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Microsoft loses legal battle over Australian -

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Reporter: Meredith Griffiths

PETER CAVE: In a legal battle against a company like Microsoft the scales could seem to be tipped
in favour of the side with the deepest pockets. But a jury in the United States has found that the
software company wilfully infringed a patent lodged by an Australian inventor.

It's ordered Microsoft to pay more than $500-million in damages for using the anti-piracy
technology devised by Ric Richardson in 1993.

Meredith Griffiths reports.

MEREDITH GRIFFITHS: When someone buys Windows or Office XP from Microsoft, the company uses
anti-piracy technology to ensure that the software is only loaded onto particular computers.

An American jury has now found that the technology was actually devised by Australian Ric
Richardson in 1992. He offered it to Microsoft, but when they rejected it, he went on to sell the
technology through a California-based company called Uniloc.

Brad Davis is the CEO of Uniloc.

BRAD DAVIS: Ric is a very, very smart guy to have figured it out way back then - this is all
pre-internet. But yes, he came up with the idea and patented it, thank goodness.

MEREDITH GRIFFITHS: So how did Microsoft get their hands on the technology?

BRAD DAVIS: Without going into too much detail, Ric was in discussions with Microsoft back in the
mid-90s. Microsoft evaluated the product and told Ric, 'No thanks'.

And then Ric had actually moved to the US, but began noticing in 2001, suspecting that something
similar to his idea was actually being used on Windows XP and Office XP and so became a little
alarmed. And that's about when I met Ric, actually - me and another guy that sort of formed the
Uniloc USA organisation.

So, after some investigation, we decided, you know, this company's going to be about the strength
of its intellectual property, if nothing else, so we decided we needed to take action to defend our
intellectual property. And so in 2003 we filed this lawsuit.

MEREDITH GRIFFITHS: Did that take some courage? I mean, Microsoft is such a giant in the software
world. Did some people think you were crazy trying to take it on?

BRAD DAVIS: Well, you can't necessarily pick your dance partners; it's kind of like you can't pick
your family, right? It's just, we didn't really have a choice. It was an extremely daunting task,
and we would prefer to have started with a smaller opponent, but at the end of the day we didn't
really have a choice.

MEREDITH GRIFFITHS: So how were you feeling when the judgement was handed down? Had you been
confident of success?

BRAD DAVIS: You know, I'd never personally been through the adversarial process in a courtroom like
that, with a jury. It's a very human process, I have to say, and when you have a lot at stake
personally - and you know, we all own stock in the company, and my family is all invested in the
company - you get a little unnerved, because it is a very human process.

But I have to tell you, coming out of it, I think the proper outcome was reached, as unbiased as I
could profess to be, and I have a lot more faith in the system than I did when I went in. So it's
nerve wracking, there's no two ways about it.

MEREDITH GRIFFITHS: How much did this case cost you in legal fees? Has it had a, quite a
detrimental impact on the operations of Uniloc for the past six years?

BRAD DAVIS: I can't disclose what we've spent; we're a private company, so I can't really get into
that. You know, we managed.

And just by the way, we have our own products, we have customers. We're not in the business of
suing people. We don't rely upon any of these awards to operate the company, so if ultimately we
get a capital out of this award, we will use it to grow the company - we're not going to, you know,
disperse it out to shareholders.

We've got big plans - we think this is, truly, Ric had a once in a lifetime idea way back in '93,
and we're all feeling quite fortunate to be here, and we plan to be here for a while.

MEREDITH GRIFFITHS: So what does happen now? What about Microsoft? Will they have to stop using the
technology, will they have to give you credit? What happens?

BRAD DAVIS: Those are the exact issues being discussed in the court now, now that the jury's come
in with this verdict. And so there's a number of motions being filed around, you know, is there an
injunction against them using this going forward.

It was a wilful infringement, so there's actually, the judge, it's within his power to triple the
damage award if he so chose. So there's a lot of that going on, and there's going to be some
wrangling between, over the next two months.

MEREDITH GRIFFITHS: Just finally, Mr Davis. Have you been in touch with Ric Richardson over the
past few days? How are you guys feeling about this victory?

BRAD DAVIS: I feel great, on behalf of the shareholders of Uniloc, but I have to tell you, I'm -
you know, the power of ideas is personal and creative and fantastic thing.

Ric is, at his core, an inventor, and so for him, this is a soul-enriching experience, I have to
say, and I'm so happy for Ric, and I'm sure he's thrilled.

MEREDITH GRIFFITHS: Microsoft has issued a statement saying it is does not believe it did infringe
the patent because it is invalid. The company says it will be appealing the verdict, saying the
award for damages is legally and factually unsupported.

PETER CAVE: Meredith Griffiths reporting.