Palm Must Put Down $50 Mil. Bond in Xerox Case
In late December, a judge ruled against Palm and 3Com, saying that Graffiti does infringe on a patent Xerox holds on a handwriting recognition method, called Unistrokes. Though the case is being appealed, the two companies have been required to put down a $50 million bond. Should Xerox win that appeal, the bond "will ensure that Xerox is able to collect at least some, if not all, of the damages it will suffer as a result of 3Com's infringement during the appeal period," wrote Judge Michael Telesca, U.S. District Court for the Western District of New York.
The bond will be returned if Palm wins its appeal.
The judge denied Xerox's motion for an injunction that would have prevented Palm from selling its handhelds during the appeal period, saying Xerox would not be irreparably harmed if sales continue.
The judge also rejected Xerox' effort to set a trial date to determine damages Xerox claims it is owed. Calling the latter motion "premature," the court noted that Palm's appeal of the decision is still pending.
There isn't much info on what the total of damages could be, because, as mentioned above, the portion of the case that would determine that hasn't been held yet. The comment from Judge Telesca that $50 million will cover "some, if not all, of the damages" is the best indication available of what the ruling might be.
Though $50 isn't chump change, having to put this money aside won't empty Palm's cash reserves. According to a Securities and Exchange Commission (SEC) filing at the end of its last fiscal quarter, the company's cash and cash equivalents equaled $242 million.
Palm is trying to downplay the importance of Graffiti. Eric Benhamou, chairman and CEO of Palm, said, "Numerous handwriting-recognition technologies have long been available, some costing pennies per unit. Graffiti is only a tiny fraction of the software experience that drives the existing 21 million Palm Powered products."
According to 3Com, though it is named in the suit, Palm is entirely responsible for paying any damages. It said in a recent filing with the SEC, "In connection with Palm's separation from 3Com, Palm agreed to indemnify and hold 3Com harmless for any damages or losses, which might arise out of the Xerox litigation."
In April 1997, Xerox sued U.S. Robotics, later acquired by 3Com, on the grounds that the Graffiti handwriting recognition technology infringed a Xerox patent received on Jan. 21, 1997, U.S. Patent No. 5,596,656. The technology in question, known as Unistrokes, was invented at Xerox's Palo Alto Research Center.
Palm maintains that it does not infringe the Xerox patent and that the patent is invalid. "We intend to pursue our appeal vigorously and have excellent arguments to support our view," said Mr. Benhamou. "For thousands of years, people have been creating writing symbols. Xerox doesn't own the alphabet.
Thanks to montyburns for the tip. -Ed
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