Microsoft suit alleges ex-worker stole trade secrets

Start-up CEO is accused of getting hired by Microsoft under false pretenses in order to steal information to use in a patent lawsuit against three Microsoft partners.

Elinor Mills Former Staff Writer
Elinor Mills covers Internet security and privacy. She joined CNET News in 2005 after working as a foreign correspondent for Reuters in Portugal and writing for The Industry Standard, the IDG News Service and the Associated Press.
Elinor Mills
3 min read

Updated 4:55 p.m. PST with Mullor comment.
Correction, 5:12 p.m. PST: An earlier version of this story had the incorrect day the Seattle Post-Intelligencer reported on this suit. It was Thursday.

Microsoft has sued a former employee for allegedly lying when he applied for a job there and stealing trade secrets that were later used in a lawsuit against Microsoft partners.

According to the lawsuit, filed January 22 in King County Superior Court, Miki Mullor stated on his application that he no longer worked at Ancora Technologies because it had gone out of business. However, Sammamish, Wash.-based Ancora was still in existence and he was the chief executive, the lawsuit alleges. (The Ancora site was inaccessible on Friday.)

Mullor was hired as a program manager in the Windows Security Group in November 2005, the lawsuit states. According to the suit, Mullor allegedly downloaded confidential documents onto his company-issued laptop at some point that were related to the subsequent patent lawsuit, and then allegedly used a file-wiping program and a "defrag" utility designed to overwrite deleted files in order to hide the tracks.

In June 2008, four days after Mullor allegedly tried to hide his downloading activities, Ancora sued Dell, HP and Toshiba claiming that their use of certain Microsoft technology violated an Ancora patent. In September 2008, Microsoft intervened as a party-defendant in the case and fired Mullor.

Mullor told CNET News early on Friday that he had been advised by an attorney not to comment on the lawsuit, but then later e-mailed a statement. Mullor said he informed Microsoft about his patent in his resume and employment agreement and that Ancora had ceased business operation before he applied to Microsoft.

Mullor also said he applied for his patent in 1998, it was issued in 2002 and in 2003 he approached Microsoft and discussed the "benefits Microsoft could realize by using it," but Microsoft wasn't interested. Then, while he was working at the company and unbeknownst to him, Microsoft developed technology that is the subject of the patent lawsuit, he said.

"Microsoft's complaint against me in Washington is a shameful and a desperate attempt to put pressure on me and my family from continuing to pursue our legal rights in the federal court in Los Angeles," he wrote.

A Microsoft spokesman could not immediately be reached for comment late on Friday.

Mark Cantor, an attorney representing Ancora in the patent litigation, accused Microsoft of trying to retaliate against Mullor for the patent lawsuit and said Mullor denies any wrongdoing.

Cantor also notes that in its lawsuit, Microsoft seeks a formal license agreement providing Microsoft with "an irrevocable, perpetual, royalty-free, worldwide license" to the patent in dispute.

"This lawsuit raises fascinating legal issues as to what rights employees have when they work at a corporation like that," he told CNET News.

"Mullor developed this patent way before he worked at Microsoft," Cantor said. "He tried to license this technology to them and they told him no. The man needed a job...so he decided to work for Microsoft."

Mullor worked on technology unrelated to the patent technology for about three years and then found out Microsoft "was infringing his patent," Cantor said. "He got upset and the company filed the lawsuit."

The Microsoft lawsuit accuses Mullor of breach of contract, misappropriation of trade secrets, and fraud. The suit seeks unspecified damages and asks the court to bar Mullor from being involved in the patent lawsuit.

Meanwhile, a court hearing in the patent litigation is scheduled for March 10 and the trial date is January 26, 2010, in federal court in Orange County, Calif., Cantor said.

The Ancora patent, dated June 25, 2002, covers technology that identifies and restricts the operation of an unauthorized software program. The patent lawsuit alleges that Microsoft's OEM Activation technology that original equipment manufacturers use to prevent piracy of pre-installed Microsoft's Windows Vista software, infringes on that patent, Mullor said.

The Seattle Post-Intelligencer reported the Microsoft lawsuit on its Web site Thursday.