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Burst lawyers trip up Microsoft http://www.northbaybusinessjournal.com © 2003 North Bay Business Journal BY LORALEE STEVENS STAFF REPORTER SANTA ROSA -- Burst.com Inc. got an edge in its suit against Microsoft at a recent discovery hearing, where Burst lawyers pointed out significant gaps in the e-mail records provided to the Santa Rosa company by Microsoft. The gaps are potentially embarrassing -- and financially damaging -- to the software giant, which claims to keep records of all company communications. Burst is suing Microsoft for patent infringement and for allegedly stealing Burst's patented audio and video streaming technology during a year-long series of licensing negotiations -- negotiations Burst claims Microsoft performed in bad faith. The suit alleges that Microsoft, after breaking off talks, went on to develop its own streaming product using the Burst technology, ignoring a nondisclosure agreement. According to Burst attorney Spencer Hosie of Hosie, Frost, Large & McArthur in San Francisco, the gaps came to light when he sorted by date and time 140 boxes of e-mail printed from a disk submitted by Microsoft as discovery material. The gaps coincided with seven substantive meetings between Microsoft and Burst principals during a 35-week period. “Microsoft conducts business almost solely by e-mail, and they testified in another trial that they keep backups of every one. It's impossible that no e-mail would be generated by those meetings,” says Mr. Hosie. Needle in the hay? Ouch! Burst can prove there was relevant e-mail: It has 70 pertinent messages saved on its own server that were not produced by Microsoft, he says. At the hearing, Microsoft attorneys responded by acknowledging the gaps exist and that the half-dozen Microsoft employees who had been involved in the Burst meetings had erased related e-mail from their PCs and company servers. It was done, the attorneys stated, because Microsoft had concluded the Burst technology was not worth licensing and the e-mails not worth preserving. “The judge didn't buy that,” says Burst chairman and CEO Richard Lang. “He ordered them to search the off-site backup tapes and employees' PCs and servers.” Reportedly, when the Microsoft lawyers complained it would be like searching for a needle in a haystack, federal judge Frederick Motz reminded them that Microsoft had placed the needle in the hay in the first place. Microsoft was ordered to produce the missing e-mail correspondence “as quickly as reasonably possible,” says Mr. Hosie. “For us, that would mean a week. For Microsoft, it'll mean a month.” Microsoft spokesman Jim Desler, contacted by the BUSINESS JOURNAL, could not name a date by which the company will respond to the court order. He denied that a gap in e-mails had been mentioned at the hearing. “Microsoft has been very forthcoming in discovery. The judge has asked us to take another look for e-mails,” he says. Saying there was no mention of a gap at the hearing “is like denying the existence of a pyramid while leaning on one,” says Mr. Hosie. “The hearing was titled 'E-mail Gap,' and I argued about nothing else for an hour and a half.” Microsoft can't delay too long: The trial is scheduled to begin early in 2004. Stock soars Reports surfacing of the discovery hearing, which was held with no fanfare in Baltimore on August 26, sent Burst stock soaring from 27¢ to about $1.25 on the Pink Sheets. “For us, the stock price is a lot less relevant than the progress of the lawsuit,” says Mr. Lang, who has not named an amount Burst will request for damages. “It's too early in the process. We have a lot more discovery to do.”
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