InterTrust moves to spike Windows XP Update

InterTrust Technologies Corp has gone gunning for Microsoft Corp with a second patent infringement lawsuit. The Santa Clara-based firm is seeking an injunction and damages from Redmond, saying Windows XP violates a seven-year old patented technology it owns,

writes Kevin Murphy.

This time the company claims that XP's method of digitally signing and authenticating more than 12,000 software drivers violates InterTrust's patent 6,157,721, which covers a "trusted operating system" technology developed in 1995. InterTrust also claims that it attempted to license the technology to Microsoft in 1999, but was turned away.

"We see a pattern from this company," said a Microsoft spokesperson. "They take advantage of whatever latest product [Microsoft comes out with], now it's this spurious at best linkage to Trustworthy Computing... I'm losing count of how many legal filings they've made."

While the latest suit is only the second, the first suit has been revised on a number of occasions to include new products as Microsoft announced details of them. The first suit relates to digital rights management technologies incorporated in Windows XP via Windows Media Player, which is embedded in the OS.

"If they came up with something new, we wouldn't be suing them," said Ed Fish, president of InterTrust's MetaTrust Utility Division. "We invented this technology more than three years before Microsoft."

Fish said that InterTrust talked to Microsoft about a possible licensing deal for the driver authentication technology in 1999, but that "certain people in Microsoft thought the idea was impractical" and a contract was never signed. He added that InterTrust has also filed an interference action with the US Patent and Trademark Office to have two recent Microsoft patents overturned on the basis that InterTrust patents supercede them.

Trustworthy Computing is Microsoft's latest initiative to improve its image - a company-wide policy of putting software security as a high priority. As a result of a seemingly unending series of holes being discovered in Microsoft's products, Bill Gates decided it might be a good idea to put security first, before asking the world to trust it with their credit card numbers.

It's no exaggeration to say that InterTrust's lawsuits are now a key part of its business strategy. The company's finances have been on the decline for years, and last week it laid off almost half of its dwindling staff. The company now has less than 100 people on payroll, about a third of October 2001 levels, and Fish said that he has several people working full time on researching the latest Microsoft technologies.

The reductions mean InterTrust will burn through about $7.5m of its $127m cash pile per quarter, meaning it can afford to maintain the litigation for well over four years. Fish admitted that the recent layoffs were made in part to allow the company to pursue the Microsoft lawsuits to a conclusion, "and to be able to appropriately support existing customers".

"We need to responsibly act to protect the assets we have," he said, adding that the company is "husbanding resources" to be able to afford to see its litigation through to conclusion.

Last week, the firm reported a loss of over $10m on sales of barely $2m and, more importantly, said it only expects to record revenue of $300,000 in the current quarter. "Any additional revenue that may result from new product sales or IP licenses is difficult to predict, both in terms of amount and timing," CFO Greg Wood said a statement.

While Fish would not talk about how much money the company expects to get from Microsoft if it wins, it is likely to be far more than InterTrust has seen in a while. Fish said Microsoft spends $100m on support a year, a large part of which is allocated to sorting out driver problems. The effect of a reliable OS on Microsoft's reputation is worth far more, he said.

In the past InterTrust has been accused of trying to force Microsoft to acquire it by pounding it relentlessly with lawsuits. Investors either believe this, or believe the company has a good chance of winning its suits, based on the company's 12% share price jump yesterday.

As an aside, it's worth noting that some wag has jumped Microsoft's gun and registered the domain name trustworthycomputing.com. The URL now redirects browsers to a Google search results page for terms such as "Microsoft security flaws," "privacy holes" and the like. There are over 400,000 results on the page, including news articles describing three separate holes discovered this week.

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