Microsoft buys phone firm Skype

 10 May 2011 Last updated at 18:18 ET Steve Ballmer (left) and Tony Bates promise "new capabilities and new features" for Skype

Microsoft has confirmed that it has agreed to buy internet phone service Skype.

The deal will see Microsoft pay $8.5bn (￡5.2bn) for Skype, making it Microsoft's largest acquisition.

Luxembourg-based Skype has 663 million global users. In August last year it announced plans for a share flotation, but this was subsequently put on hold.

Internet auction house eBay bought Skype for $2.6bn in 2006, before selling 70% of it in 2009 for $2bn.

This majority stake was bought by a group of investors led by private equity firms Silver Lake and Andreessen Horowit.

Other major shareholders include tech-firm Joltid and the Canada Pension Plan Investment Board.

Shares in Microsoft ended the day in New York down 0.5% at $25.68. In contrast, eBay - which owns a stake in Skype - saw its share price rally 2.5%.

'Defensive move'

Microsoft chief executive Steve Ballmer said: "Skype is a phenomenal service that is loved by millions of people around the world.

Continue reading the main story  Tim Weber Business editor, BBC News website

It's a done deal: Microsoft has bought Skype for a whopping $8.5bn.

That's a lot of cash for an eight-year-old company that's not making a lot of money.

So what's in it for Microsoft?

For starters, the firm gets well over 600 million users who make Skype the world's largest phone company for international voice calls.

More importantly, Microsoft buys into a lot of potential.

Marry Skype's software with the Xbox Kinect and an HD television set, and Microsoft can make a powerful argument for getting into millions of living rooms.

Think beyond teleconferencing for the whole family: there's one-on-one training, home schooling, even patient care delivered remotely and in vision.

Smarten it up for the corporate world, and Microsoft can challenge the telepresence business of firms like Cisco and Polycom.

And Skype is multi-platform, reaching into the worlds of Apple and Linux.

Finally, Skype is mobile, and can be paired with Windows Phone 7.

The hitch: Microsoft boss Steve Ballmer will have to work hard to integrate Skype, to ensure the voice/video-over-the-internet company is not strangled by his firm's notorious bureaucracy.

"Together we will create the future of real-time communications so people can easily stay connected to family, friends, clients and colleagues anywhere in the world."

Skype will now become a new division within Microsoft, and Skype chief executive Tony Bates will continue to lead the business, reporting directly to Mr Ballmer.

"It's a strategic asset and a defensive move [for Microsoft]," said Colin Gillis, an analyst at BGC Financial.

"If they can put it on Windows 8, it gives them an advantage. It helps them in the tablet market."

Other analysts say Microsoft's aim in buying Skype is to improve its video conferencing services.

Price concerns

Although the price tag of $8.5bn will not stretch the US giant, some experts have questioned whether it is paying too much for a company that has struggled to turn a profit.

Michael Clendenin, managing director of consulting firm RedTech Advisors, said: "If you consider [Skype] was just valued at about $2.5bn 18 months ago when a chunk was sold off, then $8.5bn seems generous.

"[It] means Microsoft has a high wall to climb to prove to investors that Skype is a necessary linchpin for the company's online and mobile strategy."

This view was echoed by Ben Woods, head of research group CCS Insight.

"The big unanswered question is how do Skype assets work for Microsoft... how do you justify the price?" he said.

Skype was founded in 2003.

Calls to other Skype users are free, while the company charges for those made to both traditional landline phones and mobiles.

PC Sales Off, Games Buoy Microsoft

While Microsoft reported Thursday that its fiscal third-quarter profits were up 31 percent, revenue from the division that includes the Windows operating system fell 4 percent, to $4.45 billion.

The fall was due in part to an overall decline in PC sales worldwide of about 3.2 percent. Analysts have blamed the earthquake and tsunami in Japan, a big market for computers, for part of that decline.

But the sales of tablet computers, like the iPad, were another major factor and that could become a persistent problem for Microsoft. The category of the tablet computer created by Apple and its iPad is expanding quickly. Apple has sold 19.5 million iPads, and all the big PC makers and cellphone makers are making tablets.

Most of the tablets on the market run either Apple’s operating system software or Google’s Android software. Manufacturers have shown little interest in using Microsoft Windows software to run a tablet.

Canalys, a technology market research firm, noted that when tablet computers are grouped with PCs, Apple becomes the fourth largest PC manufacturer in the world with almost 10 percent of the market. The three biggest PC makers, Hewlett-Packard, Acer and Dell, are all making tablets that don’t use Microsoft software.

One other indication of Microsoft’s changing stature: for the first time, Apple’s quarterly profits exceeded Microsoft’s — $5.99 billion compared with $5.23 billion. Last year, Apple surpassed Microsoft in market capitalization and in revenue.

“It’s a huge testament to Apple,” said Colin Gillis, an analyst with BGC Financial. “There is clearly some disruption in the PCs.” However, Mr. Gillis noted that Microsoft Windows 7 is the fastest-selling operating system in history. He thinks Microsoft will probably make a move into tablets later this year with its expected release of Windows 8. In any case, Mr. Gillis said, “PCs aren’t going to disappear.”

Microsoft also has found itself left behind in software for cellphones. It recently acted to ramp up its presence on mobile phones through an agreement with Nokia, the Finnish handset maker that is troubled, but still the largest makers of cellphones in the world. The two companies are working together on new mobile phones that would use Microsoft’s Windows Phone operating system.

Microsoft has seen declines in its operating software before, as recently as last year’s first fiscal quarter when it fell 4 percent.

To be sure, other parts of the company’s business remain strong and helped Microsoft report Thursday that net income in its third quarter rose 31 percent to $5.23 billion, or 61 cents a share, from $4 billion, or 45 cents a share, in the quarter a year ago. Revenue climbed 13 percent, to $16.43 billion, from $14.5 billion.

The company’s Office software, where it has no significant competition, grew 21 percent, to $5.25 billion. Office 2010 is the fastest-selling version of Office ever, Microsoft said, with businesses deploying the software at five times the rate of its predecessor.

However, revenue from Microsoft’s entertainment and devices, which includes the Xbox 360 video game console and the innovative Kinect game controller that interprets gestures and voice commands, gained 60 percent, to $1.94 billion. Kinect, a sensor that lets players interact with video games without having to hold a controller, did particularly well, selling 2.4 million units in the quarter. Customers bought 2.7 million Xbox 360s.

Microsoft blamed the economy for the lower revenue from Windows. Consumers are saving their money rather than buying new computers, said Peter Klein, Microsoft’s chief financial officer. Asked in an interview about the impact of tablets on computer sales, he acknowledged that “it’s part of the story.”

“There are a whole host of consumer purchases vying for the consumer wallet,” Mr. Klein said.

Sales of Windows for consumers PCs fell 8 percent in the quarter, Microsoft said. Windows for netbooks, the small laptops that had been big sellers until tablets came along, declined 40 percent, highlighting the rapid shift in computer buying habits.

Revenue from Microsoft’s online properties like the MSN portal and Bing search engine rose 14 percent, to $648 million. The unit lost $726 million in operating income, continuing a pattern of losses.

Two years ago, Microsoft signed an agreement to take over Yahoo’s search business to create a more formidable rival to Google. However, Yahoo’s chief executive, Carol A. Bartz, said last week that the partnership had not yielded the expected financial results for Yahoo and that technical glitches by Microsoft were to blame.

Downbeat reports about personal computer shipments in early 2011 had raised questions about Microsoft’s future dominance. Microsoft has developed an operating system for smartphones, but it is on relatively few phones. It does not have software that makers of tablet computers want. In after-hours trading, Microsoft’s shares lost 1.4 percent. They had ended regular trading at $26.71, up 33 cents, or 1.25 percent.

 

PC Sales Off, Games Buoy Microsoft

While Microsoft reported Thursday that its fiscal third-quarter profits were up 31 percent, revenue from the division that includes the Windows operating system fell 4 percent, to $4.45 billion.

The fall was due in part to an overall decline in PC sales worldwide of about 3.2 percent. Analysts have blamed the earthquake and tsunami in Japan, a big market for computers, for part of that decline.

But the sales of tablet computers, like the iPad, were another major factor and that could become a persistent problem for Microsoft. The category of the tablet computer created by Apple and its iPad is expanding quickly. Apple has sold 19.5 million iPads, and all the big PC makers and cellphone makers are making tablets.

Most of the tablets on the market run either Apple’s operating system software or Google’s Android software. Manufacturers have shown little interest in using Microsoft Windows software to run a tablet.

Canalys, a technology market research firm, noted that when tablet computers are grouped with PCs, Apple becomes the fourth largest PC manufacturer in the world with almost 10 percent of the market. The three biggest PC makers, Hewlett-Packard, Acer and Dell, are all making tablets that don’t use Microsoft software.

One other indication of Microsoft’s changing stature: for the first time, Apple’s quarterly profits exceeded Microsoft’s — $5.99 billion compared with $5.23 billion. Last year, Apple surpassed Microsoft in market capitalization and in revenue.

“It’s a huge testament to Apple,” said Colin Gillis, an analyst with BGC Financial. “There is clearly some disruption in the PCs.” However, Mr. Gillis noted that Microsoft Windows 7 is the fastest-selling operating system in history. He thinks Microsoft will probably make a move into tablets later this year with its expected release of Windows 8. In any case, Mr. Gillis said, “PCs aren’t going to disappear.”

Microsoft also has found itself left behind in software for cellphones. It recently acted to ramp up its presence on mobile phones through an agreement with Nokia, the Finnish handset maker that is troubled, but still the largest makers of cellphones in the world. The two companies are working together on new mobile phones that would use Microsoft’s Windows Phone operating system.

Microsoft has seen declines in its operating software before, as recently as last year’s first fiscal quarter when it fell 4 percent.

To be sure, other parts of the company’s business remain strong and helped Microsoft report Thursday that net income in its third quarter rose 31 percent to $5.23 billion, or 61 cents a share, from $4 billion, or 45 cents a share, in the quarter a year ago. Revenue climbed 13 percent, to $16.43 billion, from $14.5 billion.

The company’s Office software, where it has no significant competition, grew 21 percent, to $5.25 billion. Office 2010 is the fastest-selling version of Office ever, Microsoft said, with businesses deploying the software at five times the rate of its predecessor.

However, revenue from Microsoft’s entertainment and devices, which includes the Xbox 360 video game console and the innovative Kinect game controller that interprets gestures and voice commands, gained 60 percent, to $1.94 billion. Kinect, a sensor that lets players interact with video games without having to hold a controller, did particularly well, selling 2.4 million units in the quarter. Customers bought 2.7 million Xbox 360s.

Microsoft blamed the economy for the lower revenue from Windows. Consumers are saving their money rather than buying new computers, said Peter Klein, Microsoft’s chief financial officer. Asked in an interview about the impact of tablets on computer sales, he acknowledged that “it’s part of the story.”

“There are a whole host of consumer purchases vying for the consumer wallet,” Mr. Klein said.

Sales of Windows for consumers PCs fell 8 percent in the quarter, Microsoft said. Windows for netbooks, the small laptops that had been big sellers until tablets came along, declined 40 percent, highlighting the rapid shift in computer buying habits.

Revenue from Microsoft’s online properties like the MSN portal and Bing search engine rose 14 percent, to $648 million. The unit lost $726 million in operating income, continuing a pattern of losses.

Two years ago, Microsoft signed an agreement to take over Yahoo’s search business to create a more formidable rival to Google. However, Yahoo’s chief executive, Carol A. Bartz, said last week that the partnership had not yielded the expected financial results for Yahoo and that technical glitches by Microsoft were to blame.

Downbeat reports about personal computer shipments in early 2011 had raised questions about Microsoft’s future dominance. Microsoft has developed an operating system for smartphones, but it is on relatively few phones. It does not have software that makers of tablet computers want. In after-hours trading, Microsoft’s shares lost 1.4 percent. They had ended regular trading at $26.71, up 33 cents, or 1.25 percent.

 

Despite Microsoft Partnership, Nokia Continues to Fade in Race With Rivals

The company, based in Espoo, Finland, said it planned to reduce annual operating expenses in its core devices and services business by 1 billion euros, or $1.44 billion, to 4.65 billion euros, or $6.72 billion, by the end of 2013.

“This reduction is expected to come from a variety of different sources and initiatives,” the company said, “including a reduction in the number of employees and normal personnel attrition, a reduction in the use of outsourced professionals, reductions in facility costs, and various improvements in efficiencies.”

Stephen Elop, the Microsoft executive whom Nokia hired to be chief executive last September, said the company would begin negotiations with its work force in Finland and elsewhere next week. Before those talks, Mr. Elop said, Nokia will not speculate on the number of jobs it may eventually cut.

“Speculation on the exact numbers and the timing of those numbers is best postponed until we discuss this with” worker representatives, Mr. Elop said in a conference call with financial analysts.

Some employees will be able to move into other jobs with Nokia, Mr. Elop said, and Nokia may have openings as a result of its partnership with Microsoft. Because of those opportunities, Nokia said it could guarantee employment to its existing employees through this year.

Nokia also confirmed that it had signed its agreement with Microsoft to obtain the Windows operating system for Nokia’s smartphones. The two companies announced the partnership on Feb. 11. Since then, Nokia’s stock price has fallen by about a third.

The cost-cutting initiative came as Nokia lost its lead in cellphone revenue to Apple, the research firm Strategy Analytics said on Thursday, according to Reuters.

Nokia’s phone revenue fell to $9.4 billion in the last quarter, while Apple’s revenue from the iPhone increased to $11.9 billion, the research firm said.

“With strong volumes and high wholesale prices, the PC vendor has successfully captured revenue leadership of the total handset market in less than four years,” Alex Spektor, an analyst, said.

Nokia also reported Thursday that its profit fell slightly, to 344 million euros ($497 million) in the first quarter from 349 million euros ($504 million) in the period a year earlier.

Sales rose 9.2 percent, to 10.4 billion euros ($15.0 billion), in large part because of gains in Latin America and China, where Nokia’s sales rose 29 percent and 30 percent respectively. Sales in North America fell 36 percent, and sales in Europe fell 5 percent.

Nokia said its sales of smartphones rose 13 percent in the quarter, to 24.2 million units from 21.5 million. The market grew 74 percent over all during the same time, Francisco Jeronimo, an analyst with the International Data Corporation in London, said.

On top of that, the average selling price fell 6 percent in the same period, to 147 euros from 155 euros a year earlier, Nokia said.

The company said it had sold 108.5 million cellphones of all types during the quarter, 1 percent more than a year ago. Yet its global share of the cellphone market fell to 32 percent from 34 percent a year ago, according to I.D.C.

Mikko Ervasti, an analyst at Evli Bank, a private bank in Helsinki, said the cuts in operating expenses were needed to bring Nokia in line with its cellphone peers, like Apple, which on average spend only half or even less on research and development than Nokia does.

Mr. Ervasti said the cost-cutting could translate into 6,000 fewer jobs in its cellphone research and development work force, or roughly 38 percent of Nokia’s total staff for mobile phones. Those employees are now working in Finland, China, India, Germany, England, Denmark and San Diego.

“These cuts were needed and are in line with what the market was expecting,” Mr. Ervasti said. “This is a direct consequence of the Microsoft agreement, and Nokia’s own need to trim expenses.”

 

Despite Microsoft Partnership, Nokia Continues to Fade in Race With Rivals

 

The company, based in Espoo, Finland, said it planned to reduce annual operating expenses in its core devices and services business by 1 billion euros, or $1.44 billion, to 4.65 billion euros, or $6.72 billion, by the end of 2013.

“This reduction is expected to come from a variety of different sources and initiatives,” the company said, “including a reduction in the number of employees and normal personnel attrition, a reduction in the use of outsourced professionals, reductions in facility costs, and various improvements in efficiencies.”

Stephen Elop, the Microsoft executive whom Nokia hired to be chief executive last September, said the company would begin negotiations with its work force in Finland and elsewhere next week. Before those talks, Mr. Elop said, Nokia will not speculate on the number of jobs it may eventually cut.

“Speculation on the exact numbers and the timing of those numbers is best postponed until we discuss this with” worker representatives, Mr. Elop said in a conference call with financial analysts.

Some employees will be able to move into other jobs with Nokia, Mr. Elop said, and Nokia may have openings as a result of its partnership with Microsoft. Because of those opportunities, Nokia said it could guarantee employment to its existing employees through this year.

Nokia also confirmed that it had signed its agreement with Microsoft to obtain the Windows operating system for Nokia’s smartphones. The two companies announced the partnership on Feb. 11. Since then, Nokia’s stock price has fallen by about a third.

The cost-cutting initiative came as Nokia lost its lead in cellphone revenue to Apple, the research firm Strategy Analytics said on Thursday, according to Reuters.

Nokia’s phone revenue fell to $9.4 billion in the last quarter, while Apple’s revenue from the iPhone increased to $11.9 billion, the research firm said.

“With strong volumes and high wholesale prices, the PC vendor has successfully captured revenue leadership of the total handset market in less than four years,” Alex Spektor, an analyst, said.

Nokia also reported Thursday that its profit fell slightly, to 344 million euros ($497 million) in the first quarter from 349 million euros ($504 million) in the period a year earlier.

Sales rose 9.2 percent, to 10.4 billion euros ($15.0 billion), in large part because of gains in Latin America and China, where Nokia’s sales rose 29 percent and 30 percent respectively. Sales in North America fell 36 percent, and sales in Europe fell 5 percent.

Nokia said its sales of smartphones rose 13 percent in the quarter, to 24.2 million units from 21.5 million. The market grew 74 percent over all during the same time, Francisco Jeronimo, an analyst with the International Data Corporation in London, said.

On top of that, the average selling price fell 6 percent in the same period, to 147 euros from 155 euros a year earlier, Nokia said.

The company said it had sold 108.5 million cellphones of all types during the quarter, 1 percent more than a year ago. Yet its global share of the cellphone market fell to 32 percent from 34 percent a year ago, according to I.D.C.

Mikko Ervasti, an analyst at Evli Bank, a private bank in Helsinki, said the cuts in operating expenses were needed to bring Nokia in line with its cellphone peers, like Apple, which on average spend only half or even less on research and development than Nokia does.

Mr. Ervasti said the cost-cutting could translate into 6,000 fewer jobs in its cellphone research and development work force, or roughly 38 percent of Nokia’s total staff for mobile phones. Those employees are now working in Finland, China, India, Germany, England, Denmark and San Diego.

“These cuts were needed and are in line with what the market was expecting,” Mr. Ervasti said. “This is a direct consequence of the Microsoft agreement, and Nokia’s own need to trim expenses.”

 

Court Hears Microsoft Patent Case

WASHINGTON — Microsoft’s challenge to a $290 million award against it in a patent infringement suit faced significant headwinds on Monday during arguments at the Supreme Court.

Some justices suggested that the court’s precedents were at odds with Microsoft’s position. The federal government supported the Canadian software company, i4i Limited Partnership, that had won in the lower courts.

Chief Justice John G. Roberts Jr. was recused from the case, apparently because he owns Microsoft stock, meaning that Microsoft would have to capture five of only eight available votes to win.

In defending against the lawsuit, which contended that Microsoft Word had infringed i4i’s method for editing documents, Microsoft argued that the patent was invalid.

At the district court trial, the judge told a jury that it should find the patent invalid only if Microsoft could satisfy a heightened standard, that of presenting “clear and convincing evidence” of invalidity.

Thomas G. Hungar, a lawyer for Microsoft, said that was a mistake. The proper standard, he said, was proof by a “preponderance of the evidence,” meaning that Microsoft should have had to prove only that the patent’s invalidity was more likely than not. That is the usual standard in civil suits. Using the heightened standard “makes no sense,” Mr. Hungar said, and “ensures the enforcement of invalid patents.”

Justice Ruth Bader Ginsburg disagreed. “It would be hard to argue, Mr. Hungar, that it makes no sense, but it made sense to Cardozo.”

In a 1934 decision, Justice Benjamin N. Cardozo wrote that the presumption that patents were valid was “not to be overthrown except by clear and cogent evidence.” Mr. Hungar responded that the decision should apply only in limited circumstances that were not present in Microsoft’s challenge.

Now it was Justice Elena Kagan’s turn to disagree. “If you read that opinion, no one would gather from that opinion the kinds of limits that you’re suggesting,” she said of the 1934 decision.

Mr. Hungar went on to say that the patent law at issue in the case was not enacted until 1952, and did not require the heightened standard even if the 1934 opinion had.

Justice Stephen G. Breyer said he was open to considering the statute a blank slate. “I’ll assume that the language is open enough in the history so that we could make what would be a change,” he said.

But Justice Breyer said he was unsure whether and what change was warranted given the competing interests.

He suggested two other possible approaches. One would be to have the officials in charge of making patent determinations reconsider their decisions.

His second proposal was to ask juries to determine only “brute facts,” and leave to judges the ultimate determination of whether a patent is invalid.

Seth P. Waxman, representing the Canadian firm, said the 1952 law codified early decisions requiring clear and convincing proof. He added that Congress’s failure to modify the law after more recent decisions imposing that heightened standard was evidence that it had “actively acquiesced” in the interpretation.

Justice Antonin Scalia, who was acting as presiding justice, questioned that formulation. “It’s like passive activity, right?” he asked.

The justices let Mr. Waxman speak without interruption for extended stretches, generally a good sign for that lawyer’s side.

Mr. Waxman said the heightened standard was warranted because it should not be easy to attack a government decision that bestowed a property right like a patent.

Justice Breyer said he understood “how important patents are and what a disaster it is to the person once they’re invalidated.”

But he said there was another side to the question.

“In today’s world,” Justice Breyer said, “where nobody really understands this technology very well, a worse disaster for the country is to have protection given to things that don’t deserve it because they act as a block on trade, they act as monopolies and they will tie the country up in individual monopolies that will raise prices to consumers.”

Near the end of the argument in the case, Microsoft Corporation v. i4i Limited Partnership, No. 10-290, Justice Breyer still sounded frustrated.

“What we’re trying to do is we’re trying to get a better tool, if possible, to separate the sheep from the goats,” he said. “And so what is that better tool?”

 

Court Hears Microsoft Patent Case

WASHINGTON — Microsoft’s challenge to a $290 million award against it in a patent infringement suit faced significant headwinds on Monday during arguments at the Supreme Court.

Some justices suggested that the court’s precedents were at odds with Microsoft’s position. The federal government supported the Canadian software company, i4i Limited Partnership, that had won in the lower courts.

Chief Justice John G. Roberts Jr. was recused from the case, apparently because he owns Microsoft stock, meaning that Microsoft would have to capture five of only eight available votes to win.

In defending against the lawsuit, which contended that Microsoft Word had infringed i4i’s method for editing documents, Microsoft argued that the patent was invalid.

At the district court trial, the judge told a jury that it should find the patent invalid only if Microsoft could satisfy a heightened standard, that of presenting “clear and convincing evidence” of invalidity.

Thomas G. Hungar, a lawyer for Microsoft, said that was a mistake. The proper standard, he said, was proof by a “preponderance of the evidence,” meaning that Microsoft should have had to prove only that the patent’s invalidity was more likely than not. That is the usual standard in civil suits. Using the heightened standard “makes no sense,” Mr. Hungar said, and “ensures the enforcement of invalid patents.”

Justice Ruth Bader Ginsburg disagreed. “It would be hard to argue, Mr. Hungar, that it makes no sense, but it made sense to Cardozo.”

In a 1934 decision, Justice Benjamin N. Cardozo wrote that the presumption that patents were valid was “not to be overthrown except by clear and cogent evidence.” Mr. Hungar responded that the decision should apply only in limited circumstances that were not present in Microsoft’s challenge.

Now it was Justice Elena Kagan’s turn to disagree. “If you read that opinion, no one would gather from that opinion the kinds of limits that you’re suggesting,” she said of the 1934 decision.

Mr. Hungar went on to say that the patent law at issue in the case was not enacted until 1952, and did not require the heightened standard even if the 1934 opinion had.

Justice Stephen G. Breyer said he was open to considering the statute a blank slate. “I’ll assume that the language is open enough in the history so that we could make what would be a change,” he said.

But Justice Breyer said he was unsure whether and what change was warranted given the competing interests.

He suggested two other possible approaches. One would be to have the officials in charge of making patent determinations reconsider their decisions.

His second proposal was to ask juries to determine only “brute facts,” and leave to judges the ultimate determination of whether a patent is invalid.

Seth P. Waxman, representing the Canadian firm, said the 1952 law codified early decisions requiring clear and convincing proof. He added that Congress’s failure to modify the law after more recent decisions imposing that heightened standard was evidence that it had “actively acquiesced” in the interpretation.

Justice Antonin Scalia, who was acting as presiding justice, questioned that formulation. “It’s like passive activity, right?” he asked.

The justices let Mr. Waxman speak without interruption for extended stretches, generally a good sign for that lawyer’s side.

Mr. Waxman said the heightened standard was warranted because it should not be easy to attack a government decision that bestowed a property right like a patent.

Justice Breyer said he understood “how important patents are and what a disaster it is to the person once they’re invalidated.”

But he said there was another side to the question.

“In today’s world,” Justice Breyer said, “where nobody really understands this technology very well, a worse disaster for the country is to have protection given to things that don’t deserve it because they act as a block on trade, they act as monopolies and they will tie the country up in individual monopolies that will raise prices to consumers.”

Near the end of the argument in the case, Microsoft Corporation v. i4i Limited Partnership, No. 10-290, Justice Breyer still sounded frustrated.

“What we’re trying to do is we’re trying to get a better tool, if possible, to separate the sheep from the goats,” he said. “And so what is that better tool?”