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Palm, 3Com Ordered To Pay $50M For 'Graffiti'

A federal judge is ordering two Silicon Valley-based companies to pay a $50 million bond as part of a settlement for copying technology from Xerox Corp. , the company said Monday.

Santa Clara, Calif.-based Palm and 3Com Corp. are appealing a December 20, 2001 court decision that says "Graffiti," the handwriting recognition software used in many handheld devices, is a copy cat of Xerox's "Unistrokes" technology.

Unistrokes, Graffiti and other handwriting recognition technology translate the shorthand drawn by the handheld user's stylus and convert it into more readable text.

The two companies must pay up to "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," U.S. District Court for the Western District of New York. Judge Michael Telesca said in his ruling.

Palm still stands by its original argument, calling the judge's ruling a little "premature."

"For thousands of years, people have been creating writing symbols. Xerox doesn't own the alphabet. Numerous handwriting-recognition technologies have long been available, some costing pennies per unit," says Palm chairman and CEO Eric Benhamou. "Graffiti is only a tiny fraction of the software experience that drives the existing 21 million Palm Powered products."

In Palm's favor, the judge denied Xerox's motion Friday for an injunction that would have prevented Palm from selling its electronic organizers during the appeal period, saying Xerox would not be irreparably harmed if sales continue.

However, Xerox says the $50 million bond still has the same effect of protecting its interests during the appeal period. A denial of an injunction is appealable by Xerox.

The $50 million bond only covers the potential damages that will accrue during the appeal period. It does not cover the entire period that Palm and 3Com have been infringing Xerox's patent.

Still, Xerox officials consider it one step closer to closing the chapter on the four-and-a-half-year old case.

"We continue to serve notice that Xerox will always take the appropriate actions to protect its valuable patents from unauthorized use and infringement," says Xerox general counsel Christina Clayton.

If the Court of Appeals rejects Palm and 3Com's appeal, the next step is for the trial court to determine the amount of damages for past infringement of the patent. If the infringement is determined to have been willful, the court could triple the amount of damages due to Xerox. Both Palm and 3Com are jointly and separately liable.

The suit began back in April 1997, when Xerox sued U.S. Robotics, later acquired by 3Com, claiming that "Graffiti" infringed a Xerox patent received on Jan. 21, 1997.

Stamford, Conn.-based Xerox says the technology was invented at its Palo Alto Research Center (PARC) back in 1993.

Xerox's case appeared to be quashed in June 2000 when a federal judge in Rochester, N.Y. dismissed the suit; the judge said the software as it appeared on Palm's PDAs did not use the same recognition patterns as Xerox's software did.

But Xerox won and appeal in October paving the way for the current ruling.