Microsoft Files Suit Against Timeline for Breach of Contract

Editor’s Note

After this press release was issued, Microsoft voluntarily dismissed without prejudice its claims for breach of contract by Timeline, and the case went to trial on the issue of the interpretation of the license agreement alone. On March 4, 2002, the Washington Court of Appeals ruled in favor of Timeline on this issue, holding that “If a Microsoft licensee adds code to SQL Server that is not a ‘material part’ of Timeline’s patent, no infringement has occurred, even if the resulting combination would otherwise infringe Timeline’s patent. But if the added code is a material part of Timeline’s patent, and the resulting combination infringes the patent, the sublicensee has exceeded the scope of Microsoft’s sublicensing rights under the agreement.” The Court’s unpublished opinion may be found at 2002 WL 339338. Independent Software Vendors, Value Added Retailers, and other interested parties are advised to consult their legal advisers with regard to the significance of the decision.

REDMOND, Wash., July 12, 1999 — Microsoft Corp. today confirmed it has filed a lawsuit against Timeline Inc. for breach of contract and breach of the implied covenants of good faith with respect to a license agreement signed by the companies this past June. That agreement provides Microsoft with rights to a Timeline patent related to database analysis technology.

Microsoft acquired a full license under Timeline’s patent rights, including the right to sublicense it to customers, independent software vendors and solution providers who use Microsoft technology in the creation of data warehousing and/or business intelligence solutions that extract data from business systems, transform the data and prepare it for reporting and analysis. The license ensures that all users of Microsoft SQL Server 7, Office 2000 and any other Microsoft products that utilize this type of technology are unencumbered by Timeline’s patents.

Microsoft believes Timeline, a firm based in Bellevue, Wash., that develops and sells financial reporting software applications, has breached its June 1999 contract with Microsoft by refusing to acknowledge that the agreement entitles Microsoft’s customers to create their own products with Microsoft’s licensed technology.

“Litigation is always viewed as a last resort, but given the fact that the contract clearly provides Microsoft the right to sublicense the Timeline patent to our customers, we felt we had to take this action,” said Andy Culbert, a Microsoft corporate attorney. “Of course, we remain hopeful that the two companies can work out their differences with respect to the licensing contract.”

Microsoft’s complaint was filed today in Superior Court of the State of Washington in King County.

Issued on Sept. 1, 1998, the patent, number 5,802,511, describes a process of accessing, transforming and summarizing data for financial reporting, similar to the process used in data warehousing tools. Timeline claims to have other patent applications pending that relate to specific uses of this general architecture. Under the June 1999 agreement between the two companies, Microsoft received a license to those related patent rights as well.

Microsoft takes this action to protect its rights under the licensing agreement with Timeline and to support its customers – all of whom are entitled to the benefit of the sublicense provided in Microsoft’s contract with Timeline.

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