Microsoft Corp. Settles Infringement Lawsuit with Virnetx Holding Corp.

Microsoft announced a settlement with VirnetX over intellectual property infringement and has agreed to pay $23 million in order to end the dispute over a pending patent. The shares of VirnetX rose after the news was published by the media.

A settlement made over Intellectual Property

This settlement will allow Microsoft to expand the earlier license it purchased from VirnetX thereby reducing the probability of future lawsuits. Furthermore, this settlement has brought to light that this $23 million received by VirnetX is 10 times more than the revenue earned by the company from licensing in 2013 (Bloomberg).

The infringement suit was filed by VirnetX against Microsoft in 2013. The issue being the use of VirnetX patents for its Microsoft Skype service, a web based application used for messaging and calling over the Internet. The out of court settlement was agreed upon after the Texas judge Leonard Davis issued an order that defined the key terms of the patents being disputed.

VirnetX Stamped as a Patent Troll

The $23 million settlement as per Microsoft spokesperson, allows Microsoft to use VirnetX’s entire suite of patents. The CEO of VirnetX, Kendall Larsen says that this settlement with Microsoft will “put all our legal disputes behind us”.

A small publicly traded company of 14 employees, VirnetX is a patent-holding company located in Zephyr Cove, Nevada. Its corporate offices are housed in a small office suite which it leases for $5 per month.

Patent trolls have for a long time been a nightmare for major tech companies and their patent attorneys. The settlement and VirnetX’s earnings from litigation far supersedes earnings from its own line of business.

VirnetX made a Previous Settlement with Microsoft Corporation

In 2010, VirnetX won a $200 million suit against Microsoft over Skype related products. Its long history of suing companies has made patent attorneys from large corporations overtly careful when filing patents for their companies.

In the 2013 suit filed by VirnetX, it has accused Microsoft Corporation of infringing as many as six of its patents with Skype. Microsoft made a costly settlement but made sure that they have rights to all VirnetX patents to avoid any further disputes.

This is not the end of the road for VirnetX. In September the company was awarded a whopping $368.2 million against Apple Inc. for Virtual Private Networking (VPN) technology infringements. The shares of the company shot up to $20 when news of the award got out. However the appeals court has thrown out the award against Apple and sent the lawsuit back to Texas to the lower courts. Cisco and Avaya are some of the other large companies it has sued in the past (NASDAQ). Today, VirnetX shares are priced at about $6.

The Corporate Tax is even Worse

These infringement lawsuits cost corporations a lot of money and have a negative impact on their overall revenue and image. Apple may have to pay much as 1% of its revenue from sales of iPhone to settle all disputes with VirnetX. These patent trolls are almost as bad as America’s corporate tax which is the highest in the world.