Not-So-Unified Communications: Microsoft Losing Edge In Patent Dispute


Microsoft's request for re-examination called into question Avistar's patents in the field of instant messaging, videoconferencing and online collaboration, all key elements in unified communications, which Microsoft has recently highlighted as a top priority.

In February, Microsoft Corp. challenged 24 of Avistar Communications Corp.'s 29 patents, but later added the remaining five to the list. As of the close of the market last week, 14 of Microsoft's re-examination requests were rejected by the Patent Office. The Patent Office did, however, authorize the re-examination of nine of Avistar's patents. The remaining six patents remain in limbo, as the office has not issued a decision on them.

Once approved, the patent re-examination process can take anywhere from six months to two years to complete.

At the time the challenges were filed, Avistar called the re-examination requests a "go-for-the-throat" maneuver that would pit David against Goliath, with Microsoft being the obvious stronger force.

Sponsored post

In a statement issued this week, Avistar CEO Simon Moss said the vendor is pleased with the Patent Office's decisions so far. Avistar would not comment beyond the statement.

"We are obviously pleased with the [Patent Office's] notification that challenges to the core 14 of our U.S. patents have been rejected," Moss said. "We continue to remain focused on our business operations and have no further comment at this time with regards to our patent discussions."

Microsoft also remained tight-lipped.

"We asked the U.S. Patent Office to take a look at Avistar's patents in light of prior art which was not considered in the original examination of the patents," a Microsoft spokesperson said Wednesday. "Any discussions that may be going on between the parties are confidential and not something we are at liberty to discuss."

But Microsoft's patent challenges have had deeper implications than on just intellectual property. In March, Avistar announced that it would cut its workforce by roughly 25 percent, with the majority of jobs being phased out by the end of the first quarter. Avistar also said it was suspending the formation of a previously announced China-based development capacity.

According to Avistar, the cost restructuring was a direct result of Microsoft's patent re-examination requests. The company said in a statement that the realignment was "prompted by Microsoft Corporation's recent challenge to all of Avistar's U.S. patents through the U.S. PatentTrademark Office."

Microsoft filed the re-examination requests after six months of unsuccessful discussions with Avistar, which included negotiations surrounding the Redmond, Wash., software giant potentially licensing Avistar's intellectual property and technology.

Avistar, San Mateo, Calif., has said that the patents in question have an important early priority date of 1993 and have already been examined over a large body of prior art and include patents that have successfully withstood two previous litigations.

"Based on the history of these patents and the [Patent Office's] response this week, Avistar is confident it will overcome any of the remaining re-examination requests that may be granted," Avistar said in a statement. "Avistar patents have industrywide applicability to audio, video and data unified collaboration products and services."

Avistar's lead counsel, Paul Carmichael, said in a statement that rejected re-examinations are a rare occurrence, but a good sign.

"Data for the entire history of the [Patent Office's] re-examination activity indicate that only 8 percent of re-examination requests are rejected," Carmichael said. "While we believed that Microsoft's challenge to Avistar's entire U.S. patent portfolio was without merit, we also recognized that the statistics relating to us avoiding a wholesale re-examination were against us. We are delighted that the Patent Office's review has resulted in this extraordinary result, which validates and strengthens many of Avistar's most important patents. We expect that the nine patents that the Patent Office has agreed to re-examine at this point also will be validated, and actually strengthened, through this process."

The patent re-examination requests came at a transitional time for Avistar, which faced rough waters at the end of 2007 and beginning of this year. In late 2007, the Nasdaq threatened to delist Avistar due to lack of compliance. Avistar regained compliance in March to avoid delisting, but about a month later received another non-compliance notice from the Nasdaq, which is still being reviewed.

In addition, Gerald Burnett, Avistar's then-CEO, resigned at the end of 2007 and was replaced by Moss.

During Burnett's departure, Avistar launched its first-ever channel program hoping to boost declining revenue and spark sales into new verticals beyond financial services, where Avistar had previously been pigeonholed.