News

Supreme Court Denies Microsoft's 'Patent Reform' Argument in i4i Case

• By Kurt Mackie
• June 10, 2011

On Thursday, eight justices in the U.S. Supreme Court denied Microsoft's appeal in the long-running patent infringement case involving Toronto-based i4i LLP.

i4i sued Microsoft in 2007 over custom XML technology used in Microsoft Word. A jury in 2009 found that Microsoft willfully infringed i4i's patent, and the judge in the East Texas district court ordered Microsoft to pay about $300 million (according to i4i estimates) in damages.

Microsoft lost a lower court appeal in the case, but later petitioned the Supreme Court over an associated issue: the standard of proof required in disproving a patent.

The unanimous decision by the Supreme Court (Justice Roberts recused himself) reaffirmed "clear and convincing evidence" as the standard to be used in disproving a patent. Microsoft had argued that a "preponderance of the evidence standard" should be used instead. Justice Sotomayor, who wrote the opinion for the court, noted that Congress has been clear about the standard of proof as outlined in Section 282 of the Patent Act of 1952.

"During the nearly 30 years that the Federal Circuit has interpreted §282 as the Court does today, Congress has often amended §282 and other patent laws, but apparently has never considered any proposal to lower the standard of proof," Sotomayor wrote in Thursday's opinion (PDF).

In addition to clarifying the standard-of-proof issue, the Supreme Court decision provides guidance in patent case appeals, according to David Long, a patent attorney at Dow Lohnes PLLC.

"Having the S. Ct. weigh-in on this issue now also helps balance the fact that the Federal Circuit is the only appellate court for patent cases, so there is not the typical disagreements among sister regional appellate courts that flag important issues for S. Ct. review," Long explained via e-mail. "This also is a classic case of statutory construction that the S. Ct. excels at."

Microsoft's Supreme Court Appeal position was opposed by U.S. Department of Justice lawyers and the U.S. Patent and Trademark Office (PTO) itself in amicus filings. The U.S. PTO had rejected Microsoft's ex parte application appeal to review U.S. Patent No. 5,787,449 (i4i's custom XML patent) in November 2010.

With the Supreme Court decision finalized, Microsoft now appears compelled to pay damages ordered by the East Texas court to i4i, plus interest. However, Microsoft wasn't so clear about that matter in a statement released Thursday.

"This case raised an important issue of law which the Supreme Court itself had questioned in an earlier decision and which we believed needed resolution," a Microsoft spokesperson said in the e-mailed statement. "While the outcome is not what we had hoped for, we will continue to advocate for changes to the law that will prevent abuse of the patent system and protect inventors who hold patents representing true innovation."

Loudon Owen, i4i's chairman, said that Microsoft should be paying shortly or it will be in contempt of court.

"As far as we know, they have no further avenues of appeal," Owen said of Microsoft's legal options in a phone interview. "We have to do the calculation because there is pre- and post-judgment interest. We are using the figure of about $300 million -- it has the virtue of roundness, but we think that's partially the amount owing."

Microsoft has lost the case, but it has already been lobbying Congress to make certain U.S. patent law changes. For instance, Microsoft currently backs the America Invents Act (S.23), which, among other matters, proposes changing current U.S. patent law to adopt a "first to file" approach used abroad. The United States' current approach is "first to invent," which allows for evidence that inventions could have been discovered concurrently.

Microsoft also appears ready to go about the process of contesting some patents. Last month, Microsoft joined Article One Partners, which offers a "Litigation Avoidance" service that collaborates over the Web to find prior art evidence that might be used to disprove patents. Supposedly, this process is aimed at rooting out "patent trolls," or companies that don't use patents per se, except to sue other companies.

Owen characterized the Supreme Court decision as a victory for patent holders.

"It's noted as one of the most important business law cases and decisions made by the U.S. Supreme Court in decades," Owen said of the i4i case. "And it's clearly a watershed moment for the invention community."