Microsoft, i4i Supreme Court Battle Could Mean Big Patent Law Changes

Microsoft and i4i's battle before the U.S. Supreme Court has the potential to change how patents are validated and IP lawsuits fought.

Whether Microsoft wins or loses the intellectual property case currently before the U.S. Supreme Court, patent law is likely to change in radical ways in the near future.

If Microsoft triumphs in this last-ditch appeal to the nation's highest court, it could establish a precedent that makes it easier for big companies to knock down weak intellectual property lawsuits-and perhaps reduce the phenomenon of "patent trolling," currently a thorn in the tech industry's side. Patent trolls are companies or individuals who lodge opportunistic patent-infringement lawsuits against others, often with an eye toward a hefty out-of-court settlement.

But should the case prove a winner for Canadian firm i4i, which has argued for years that Microsoft violated its patents for custom XML, it could potentially help smaller companies fight larger aggressors in open court.

In its April 18 argument before the court, Microsoft's legal counsel argued that the current standard of proof for invalidating patents is too high, making it difficult for companies to repulse frivolous patent-infringement suits. "When the Patent Office didn't even consider the evidence, it makes absolutely no sense," Microsoft attorney Thomas Hungar told the court, according to an April 18 Bloomberg report.

Following that line of argument, if Microsoft wins the case, it could potentially weaken the perception of the U.S. Patent and Trademark Office as an arbiter of patent validity. Meanwhile, i4i touted the preservation of existing patent law as necessary for innovation.

"It is abundantly clear that the fundamental change in the law, which Microsoft seeks, would result in an enormous decrease in innovation," i4i Chairman Loudon Owen wrote in an April 18 statement. "Microsoft did not present either policy or legal reasons that would justify any changes to the law, particularly the sweeping change they now apparently seek."

Chief Justice John Roberts, who apparently owns Microsoft stock, recused himself from the case. Out of the remaining eight court members, Microsoft must win five votes in order to succeed in its appeal, which seeks to overturn earlier rulings that Word 2003 and 2007 violated i4i's patents for custom XML.

The Supreme Court case is filed under Microsoft Corp. v. i4i Limited Partnership and Infrastructures for Information, No. 10-290. The judges could hand down a decision by the end of June. And according to some analysts, the ramifications of that decision are huge.

"This crosses well beyond the technology industry and into every area of patent litigation," Rob Enderle, principal analyst of the Enderle Group, wrote in an April 19 email to eWEEK. "It would make it vastly easier for companies to bring new products to market but harder for inventors to protect ideas that seem obvious after the fact."

There's a reason, Enderle added, that big tech companies ranging from Google and Cisco Systems to Apple are publicly siding with Microsoft on the case.

"There are large companies on both sides of this question, though you would expect companies that are aggressive on bringing products to market would want these changes," he wrote, "and those that have large patent portfolios but a relatively stable group of products would be against the changes."

Some might have more skin in the game than others: "I think the impact of the losing would actually be bigger on Google who currently lacks much of a patent defense and is arguably as big a target as Microsoft, which explains why they are on Microsoft's side on this."

Those filing briefs in support of i4i include 3M, General Electric and Genentech.

"The bottom line: tech vendors attacked by patent trolls are only asking for payback by reducing the standards in patent law," Ray Wang, principal analyst of Constellation Research, wrote in an April 19 email to eWEEK. "If Microsoft wins, it's a check and balance against patent trolls. If i4i wins, innovators who feel their rights have been trampled by large evil tech vendors will have protected their rights."

Microsoft's troubles with i4i extend back to August 2009, when the federal judge in the U.S. District Court in Eastern Texas ordered that all copies of Word 2003 and 2007 be removed from retail channels within 90 days, after i4i argued that the word-processing software violated its key patents for custom X M L. Microsoft's attorneys managed to argue a delay, only to have the U.S. Court of Appeals uphold the verdict four months later.

That upheld verdict came with the court order that all offending copies of Word be yanked from store shelves by early January 2010. Microsoft responded by asking for the review by all 11 judges on the U.S. Court of Appeals for the Federal Circuit, on top of issuing a patch for Word that it insisted would sidestep the alleged infringement.

There's also a substantial money question, as Microsoft seeks to overturn a nearly $300 million judgment leveled by a lower court.