i4i says patent chaos will follow if Microsoft wins Supreme Court case

Microsoft Corp.’s (Nasdaq: MSFT) appeal yesterday before the U.S. Supreme Court to make it easier to challenge patent could cut both ways and may hold perils for both patent holders and challengers, according to technology industry observers.

In April 2010, the U.S. Court of Appeals denied Microsoft’s appeal after which a three-judge panel upheld a $290-million judgment over willful patent infringement. Toronto-based i4i sued Microsoft in May 2007 claiming it had patented the technology behind the XML in Word 2003 and 2007. The last chance for a successful appeal for Microsoft is at the Supreme Court level.

The Redmond, Wash.-based software giant yesterday argued that the court should reject the requirement that a defendant in a patent infringement case must prove by “clear and convincing evidence that a plaintiff’s patent is invalid. A lower standard ought to be used instead, said Thomas Hungar, lawyer for Microsoft Corp, which is appealing before the U.S. Supreme Court a record $290 million jury verdict for infringing the software patent of i4i, a Canadian software company.

Microsoft wants the standards for challenges to the validity of a properly issued patent be based on mere “preponderance of evidence,” according to i4i. Seth Waxman, lawyer for the Toronto-based i4i, said that Congress has accepted the standard which has been in effect for the last 28 years.

This is something that could potentially “cause chaos,” says Loudon Owen, chairman of i4i.

“Microsoft is basically asking the court to move from seeking evidence beyond reasonable doubt to a mere flip of a coin,” he said.

If patents are easier to invalidate, then the patent system will suffer overall, said Owen. “If anything can come up in 10-12 years that can invalidate your patent, then people are going to take mountains of information, they’re going to dump the library of congress on the patent examiner and that’s going to make it impossible to examine the patents,” said Owen. “They’re legal argument is fatally flawed.”

“Tinkering with something that is fundamental to the entire patent system could result in disaster,” Owen added.

He said “watering down” prevailing standards will “erode the confidence that patent filers have on the system.”

The Court is set to decide on the appeal in June but technology industry experts said the case which has been going on since 2007, has reached a new level that now touches the concerns of both small and large businesses.

CDN sought a comment from Microsoft, but the company has yet to issue a statement on the matter.

The record $290 million ruling in favour of i4i is enough to get “people to sit and take notice,” said Sarah Dale-Harris, Toronto-based legal counsel for Accenture, a managing, technology and outsourcing services firm.

But with Microsoft petitioning the Supreme Court to lower the standards of proof for patent challenges, she said “things have certainly become more interesting.”

“The appeal could turn out to be a double-edged sword,” says the lawyer, who specializes in transactions and intellectual property in the IT space.

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Nestor Arellano
Nestor Arellano
Toronto-based journalist specializing in technology and business news. Blogs and tweets on the latest tech trends and gadgets.

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