Sunstein Kann Murphy & Timbers LLP

March 2009 IP Update

GPS Navigation System Steers TomTom into Microsoft's Briar Patch

T omTom's GPS navigation products recently brought the Amsterdam-based company into a Seattle courtroom and into the offices of the International Trade Commission ("ITC"), accused in both venues of infringing Microsoft patents.

The Hatch-Waxman Act rewards makers of generic drugs for the risk and expense of litigating challenges to a pioneer drug company's patents: 180 days of exclusive marketing rights, if the patent challenge succeeds. Procedurally, the generic drug maker files an abbreviated new drug application (ANDA) for drugs that are the bioequivalent of previously approved drugs.

When the approved drug is covered by patents still in force, the ANDA filer submits a so-called Paragraph IV certification, declaring that those patents are invalid. This declaration is itself an act of infringement, entitling either party to commence an infringement lawsuit. Increasingly, pioneer drug companies have settled such litigations with reverse payments. See our May 2008 article.

The courts have taken conflicting views of such payments. The FTC and at least one appeals court regards them as per se antitrust violations. Other courts, applying a "rule of reason," believe that, as long as the pioneer drug company does not seek to expand the scope of its patent through the settlement process, reverse payments do not offend the antitrust laws. See our December 2008 article.

Microsoft has an active licensing program that boasts over 500 licenses with technology heavyweights, including Apple, LG Electronics, and open-source provider Novell. The software giant describes its program as fostering innovation through collaboration, for the benefit of the consuming public.

The present suits involve Microsoft patents that the company alleges not only relate to navigation but cover the open-source Linux operating system used in TomTom's GPS navigation products. Microsoft had been negotiating a license with TomTom for over a year before filing actions in both federal court and the ITC on February 25, 2009.

The allegations against TomTom have caused an uproar in the open-source software community. Some open-source advocates view this as the latest attempt by Microsoft to destroy the competitive threat posed by the open-source operating system.

Microsoft, by contrast, explains its double-barreled litigation as an inevitable consequence of a year of failed license negotiations. Those negotiations likely saw patent-infringement assertions and licensing proposals from Microsoft, and denials, counter-assertions, and counteroffers from TomTom. Without reaching a deal, Microsoft saw no option but to turn to federal court and the ITC.

Tactically, TomTom's defensive roadmap holds the usual options - namely, arguing non-infringement or invalidity of the patents. TomTom may have substantial assistance from the open-source community in locating prior art and assembling persuasive arguments that the patents never should have issued in the first place. TomTom may also take advantage of the Federal Circuit's recent In re Bilski decision, which calls into question the eligibility of software for patent protection.

Strategically, however, the Microsoft actions increase the pressure on TomTom to accept Microsoft's offer of a license. The ITC moves relatively quickly and can ban the import of infringing TomTom products. The trial court in Seattle will probably move more slowly, but will give Microsoft a "home court" advantage. TomTom must defend on two fronts, and a loss in either one could be devastating.

Electronics retailers, already battered by economic conditions, may grow increasingly uneasy about the risk of selling allegedly infringing TomTom products (Microsoft could sue them, too), and may pressure TomTom to accept a deal with Microsoft, or may demand costly indemnity promises from the company. Even worse, the retailers might drop TomTom's products altogether.

TomTom may be in a position to leverage its own patent portfolio by means of a countersuit against Microsoft. A search of the PTO's patent assignment database shows that TomTom owns more than 60 U.S. patents and many pending applications, mostly in the GPS navigation space.

TomTom's attention to its patent portfolio will pay off if some of these patents in fact cover Microsoft's GPS navigation products. TomTom has now seized the chance to prove the stature of its own patents. In a separate suit filed in Virginia last week, TomTom accused Microsoft's "Streets & Trips" product of infringing several of TomTom's GPS navigation patents.

In the end, this dispute is not about Microsoft versus open-source, and the fate of open-source does not hang in the balance as some members of that community fear. Neither is this about collaboration and leveraging technology, as Microsoft may contend.

Rather, the parties are seeking to determine the value to TomTom of Microsoft's patent portfolio (a value measured in dollars), and these actions are about finding that value. To that end, Microsoft's twin lawsuits buy negotiating leverage and unleash a strategy that may prove overwhelming to TomTom.

	Articles Our Newsletters Speaking/Press Other Useful IP Links	March 2009 IP Update GPS Navigation System Steers TomTom into Microsoft's Briar Patch By Tom Tuytschaevers T omTom's GPS navigation products recently brought the Amsterdam-based company into a Seattle courtroom and into the offices of the International Trade Commission ("ITC"), accused in both venues of infringing Microsoft patents. The Hatch-Waxman Act rewards makers of generic drugs for the risk and expense of litigating challenges to a pioneer drug company's patents: 180 days of exclusive marketing rights, if the patent challenge succeeds. Procedurally, the generic drug maker files an abbreviated new drug application (ANDA) for drugs that are the bioequivalent of previously approved drugs. When the approved drug is covered by patents still in force, the ANDA filer submits a so-called Paragraph IV certification, declaring that those patents are invalid. This declaration is itself an act of infringement, entitling either party to commence an infringement lawsuit. Increasingly, pioneer drug companies have settled such litigations with reverse payments. See our May 2008 article. The courts have taken conflicting views of such payments. The FTC and at least one appeals court regards them as per se antitrust violations. Other courts, applying a "rule of reason," believe that, as long as the pioneer drug company does not seek to expand the scope of its patent through the settlement process, reverse payments do not offend the antitrust laws. See our December 2008 article. Microsoft has an active licensing program that boasts over 500 licenses with technology heavyweights, including Apple, LG Electronics, and open-source provider Novell. The software giant describes its program as fostering innovation through collaboration, for the benefit of the consuming public. The present suits involve Microsoft patents that the company alleges not only relate to navigation but cover the open-source Linux operating system used in TomTom's GPS navigation products. Microsoft had been negotiating a license with TomTom for over a year before filing actions in both federal court and the ITC on February 25, 2009. The allegations against TomTom have caused an uproar in the open-source software community. Some open-source advocates view this as the latest attempt by Microsoft to destroy the competitive threat posed by the open-source operating system. Microsoft, by contrast, explains its double-barreled litigation as an inevitable consequence of a year of failed license negotiations. Those negotiations likely saw patent-infringement assertions and licensing proposals from Microsoft, and denials, counter-assertions, and counteroffers from TomTom. Without reaching a deal, Microsoft saw no option but to turn to federal court and the ITC. Tactically, TomTom's defensive roadmap holds the usual options - namely, arguing non-infringement or invalidity of the patents. TomTom may have substantial assistance from the open-source community in locating prior art and assembling persuasive arguments that the patents never should have issued in the first place. TomTom may also take advantage of the Federal Circuit's recent In re Bilski decision, which calls into question the eligibility of software for patent protection. Strategically, however, the Microsoft actions increase the pressure on TomTom to accept Microsoft's offer of a license. The ITC moves relatively quickly and can ban the import of infringing TomTom products. The trial court in Seattle will probably move more slowly, but will give Microsoft a "home court" advantage. TomTom must defend on two fronts, and a loss in either one could be devastating. Electronics retailers, already battered by economic conditions, may grow increasingly uneasy about the risk of selling allegedly infringing TomTom products (Microsoft could sue them, too), and may pressure TomTom to accept a deal with Microsoft, or may demand costly indemnity promises from the company. Even worse, the retailers might drop TomTom's products altogether. TomTom may be in a position to leverage its own patent portfolio by means of a countersuit against Microsoft. A search of the PTO's patent assignment database shows that TomTom owns more than 60 U.S. patents and many pending applications, mostly in the GPS navigation space. TomTom's attention to its patent portfolio will pay off if some of these patents in fact cover Microsoft's GPS navigation products. TomTom has now seized the chance to prove the stature of its own patents. In a separate suit filed in Virginia last week, TomTom accused Microsoft's "Streets & Trips" product of infringing several of TomTom's GPS navigation patents. In the end, this dispute is not about Microsoft versus open-source, and the fate of open-source does not hang in the balance as some members of that community fear. Neither is this about collaboration and leveraging technology, as Microsoft may contend. Rather, the parties are seeking to determine the value to TomTom of Microsoft's patent portfolio (a value measured in dollars), and these actions are about finding that value. To that end, Microsoft's twin lawsuits buy negotiating leverage and unleash a strategy that may prove overwhelming to TomTom.