Microsoft's Losing Battle With i4i Will Alter Patent Cases
Last week, the U.S. Supreme Court denied Microsoft's (NASDAQ:MSFT) appeal in its long-running patent-infringement suit with Canadian firm i4i. That rendered Microsoft vulnerable to the nearly $300 million judgment delivered by the lower courts.
That seemed pretty devastating for Microsoft, which nonetheless tried to put a brave face on the setback.
"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 wrote in a June 9 email to eWEEK. "While the outcome is not what we had hoped for, we will continue to advocate for changes to the law that will prevent the abuse of the patent system and protect inventors who hold patents representing true innovation."
In its case before the Court (filed under Microsoft Corp v. i4i Limited Partnership and Infrastructures for Information, No. 10-290), Microsoft's counsel had argued that the overwhelming standard of evidence needed to invalidate patents made it too difficult for companies to beat back frivolous patent-infringement suits-a position with which the Court's justices unanimously disagreed (with the exception of Chief Justice John Roberts, who recused himself from hearing arguments in the case).
"According to Microsoft, a defendant in an infringement action need only persuade the jury of an invalidity defense by a preponderance of the evidence," reads the court opinion. "In the alternative, Microsoft insists that a preponderance standard must apply at least when an invalidity defense rests on evidence that was never considered by the [United States Patent and Trademark Office] in the examination process. We reject both contentions."
After delving into the evolution of patent law, the Court digs into what exactly it found wrong with Microsoft's arguments. "Resisting the conclusion that Congress adopted the heightened standard of proof reflected in our pre-1952 cases, Microsoft contends that those cases applied a clear-and-convincing standard of proof in only two limited circumstances," the opinion continues. However, "Squint as we may, we fail to see the qualifications that Microsoft purports to identify in our cases."
And just to slam the point home:
"Our pre-1952 cases never adopted or endorsed the kind of fluctuating standard of proof that Microsoft envisions. And they do not indicate ... that anything less than a clear-and-convincing standard would ever apply to an invalidity defense raised in an infringement action."
Microsoft had been seeking to overturn earlier rulings that Word 2003 and 2007 violated i4i's rights for custom XML. The battle between the two companies extended back to August 2009, when the federal judge in the U.S. District Court in Eastern Texas ordered that all copies of those Word editions be removed from retail channels within 90 days. In between then and now, attorneys for i4i and Microsoft argued their way up through the U.S. Court of Appeals and beyond.
The Supreme Court's decision has ramifications for other companies in the technology space that often find themselves embroiled in patent warfare.
"The ruling pretty much says the Patent Act of 1952 requires more proof going forward," Ray Wang, an analyst with Constellation Research, wrote in a June 13 email to eWEEK. In essence, he wrote, the Court's decision "shifts the balance back to patent holders for being there first."
In other words, that ironclad standard of proof will make it difficult to invalidate patents. Will that make it more difficult for larger companies to knock down the patent trolls, who launch intellectual-property suits in favor of scoring a hefty payday? Perhaps. At least in the case of a company like i4i, though, that high burden of proof offers a sizable defense against even a massive conglomerate.