Microsoft loses $106 million patent verdict

NEW YORK (Reuters) - A federal jury in Texas on Tuesday ordered Microsoft Corp MSFT.O to pay $105.75 million to VirnetX Holding Corp VHC.A for infringing two patents for communicating over the Internet.

Microsoft was ordered to pay $71.75 million for infringing a patent covering a method for creating a virtual private network between two computers, and $34 million for infringing a patent for establishing such a network using a secure domain name service, the law firm McKool Smith said in a statement.

The jury found the infringement to be willful, the law firm said. The judge could triple the award against Microsoft, the world’s largest software maker.

“We believe the evidence demonstrated that we do not infringe and the patents are invalid,” Microsoft spokesman Kevin Kutz said in a statement. Kutz called the damages “legally and factually unsupported,” and said Microsoft will ask the court to overturn the award.

VirnetX had accused Microsoft of violating the patents in an amended complaint filed in April 2007, court records show.

The Tyler, Texas, jury handed down its verdict after a week-long trial, the law firm said.

Based in Scotts Valley, California, VirnetX describes itself as a developer of software and technology solutions for securing real-time communications over the Internet.

The company lost $33 million from its inception on August 2, 2005 through September 30, 2009, with revenue from royalties totaling $222,204, a regulatory filing shows.

Microsoft is based in Redmond, Washington.

VirnetX shares last traded on Monday, closing at $5.59 on the American Stock Exchange, Reuters data show. Microsoft closed Tuesday up 8 cents at $29.37 on Nasdaq.

The case is VirnetX Inc v. Microsoft Corp, U.S. District Court, Eastern District of Texas, No. 07-00080.

Reporting by Jonathan Stempel; Editing by Gary Hill and Richard Chang