Modern-Day David and Goliath Battle Could Head to U.S. Supreme Court: i4i v. Microsoft

Technology giant Microsoft Corp. has made one last-ditch effort to defend a decade-long patent infringement lawsuit against a small Canadian software company, i4i Inc.  Last week, Microsoft filed a petition (PDF link) with the US Supreme Court asking for a final resolution to the dispute.  In the suit, i4i alleges that Microsoft used the small company’s patented custom XML editing technology in the widely-used Microsoft Word processing software. 

This Time, David Challenges Goliath

i4i is a small Canadian company that holds a patent (issued in 1998) covering the use of custom XML, a computer programming language which allows for the preservation of data formats across multiple programs.  The Toronto-based company first became suspicious their technology was being improperly used after the release of Microsoft Word 2003 , since that program enabled users to customize XML schemes. In 2007, i4i initiated legal proceedings against Microsoft.  At trial in 2009, a Texas jury found in favour of the underdog Canadian company, awarding i4i $200 million in damages and $40 million in enhanced damages (similar to the Canadian concept of punitive damages).  Microsoft was also ordered to remove the offending technology from the Word software.

Unsurprisingly, Microsoft quickly appealed.  The United States Court of Appeal for the Federal Circuit, however, upheld the ruling.  Shortly after, Microsoft requested all 11 judges on the US Court of Appeal for the Federal Circuit review the decision.  This appeal was denied, leaving Microsoft with this one final option – a petition to the US Supreme Court.

A Deviation from the Scripture

In this story, Goliath does not stay down.  On August 27th, 2010, Microsoft filed a writ of certiorari with the US Supreme Court asking for the case to be reconsidered.  At trial, Microsoft had unsuccessfully attempted to use a defence of invalidity.  In the writ, Microsoft poses the crucial question as:

Whether the court of appeals erred in holding that Microsoft’s invalidity defense must be proved by clear and convincing evidence.

The Patent Act states that a patent is valid and that the burden of proving invalidity rests on a party relying on such a defence.  The Federal Circuit used a rule stating that invalidity must be proven by “clear and convincing evidence.”

However, what if evidence exists which was not considered by the Patent and Trademark Office (PTO) before the patent in question was granted?  According to Microsoft, this question is significant enough to justify an appeal to the US Supreme Court.  The company relied on three main arguments in support.

1.  The Decision Is At Odds With The KSR Case

In KSR International Co. v. Teleflex, Inc., 550 U.S. 398 (2007) the US Supreme Court held that the “clear and convincing” standard is diminished when an invalidity defence rests on evidence not considered by the PTO.  According to Microsoft, KSR stands as an “invitation” to reconsider the clear and convincing standard. 

Microsoft also submitted that the Federal Circuit’s rule, which states the standard holds even when the relevant prior-art evidence was not presented or considered by the PTO, conflicts with pre-1982 decisions of all twelve regional circuits.  This fact alone demands judicial review, according to Microsoft.

I would find it fascinating to see how the Supreme Court would address Microsoft’s tactic in relying on the KSR case.  To non-intellectual property specialists, it does (at first glance) make sense that a Patent Office consider all relevant information before a patent is granted.  However, I do find Microsoft’s second sub-point concerning.  The Federal Circuit has exclusive jurisdiction over most patent appeals which Microsoft’s writ of certiorari glosses over, quite unsatisfactorily. 

2.  Policy Reasons For Selecting An Appropriate Standard of Proof

The next argument discussed the potential chilling effect patents may have on technological development.  In my opinion, this aspect of the writ is simply-space filler.  The writ contains the typical arguments surrounding patent regulation and how progress may be either hindered or progressed through the use of patents.  If readers are interested in re-visiting this debate, see pp. 19-23 of the writ.

3.  It Is Time For Review Of The Standard Of Proof Issue

Finally, Microsoft argued that the time is ripe to review the standard of proof, as the previously-mentioned Federal Circuit rule was developed over a decade ago.  According to Microsoft, this, coupled with the fact that the case at hand is the largest patent-infringement verdict ever affirmed on appeal, is an excellent opportunity to revisit the standard of proof.  I agree.

Speculation For The Future

Readers may find that this post takes a rather pro-Microsoft stance in analyzing the writ.  This is not because I would necessarily like to see Microsoft (or i4i, for that matter) emerge victorious.  Instead, the prospect of seeing the US Supreme Court take a crack at clarifying the law surrounding technology patents is very exciting.  Particularly in the fast-paced and ever-changing world of computer software, a decade is simply too long for a precedent to govern without additional high court review.  A Supreme Court decision would not only give this small, successful Canadian company international publicity, but would provide the intellectual property law industry with much-needed, updated guidance with respect to technology patents.

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