Who's Afraid of EDTX? Not Microsoft

Don't accuse Microsoft Corp. of being unwilling to take legal risks.

The tech giant went to trial earlier this month in the Eastern District of Texas over accusations that it infringed a TV video conferencing patent, despite having failed on repeated attempts to invalidate it at the Patent Trial and Appeal Board.

Microsoft's opponent, Biscotti Inc., has a funny name but serious credentials: Its founder and CEO, Matthew Shoemake, is a former chairman of the IEEE 802.11 study group that approved Wi-Fi standards and he is an experienced expert witness. The state of Texas invested more than $1 million in Shoemake's idea for providing video calls over a high definition TV system.

Backed by Kirkland & Ellis, Shoemake's company was seeking $43 million in damage—before potential trebling for willful infringement. And the trial was held before U.S. District Judge Rodney Gilstrap on Biscotti's home turf.

But after a weeklong trial, a jury found June 13 that Microsoft's Xbox One didn't infringe, and that all seven of Biscotti's asserted patent claims are invalid. In other words, Microsoft and a trial team led by Sidley Austin partner Michael Bettinger pitched a shutout.

"Microsoft developed its own, different technology, and we’re pleased with the jury’s decision,” a Microsoft spokesperson said in an emailed statement.

A Kirkland representative declined to comment.

Biscotti v. Microsoft pitted California lawyers from Chicago-based firms in a Marshall, Texas, courtroom. But a read of the closing argument transcript suggests that a former nuclear submarine officer from Austin, Texas, might have been the difference maker.

That would be Craig Malloy, now CEO of videoconferencing company Lifesize Inc., who testified that his company came up with a technique for running video calls through HDMI cables before Biscotti did.

Malloy's testimony was crucial because the Eastern District broadly applied PTAB estoppel—an approach now under consideration by the U.S. Supreme Court. In other words, Judge Gilstrap forbade Microsoft from presenting all of the prior art the company raised or even could have raised during the PTAB proceedings.

But Malloy was allowed to testify about the Lifesize Express videoconferencing system because it's a physical system, not a printed publication, and therefore not eligible to be raised in a PTAB inter partes review.

In closings, Biscotti's lead attorney, Kirkland partner Adam Alper, argued that Lifesize Express was an expensive corporate conferencing system, not designed for a living room TV like the Biscotti. And far from being a disinterested witness, Malloy prepared slides with Microsoft lawyers, did tests with them, “and he practiced his testimony with Microsoft lawyers,” Alper said.

Bettinger jumped on that during his closing. First, the patent claims don't say anything about price or living rooms, he said. “That may be a marketing strategy,” he said. “But that's not a patent defense.”

As for coaching Malloy's testimony, “Really?” Bettinger asked the jurors. “We took a guy that graduated from the Naval Academy and ran a nuclear sub for four years. He's going to have the lawyers tell him what to do? That's just nonsense. It's just nonsense.”

Bettinger wasn't finished. “Really?” he repeated. “The guy who is running the nuclear sub for us? Sorry. I just think I have a problem with that.”

Apparently the jurors did, too. First, they found that Microsoft had not infringed Biscotti's U.S. 8,144,182 patent. Then—notwithstanding the higher burden of proof in a jury trial than at the PTAB—they found all seven challenged patent claims invalid as anticipated or obvious in view of the Lifesize Express.

Bettinger tried the case with Sidley partner Richard Cederoth, counsel Irene Yang, local counsel Melissa Smith of Gillam & Smith and others. Microsoft's associate GC for intellectual property, Isabella Fu, supervised the team.

Bettinger had told jurors that Microsoft has a 20-year history in the videoconferencing business. He said this week it was clear Microsoft had come up with its own design. “We didn’t take or steal anything,” he said. “We didn’t get it from Biscotti or anybody else.”

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Contributing Author

Scott Graham

Scott Graham is a journalist who writes for The Recorder and The National Law Journal.

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