Microsoft bites the bullet on .Net suit

Two entries in a row about .Net. What is this blog coming to?

After the Seattle Post Intelligencer reported last week that Vertical Computer Systems (VCSY) and Microsoft had settled their .Net patent suit, three Cringesters emailed me on a Sunday wondering why this story hasn't gotten more attention. (Though I have my suspicions as to why they did -- see below.)

As reported in April 2007, Vertical claims that .Net violated the patents on its SiteFlash technology, a "system and method for generating Web sites in an arbitrary object framework." A day before an important hearing on how to define terms used in the suit, Microsoft settled, buying a nonexclusive license to VCSY's technology for an undisclosed amount.

If broadly interpreted, that license deal could spell trouble for more than just Microsoft, notes reader J. C.:

I think Microsoft's partners would want to know that's there's no impending injunction on these products now that the case is settled and Microsoft was granted a paid-up license to the patent (# 6826744). Vertical announced it in the following 8-K on Friday. The non-exclusive terms could be potentially disruptive to many other web content software companies like Adobe, IBM, Documentum, Vignette, etc.

Unlike many companies that exist purely as patent trolls, VCSY appears to have actual products, though not much in the way of actual revenue -- just under US$6 million according to its 2007 annual report, with losses of around US$700K.

I imagine that after the Microsoft license they're a little bit richer today.

Publicly traded on the Pink Sheets, VCSY's stock zoomed from 1.5 cents to 8 cents a share (as I write this) after news of the settlement leaked. Given the high volumes these stocks are traded at, even a shift of a penny can put thousands of dollars in one investor's pocket while taking thousands out of someone else's. As a result, the Pink Sheet markets are subject to heavy manipulation, usually in the form of spam and message board puffery. I suspect some of my faithful readers might have financial motivations for pushing this story.

So far, neither company has revealed any more details about the settlement. I'd be shocked if Microsoft dropped the tens of millions or more that some VCSY shareholders are speculating, or that this tiny Texas company will suddenly take on everyone who generates Web sites in a similar way. But maybe I'm wrong.