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An Inventor’s Court Win Over Microsoft Took Years—at What Cost?

July 29, 2022, 9:15 AM

Inventor Michael Kaufman finally got his big payday, 22 years after coming up with the idea for a technology patent and 10 years after he saw Microsoft Corp. was infringing it.

After years of settlement talks, patent validity proceedings, a jury trial, and an appeal to the US Court of Appeals for the Federal Circuit, Kaufman secured a $10 million award for his invention, a user-friendly interface for interacting with complex computer databases that Microsoft infringed with a software development program.

For Kaufman, the experience was a crash course in the challenges—time, money, and resources—inventors face in protecting their ideas even with the shield of a patent. It’s a path that others would find difficult to recreate successfully.

“Patents in particular are meant to protect against this, but the tech giants are just so big and have deep pockets,” Kaufman said. “I was arguably in a much better position than most inventors would be, and still, I ran out of money long before we got to Microsoft. It’s sobering.”

A lot went right for Kaufman even though at times the outlook didn’t look promising. His lawyer, Ronald Abramson of boutique firm Liston Abramson LLP in New York, wrote the claims of the patent in such a way that 20 years later they withstood Microsoft’s attacks.

His lawyers found Woodsford, a UK-based legal finance provider, that was comfortable going against a major technology company in the face of new validity challenges for software patents.

Still, the celebration didn’t come until the end of June, nearly a month after the Federal Circuit issued its ruling without further challenges from Microsoft, when the money hit Kaufman’s account.

Media representatives and attorneys for Microsoft didn’t respond to requests for comment.

Getting Started

Kaufman came up with the idea for the now-expired US Patent No. 7,885,981 while working as a freelance consultant in the late 1990s. He met Abramson, then at Hughes, Hubbard & Reed LLP, who convinced him to patent the technology.

It took about a decade for Abramson and Kaufman to get the patent issued in the US, mostly battling an examiner who didn’t seem to understand the claims, they said.

During that time, Kaufman went from one child to three, and had to leave the consulting industry for Deutsche Bank.

By the time Abramson noticed Microsoft was potentially infringing the product in 2011 with its Dynamic Data function in its Visual Studios software, Kaufman said he was “tapped out.”

Abramson declined to say how much Kaufman had spent defending the patent.

Kaufman didn’t give up on productizing the invention, but he wasn’t sure how he could afford the litigation.

‘Level the Playing Field’

The Liston Abramson team started pitching the case to venture capitalists and private equity firms, but there wasn’t an appetite for suing Microsoft.

Many were also shying away because the future of software patents seemed uncertain, given the US Supreme Court’s 2014 decision in Alice v. CLS Bank and the onset of patent validity challenges at the US Patent and Trademark Office, known as inter partes review.

Five years later, they found Woodsford Litigation and sued Microsoft in the Southern District of New York.

Robin M. Davis, Woodsford’s chief investment officer, said Kaufman’s case fit with the “David and Goliath archetype” that her company typically finances. She declined to say on how much was spent on the litigation or how much Woodsford earned.

“Funding is a hard thing to get,” David G. Liston, a Liston Abramson partner, said. “It helps in cases like this. It helps level the playing field.”

Protecting patents is a resource issue for most inventors, said Nicole Morris, a professor at Emory School of Law.

Inventors need to have the money to get good counsel who will craft thoughtful briefs that can stand up on appeal. Litigation can cost millions, and sometimes firms work on contingency or partial contingency, though there’s no typical system, attorneys said. Liston Abramson declined to comment on whether they worked on a contingency basis.

It’s unusual for one person to have the finances to spend the time Kaufman did on this case, said Eligio Pimentel, a patent attorney at McAndrews, Held & Malloy Ltd.

Most inventors who challenge alleged infringers want their day in court, Morris said.

“Solo inventors are probably less likely to settle, for the primary reason that as a solo inventor filing a patent you take great pride in having your invention,” she said. “You’re willing to go toe to toe and fight it out.”

Some companies view these types of suits as a nuisance, Pimentel said, adding that inventors need to be taken seriously.

“You don’t stop fighting the gorilla when you’re tired,” Pimentel said. “The fight’s not over until it’s over.”

Worth Winning

After a failed settlement negotiation in 2016, the team set off preparing for trial. But it wasn’t clear how much Microsoft was making off the specific software that infringed Kaufman’s patent.

That information would determine how much Kaufman and Woodsford could potentially receive in damages, and whether the whole suit would be worth pursuing.

A day before trial in 2019, Microsoft released the information. The data Microsoft had on the use of the product started in 2018, and showed the use was “very low,” Abramson said.

“Why didn’t they tell us this three years ago?” Abramson said. “The whole case was about this. We wouldn’t have even bothered.”

Microsoft didn’t have any of the data before 2018, so another attorney at Liston Abramson used Google Trends data to estimate that the use was actually much higher earlier, around the time Abramson first noticed the infringement. Then, Liston said they knew the case would be worth it.

The jury credited Kaufman’s testimony in finding infringement. Microsoft first moved for a new trial, then appealed to the Federal Circuit. On appeal, Kaufman’s attorneys decided to challenge the New York judge’s ruling that the $7 million award was reasonable, saying prejudgment interest should’ve been included.

Abramson has argued to the Federal Circuit several times, but it was the first time for Alex G. Patchen, another attorney on the team. He was tasked with handling the prejudgment interest portion of the appeal, and he won.

The panel in a May 20 precedential opinion found that Kaufman should’ve been entitled to royalties from when the infringement started in 2011 to the patent’s expiration in 2021.

That made the total around $10 million. Kaufman received a “lion’s share” of the award, Abramson said. The firm declined to comment on the breakdown of the award and the total cost of litigation.

After the win was complete, Kaufman said his co-inventor asked him if he thought the case would change the nature of patent law to show that the “little guy” can have champions.

“My first reaction was cynical, like, ‘How naive can you be?’” Kaufman said. “My second response was, ‘Well, I hope so.’”

To contact the reporter on this story: Samantha Handler in Washington at shandler@bloombergindustry.com

To contact the editors responsible for this story: Jay-Anne B. Casuga at jcasuga@bloomberglaw.com; Martha Mueller Neff at mmuellerneff@bloomberglaw.com