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Microsoft Challenges Avistar Patents
Monday February 25, 8:39 pm ET

Unsuccessful Business Discussions Result in Re-Examination Request to United States Patent and Trademark Office for Majority of Avistar's Patent Portfolio

SAN MATEO, CA – February 25, 2008 – Avistar Communications Corporation (Nasdaq: AVSR) has received notification that Microsoft Corporation (Nasdaq: MSFT) has filed requests for re-examination of 24 of Avistar’s 29 U.S. patents. This follows 6 months of unsuccessful business discussions. Thus far, four of the requests have been rejected by the United States Patent and Trademark Office (USPTO) on procedural grounds. If all procedural flaws are corrected, the USPTO has approximately two months to decide whether to grant the requests and engage in a formal re-examination. Patent re-examination, if undertaken by the USPTO, could take between six months to two years.
 
The challenged Avistar patents have an important early priority date (1993), have already been examined over a large body of prior art, and include patents that have successfully withstood two litigations. Accordingly, Avistar is confident it can and will overcome these re-examination requests.
 
Avistar has elected to withdraw and re-submit for examination seven about-to-issue patent applications. This will give the USPTO the opportunity to evaluate Microsoft’s re-examination documents in these applications as well. Although this action will likely delay the formal issuance of this set of seven patents, the Company believes the prior art cited by Microsoft will have no impact on these patent applications’ claims, and likely will result in even stronger patents when they issue.
 
Avistar will continue to be represented by Paul Carmichael as its primary licensing advisor. Among many executive assignments, Paul has served as Apple Computer Inc.’s Associate General Counsel for Patent and Trademark and Acting General Counsel, and in prior work, as IBM’s Senior Corporate Counsel for Intellectual Property Law during a thirty year career at IBM.
 
“Avistar’s patent portfolio has been challenged previously in two significant litigations without effect,” stated Paul Carmichael. “We fully believe that this action on Microsoft’s part is motivated by its recognition of the applicability of our patents to its products and services. We expect the USPTO will concur that the challenge is without merit.”
 
“It is unfortunate that we have arrived at this,” stated Avistar’s CEO Simon Moss. “We are frankly quite surprised by Microsoft’s action given our lengthy discussions with them. Avistar is going through a significant organizational, technological, financial and cultural transformation. This seems to have been taken by Microsoft as a sign of weakness. All of us at Avistar, in our Board of Directors, in our management team, and in our trusted global advisors, stand behind these patents and will take any steps necessary to ensure their current issuance status.”
 
Forward Looking Statements

Statements made in this news release that are not purely historical, including but not limited to statements regarding the issuance of Avistar’s seven pending patents, the impact of Microsoft’s claims on Avistar’s issued and pending patents and the USPTO’s disposition of the re-examination requests, are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act. Such statements are subject to risks and uncertainties that could cause actual results to differ materially, including such factors, among others, as uncertainty associated with the USPTO’s review and determination process, the time and expense to Avistar of responding to the re-examination requests and defending its patent portfolio, difficulties associated with enforcing or licensing Avistar’s patent portfolio during the review and possible re-examination process, and the risk that Avistar’s existing and pending patents could be revoked by the USPTO.  As a result of these and other factors, Avistar expects to experience significant fluctuations in its licensing activities and operating results, and there can be no assurance that Avistar’s future results will meet expectations. These and other risk factors are discussed in Avistar’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission from time to time. Avistar disclaims any intent or obligation to update these forward-looking statements.
 
About Avistar Communications Corporation
 
Avistar creates technology that provides the missing critical element in unified communications: bringing people in organizations face-to-face, through enhanced communications, for true collaboration anytime, anyplace. Its latest product, Avistar C3, draws on over a decade of market experience to deliver a single-click desktop videoconferencing and collaboration experience that moves business communications into a new era. Available as a stand-alone solution, or integrated with existing unified communications software from other vendors, Avistar C3 users gain instant messaging-style ability to initiate video communications across and outside the enterprise. Patented bandwidth management enables thousands of users to access desktop videoconferencing, Voice over IP (VoIP) and streaming media, without requiring substantial new network investment or impairing network performance.
 
Avistar’s desktop videoconferencing and collaboration installations are among the world’s largest, including more than 17,000 seats in more than 40 countries. Clients report as much as a 20 percent reduction in travel expense, 23 percent reduction in carbon emissions, 2.5 percent increase in productivity, and immeasurably improved relationship building within their organizations, as well as with suppliers and customers. Avistar holds a portfolio of 80 patents for inventions in video and network technology and licenses IP to videoconferencing, rich-media services, public networking and related industries. Current licensees include Sony Corporation, Polycom, Inc., Tandberg ASA, Radvision Ltd. and Emblaze-VCON.
 
For more information, visit www.avistar.com
 
Contact
 
Ken Lempit
Austin Lawrence Group
+1 203-391-3006
k.lempit@austinlawrence.com

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