i4i versus The Mighty Microsoft!

Microsoft vs i4i heads to Supreme Court
Lee-Anne Goodman
The Canadian Press
April 18, 2011

WASHINGTON—A Toronto-based company’s David-and-Goliath battle against tech giant Microsoft made it all the way to the U.S. Supreme Court on Monday as the august panel explored complex issues of patent infringement.

I4i sued Microsoft in 2007, and the lower courts have ruled that the world’s biggest software maker willfully infringed on the Canadian company’s patent for an editing tool it co-opted for Microsoft Word. The technology in question gave Word 2003 and Word 2007 users an improved way to edit XML, which is computer code that tells the program how to interpret and display a document’s contents.

Microsoft has been ordered to pay i4i a record $290 million (U.S.) in damages, and an injunction prevents it from selling versions of Word containing i4i’s technology.

The hour-long hearing before eight Supreme Court justices delved into the intricacies and the history of the U.S. patent system. Chief Justice John Roberts recused himself from the hearing since he owned more than $100,000 (U.S.) in Microsoft stock in 2009.

Microsoft wants the high court to make it easier for companies to challenge the validity of other firms’ patents. The current standard requires a defendant to prove by “clear and convincing evidence” that a plaintiff’s patent is invalid.

In essence, the Supreme Court is being asked to decide whether juries should be able to question whether a patent should have been issued in the first place when they’re considering patent infringement cases.

“It’s a bad thing not to give protection to an invention that deserves it,” Justice Stephen Breyer said in an exchange with Thomas Hungar, Microsoft’s lawyer.

“And it’s also a bad thing to give protection to an invention that doesn’t deserve it,” he said, adding such a situation is “bad for the economy.”

But Microsoft, Breyer added, was suggesting that the U.S. Patent and Trademark Office “is out of control” and handing out patents with abandon, and asked for evidence that was true.

Justice Ruth Ginsburg asked Hungar whether the U.S. Congress had ever introduced legislation that would change the current standard requiring a company to prove the invalidity of a patent. Hungar said that hasn’t happened.

Seth Waxman, a lawyer for i4i, argued that’s because Congress hasn’t had a problem with the standard for almost three decades.

Hungar, a high-powered legal mind who worked previously as a U.S. deputy solicitor general, urged the court to overturn the lower court ruling, arguing that i4i’s patent was invalid because the Toronto firm was selling the product for four years prior to getting the patent.

Lawyers for i4i and the Obama administration argued, however, that there’s little point in granting patents to inventors if corporations can simply infringe upon them with impunity.

“It’s a marathon, not a sprint, but I think it went very well,” Loudon Owen, i4i’s chairman, said on the steps of the iconic Supreme Court building following the hearing.

“The bottom line is whether there’s a robust patent system, and whether or not if you get a patent, it means something. If the law goes the way Microsoft wants it to, it will mean it will be very easy to invalidate patents, which will make it hard to justify why one seeks a patent in the first place.”

Several high-powered companies are supporting Microsoft in its battle against i4i, including Apple, Google and Cisco Systems. Smaller tech companies and venture capital firms, meantime, are rooting for i41.

The Supreme Court will hand down its decision in the case in June.

With only eight, rather than the usual nine, Supreme Court justices hearing the case, there could be a split decision. But in the event of a tie, the lower court ruling against Microsoft would be upheld.