Microsoft’s Loss in South Korean Patent Case May Signal Trend

Microsoft lost a key ruling this week in the South Korean Supreme Court, which upheld a finding that the company infringed on Korean-English translation software patents held by a local inventor.

The plaintiffs — the academic who invented the language-switching process and the company representing his interests — have requested that the version of Office that contains the technology be pulled from the market. They are also reportedly seeking US$75 million in damages.

The case is not over, however, as Microsoft is appealing the decision, a surprising move, given the limited impact of the court’s ruling. It applies only to Microsoft in a market that is not a top destination for software exports.

Nevertheless, the suit, which was originally filed in 2000, does present some worrisome issues for American tech companies that are expanding overseas: It might be a harbinger of more so-called “patent troll” lawsuits to come in foreign jurisdictions.

Patent Troll or Marketing Hype?

Steven Rubin, an attorney with WolfBlock’s Intellectual Property/Information Technology Practice Group, is careful not to use the expression “patent troll,” as he doesn’t care for it. However, it is conceivable that P and IB, the company that owns the disputed patent, might be considered such a troll in some quarters.

“The flip side is that there is an individual inventor that came up with this idea and doesn’t have the resources to go through the court and patent system, so [he] looks to another company for support,” Rubin told the E-Commerce Times.

Whatever one calls them, it is likely that such companies are going to start duplicating arguments that have been successful in court systems both in the U.S. and elsewhere. For instance, there are cases pending in which foreign holders of multiple patents have filed suit to enforce patents that were granted in the United States, Alan Fisch, a partner at Kaye Scholer, told the E-Commerce Times.

“The business of patent and tech transfer looks like it is also viable in other markets, such as South Korea,” Rubin said.

Whether such suits reach the same volume as they have in the U.S. remains to be seen, however. It should also be noted that the U.S. Supreme Court earlier this year set aside a lower court ruling that barred eBay from using its “Buy it Now” technology. The lower court had ruled that the technology was patented byMercExchange, and a jury awarded the company $25 million in 2003.

eBay appealed that decision to the Supreme Court and won, a victory that is now being widely viewed as a setback to suits filed by companies that hold multiple patents.

The ruling does not apply to suits filed in foreign courts, however.

Global Markets

The larger lesson to be drawn from Microsoft’s legal battles in South Korea is the difficulty of maintaining patents in multiple markets.

“There is no such thing as a worldwide patent — you have to file for a patent in every market in which you operate,” Rubin said. Companies typically don’t put South Korea at the top of their list of countries in which to seek a patent, he added. Rather, they start with larger markets such as the United States, United Kingdom, Japan and others.

Now, however, a foreign company — a tech company in particular — may want to reconsider its priority markets if South Korea figures large in its export plans, Rubin concluded.