On Tuesday, August 11th, U.S. District Judge Leonard Davis, of the Eastern District Court of Texas, issued a judgment and signed a permanent injunction against the Microsoft Corporation in reference to a lawsuit from the Canadian software company i4i. Microsoft is a publicly traded company, whose primarily listing is on the NASDAQ exchange under the ticker symbol MSFT. It is a member of the following indices:
Dow Jones Composite Dow Industrials S&P 100 S&P 500 S&P 1500 Super Composite and Nasdaq 100
There has been alot of conjecture during the last few days about what this news means for Microsoft as a company, and MSFT as a stock. Some analysts are going as far as to call it a veritable doomsday for MSFT and are recommending the immediate sale of the stock. Many reporters are making claims about the injunction that are truly misleading. Before you sell off MSFT or toss your PC in the dumpster, it would behoove you to take a look at the text of the judgment and injunction. They are pasted below. My analysis continues below them .
.....begin injunction text.....
Case 6:07-cv-00113-LED Document 413 Filed 08/11/2009
IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS TYLER DIVISION
i4i LIMITED PARTNERSHIP and INFRASTRUCTURES FOR INFORMATION, INC., Plaintiffs vs. MICROSOFT CORPORATION, Defendant
CASE NO. 6:07CV113 PATENT CASE
PERMANENT INJUNCTION In accordance with the Court's contemporaneously issued memorandum opinion and order in this case, Microsoft Corporation is hereby permanently enjoined from performing the following actions with Microsoft Word 2003, Microsoft Word 2007, and Microsoft Word products not more than colorably different from Microsoft Word 2003 or Microsoft Word 2007 (collectively "Infringing and Future Word Products") during the term of U.S. Patent No. 5,787,449:
1. selling, offering to sell, and/or importing in or into the United States any Infringing and Future Word Products that have the capability of opening a .XML, .DOCX, or .DOCM file ("an XML file") containing custom XML;
2. using any Infringing and Future Word Products to open an XML file containing custom XML;
3. instructing or encouraging anyone to use any Infringing and Future Word Products to open an XML file containing custom XML;
4. providing support or assistance to anyone that describes how to use any infringing and Future Word Products to open an XML file containing custom XML;
and
5. testing, demonstrating, or marketing the ability of the Infringing and Future Word Products to open an XML file containing custom XML.
This injunction does not apply to any of the above actions wherein the Infringing and Future Word Products open an XML file as plain text. This injunction also does not apply to any of the above actions wherein any of the Infringing and Future Word Products, upon opening an XML file, applies a custom tranform that removes all custom XML elements. This injunction further does not apply to Microsoft providing support or assistance to anyone that describes how to use any of the infringing products to open an XML file containing custom XML if that product was licensed or sold before the date this injunction takes effect. This injunction becomes effective 60 days from the date of this order.
LEONARD DAVIS UNITED STATES DISTRICT JUDGE So ORDERED and SIGNED this 11th day of August, 2009.
.....end injunction text.....
.....begin judgement text..... Case 6:07-cv-00113-LED Document 414 Filed 08/11/2009
IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS TYLER DIVISION
i4i LIMITED PARTNERSHIP and INFRASTRUCTURES FOR INFORMATION, INC., Plaintiffs vs. MICROSOFT CORPORATION, Defendant
CASE NO. 6:07CV113 PATENT CASE
FINAL JUDGMENT Pursuant to Rule 58 of the Federal Rules of Civil Procedure, consistent with the Court's contemporaneous Memorandum Opinion and Order, and in consideration of the jury verdict delivered on May 20, 2009 and the entirety of the record available to this Court, the Court ORDERS AND ENTERS FINAL JUDGMENT as follows:
Defendant Microsoft Corporation ("Microsoft") is found to have unlawfully infringed U.S. Patent No. 5,787,449 (the "'449 patent").
Defendant Microsoft is found to have infringed the '449 patent willfully.
The '449 Patent is valid and enforceable, and Michel Vulpe is found not to have engaged in inequitable conduct with respect to the '449 patent.
i4i, LP's and Infrastructures for Information, Inc.'s (collectively "i4i") damage award is found not barred by laches.
The Court awards damages to i4i for Microsoft's infringement of the '449 patent in the amount of $200,000,000.
i4i is further awarded enhanced damages of $40,000,000 for Microsoft's willful infringement.
i4i is further awarded post-verdict damages of $144,060 per day from May 21, 2009 until the date of this Final Judgment.
i4i is further awarded pre-judgment interest of $37,097,032 up to May 20, 2009 and $21,102 per day thereafter until the date of this Final Judgment.
i4i is entitled to post-judgment interest as provided for by 28 U.S.C. § 1961 for any time period between the entry of this Final Judgment and the date upon which i4i receives payment from Microsoft as ordered herein.
Microsoft is enjoined from infringing the '449 Patent. The terms of that injunction are contained in a separate Order of this Court.
Except for the Court's more detailed injunction terms as contained in a separate Order, all relief not specifically granted herein is DENIED.
All pending motions not previously resolved are DENIED.
LEONARD DAVIS UNITED STATES DISTRICT JUDGE So ORDERED and SIGNED this 11th day of August, 2009.
.....end judgement text..... There are two main points to glean from these documents:
1. If the suit is upheld upon (potential) appeal, MSFT will need to payout the ~290 Million issued against them. But, Microsoft has a market capitalization of over 210 Billion dollars. That 290 Million dollar payout would only reduce the net worth of that enterprise by 0.13% . By comparison, over the last 100 trading days, MSFT has had an average trading range that was 2.86% wide on any given day, with a standard deviation of 1.21%. A one time 0.13% fluctuation in the stock would be well within the normal volatility range and even if it does permanently reduce the price of the stock by that amount, that loss would be hardly significant when viewed in reference to the fact that MSFT has a 5-year average dividend yield of 4.0%
2. The injunction however, might have untold damage to Microsoft's bottom line, especially if the (foreseeable) lack of XML compatibility in future editions of MSWord will prevent that program from being run on handheld/non-traditional devices.
The actual damage to Microsoft (and MSFT), if it comes at all, will most likely come not from the damages awarded in the lawsuit, but from the ramifications of the injunction. The exact scope and impact of those ramifications are not knowable at this point. Be wary of any analyst who claims to forsee the future effects of the injunction. A handful of such analysts will be proven right in the future, but that will only be due to random chance, not to their psychic ability. The effect of this injunction on consumer demand for the next version of Microsoft Word will only be knowable as time goes by and more events unfold.
So, the sell/hold call is really in the hands of each individual investor. There is no evidence that conclusively states that investors should either hold or dump the stock. That call is up to each of you.
About the Author
Leslie Lewis Senior Market Analyst Lewis Financial Research Welcome to Lewis Financial Research Our mission: To provide all investors with unbiased, well supported, and thoroughly researched information.
Dow Jones Composite Dow Industrials S&P 100 S&P 500 S&P 1500 Super Composite and Nasdaq 100
There has been alot of conjecture during the last few days about what this news means for Microsoft as a company, and MSFT as a stock. Some analysts are going as far as to call it a veritable doomsday for MSFT and are recommending the immediate sale of the stock. Many reporters are making claims about the injunction that are truly misleading. Before you sell off MSFT or toss your PC in the dumpster, it would behoove you to take a look at the text of the judgment and injunction. They are pasted below. My analysis continues below them .
.....begin injunction text.....
Case 6:07-cv-00113-LED Document 413 Filed 08/11/2009
IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS TYLER DIVISION
i4i LIMITED PARTNERSHIP and INFRASTRUCTURES FOR INFORMATION, INC., Plaintiffs vs. MICROSOFT CORPORATION, Defendant
CASE NO. 6:07CV113 PATENT CASE
PERMANENT INJUNCTION In accordance with the Court's contemporaneously issued memorandum opinion and order in this case, Microsoft Corporation is hereby permanently enjoined from performing the following actions with Microsoft Word 2003, Microsoft Word 2007, and Microsoft Word products not more than colorably different from Microsoft Word 2003 or Microsoft Word 2007 (collectively "Infringing and Future Word Products") during the term of U.S. Patent No. 5,787,449:
1. selling, offering to sell, and/or importing in or into the United States any Infringing and Future Word Products that have the capability of opening a .XML, .DOCX, or .DOCM file ("an XML file") containing custom XML;
2. using any Infringing and Future Word Products to open an XML file containing custom XML;
3. instructing or encouraging anyone to use any Infringing and Future Word Products to open an XML file containing custom XML;
4. providing support or assistance to anyone that describes how to use any infringing and Future Word Products to open an XML file containing custom XML;
and
5. testing, demonstrating, or marketing the ability of the Infringing and Future Word Products to open an XML file containing custom XML.
This injunction does not apply to any of the above actions wherein the Infringing and Future Word Products open an XML file as plain text. This injunction also does not apply to any of the above actions wherein any of the Infringing and Future Word Products, upon opening an XML file, applies a custom tranform that removes all custom XML elements. This injunction further does not apply to Microsoft providing support or assistance to anyone that describes how to use any of the infringing products to open an XML file containing custom XML if that product was licensed or sold before the date this injunction takes effect. This injunction becomes effective 60 days from the date of this order.
LEONARD DAVIS UNITED STATES DISTRICT JUDGE So ORDERED and SIGNED this 11th day of August, 2009.
.....end injunction text.....
.....begin judgement text..... Case 6:07-cv-00113-LED Document 414 Filed 08/11/2009
IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS TYLER DIVISION
i4i LIMITED PARTNERSHIP and INFRASTRUCTURES FOR INFORMATION, INC., Plaintiffs vs. MICROSOFT CORPORATION, Defendant
CASE NO. 6:07CV113 PATENT CASE
FINAL JUDGMENT Pursuant to Rule 58 of the Federal Rules of Civil Procedure, consistent with the Court's contemporaneous Memorandum Opinion and Order, and in consideration of the jury verdict delivered on May 20, 2009 and the entirety of the record available to this Court, the Court ORDERS AND ENTERS FINAL JUDGMENT as follows:
Defendant Microsoft Corporation ("Microsoft") is found to have unlawfully infringed U.S. Patent No. 5,787,449 (the "'449 patent").
Defendant Microsoft is found to have infringed the '449 patent willfully.
The '449 Patent is valid and enforceable, and Michel Vulpe is found not to have engaged in inequitable conduct with respect to the '449 patent.
i4i, LP's and Infrastructures for Information, Inc.'s (collectively "i4i") damage award is found not barred by laches.
The Court awards damages to i4i for Microsoft's infringement of the '449 patent in the amount of $200,000,000.
i4i is further awarded enhanced damages of $40,000,000 for Microsoft's willful infringement.
i4i is further awarded post-verdict damages of $144,060 per day from May 21, 2009 until the date of this Final Judgment.
i4i is further awarded pre-judgment interest of $37,097,032 up to May 20, 2009 and $21,102 per day thereafter until the date of this Final Judgment.
i4i is entitled to post-judgment interest as provided for by 28 U.S.C. § 1961 for any time period between the entry of this Final Judgment and the date upon which i4i receives payment from Microsoft as ordered herein.
Microsoft is enjoined from infringing the '449 Patent. The terms of that injunction are contained in a separate Order of this Court.
Except for the Court's more detailed injunction terms as contained in a separate Order, all relief not specifically granted herein is DENIED.
All pending motions not previously resolved are DENIED.
LEONARD DAVIS UNITED STATES DISTRICT JUDGE So ORDERED and SIGNED this 11th day of August, 2009.
.....end judgement text..... There are two main points to glean from these documents:
1. If the suit is upheld upon (potential) appeal, MSFT will need to payout the ~290 Million issued against them. But, Microsoft has a market capitalization of over 210 Billion dollars. That 290 Million dollar payout would only reduce the net worth of that enterprise by 0.13% . By comparison, over the last 100 trading days, MSFT has had an average trading range that was 2.86% wide on any given day, with a standard deviation of 1.21%. A one time 0.13% fluctuation in the stock would be well within the normal volatility range and even if it does permanently reduce the price of the stock by that amount, that loss would be hardly significant when viewed in reference to the fact that MSFT has a 5-year average dividend yield of 4.0%
2. The injunction however, might have untold damage to Microsoft's bottom line, especially if the (foreseeable) lack of XML compatibility in future editions of MSWord will prevent that program from being run on handheld/non-traditional devices.
The actual damage to Microsoft (and MSFT), if it comes at all, will most likely come not from the damages awarded in the lawsuit, but from the ramifications of the injunction. The exact scope and impact of those ramifications are not knowable at this point. Be wary of any analyst who claims to forsee the future effects of the injunction. A handful of such analysts will be proven right in the future, but that will only be due to random chance, not to their psychic ability. The effect of this injunction on consumer demand for the next version of Microsoft Word will only be knowable as time goes by and more events unfold.
So, the sell/hold call is really in the hands of each individual investor. There is no evidence that conclusively states that investors should either hold or dump the stock. That call is up to each of you.
About the Author
Leslie Lewis Senior Market Analyst Lewis Financial Research Welcome to Lewis Financial Research Our mission: To provide all investors with unbiased, well supported, and thoroughly researched information.