claimed to have made, of a system that can detect when the underlying hardware for the software has been changed from the original point of licensing, to disable images of that software from being copied and run on multiple PCs.

As Frederickson's 1996 patent summary describes it, "In broad terms, the system according to the invention is designed and adapted to allow digital data or software to run in a use mode on a platform if and only if an appropriate licensing procedure has been followed. In particular forms, the system includes means for detecting when parts of the platform on which the digital data has been loaded has changed in part or in entirety as compared with the platform parameters when the software or digital data to be protected was for example last booted or run or validly registered."

The jury verdict showed that Microsoft's defense was not that Microsoft had discovered the concept of software activation for itself -- as it has claimed in 2001 -- but that Frederickson's patent was invalid due to prior art. Specifically, Microsoft claimed that another inventor came up with the basic distribution principle in a 1983 patent for a software distribution mechanism invention. The jury unanimously voted "No" on Microsoft's defense claim.
Microsoft also claimed that the whole notion of software activation was obvious enough not to require an invention. Granted, Microsoft did not cite any patents it may have held -- if it had, it could have countersued on the basis of their validity. Again, the jury voted "No."

In a statement first issued to Reuters this morning, Microsoft stated it will ask the court to overturn the verdict, but did not give any indication that it might appeal. A willful infringement victory, if upheld, does not necessarily mandate that Microsoft must now obtain a license to use the technology from its inventor; the $388 million may be seen as effectively covering any license fee.