Canada’s i4i finally triumphs over Microsoft

MIAMI — The U.S. Supreme Court has given Toronto-based I4I Inc. a US$300 million patent infringement victory over Microsoft Corp. by letting a lower court ruling stand.

The legal battle, which started in 2007, has already forced Microsoft to modify certain functionality in its Word application in 2009, when the U.S. District Court for the Eastern District of Texas ruled in favor of i4i and told Microsoft to stop selling Word in the U.S.

At issue was an i4i patent that covers technology that lets users manipulate the architecture and content of a document, which i4i alleged Microsoft infringed upon by letting Word users create custom XML documents. Microsoft removed the feature.

i4i chairman Loudon Owen was at his desk when he got the news.  “We were doing some strategy and everything happened at once – the phones started ringing, email started coming,” he told Network World Canada. “I wouldn’t say the whole building started to shake, but close to it.”

i4i staff celebrated for about 20 seconds, he claimed, then went back to work. “We’ve been living with this a long time,” he explained. Owen got a cup of tea and phoned congratulations to company co-founder and chief technology officer Michael Vulpe.

Owen, who is also co-founder and managing partner of investor Maclean Watson Capital Pte., said he’s gratified the long fight ended in victory.“This started out as a case of enforcing property rights, but it became one of the most important business law cases in decades heard by the U.S. Supreme Court … I think it’s a watershed for patents.”Opinion: Microsoft was ‘trounced’
“It’s the right step, but it’s one step. Now we have to build the company they way we want to.”

The win gives the company a sizeable bankroll on which it can build. “It will mean we’re really in a position to grow the business the way we planned before the infringement occurred,” Owen said. “And the second thing is we can continue to develop new patents and enforce our intellectual property. So I think people will take us very seriously in the event we find people are infringing on our intellectual property.”

In a statement, Microsoft said the case “raised an important issue of law which the Supreme Court itself had questioned in an earlier decision and which we believed needed resolution. 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,” Microsoft said in a statement.

The case has been closely watched by legal experts because Microsoft, backed by other major technology vendors like Google and Apple, had argued in favor of watering down the usual standard required for companies to successfully defend themselves from patent infringement accusations.

Currently under U.S. law, a patent is presumed valid and alleged infringers bear the burden of establishing otherwise “by clear and convincing evidence.” However, Microsoft sought to have that standard loosened, so that the invalidity of the i4i patent could be established “by a preponderance of the evidence.”

Requiring defendants to establish “clear and convincing evidence” hurts innovation because it unduly shields dubious inventions from legal challenges after the U.S. Patent and Trademark Office has granted them patent protection, Microsoft argued

But on Thursday the U.S. Supreme Court, in an 8-0 decision in which Chief Justice John Roberts didn’t participate, sided with the lower court’s decision.

According to Microsoft, a defendant in an infringement action need only persuade the jury of an invalidity defense by a preponderance of the evidence. 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 [U.S. Patent and Trademark Office] in the examination process. We reject both contentions,” wrote Associate Justice Sonia Sotomayor in court’s opinion.

(With files from Howard Solomon, ITWorld Canada)

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