Law Times

PAGE 14 BRIEF: INTELLECTUAL PROPERTY LAW December 6, 2010 • Law Times David v. Goliath patent case closely watched A BY ROBERT TODD Law Times David v. Goliath patent dispute involving technol- ogy behemoth Microsoft Corp. and a comparatively di- minutive Canadian company has this country's intellectual property bar gazing south of the border. Th e U.S. Supreme Court agreed last week to hear argu- ments in Microsoft Corp. v. i4i Ltd. Partnership, thereby mak- ing way for a fi nal appeal of a US$290-million judgment relat- ed to patent infringement against Microsoft issued last year follow- ing a U.S. District Court jury trial in Texas. Toronto-based i4i is up against not only Microsoft but also other titans of industry such as Apple Inc., Google Inc., and Wal-Mart Stores Inc. that are backing the appellant's position. Th e battle dates back to March 2007, when i4i sued Microsoft for allegedly infringing its pat- ent on technology that involves a method and system for manipu- lating the architecture of an elec- tronic document. Th e company argued that technology adopted in certain Microsoft Word 2003 and all Word 2007 products in- fringed aspects of the patent. After the jury found in fa- vour of i4i, Judge Leonard Davis awarded damages and a permanent injunction that took hold on Jan. 11. Microsoft's ap- peal to the Court of Appeals for the Federal Circuit was denied in late 2009, while an attempt to have the matter reheard also failed earlier this year. Meanwhile, the U.S. Patent and Trademark Offi ce reject- ed Microsoft's application last month for re-examination of the i4i patent. Th e Supreme Court hearing, expected to take place next spring, will be the company's fi nal forum to try to overturn the award to i4i. "We are gratifi ed by the court's decision," said David Howard, Microsoft's deputy general coun- sel for litigation. "It's a clear af- fi rmation that the issues raised in this case are critical to the integri- ty of our patent system. We look forward to presenting our case to the Supreme Court." But Loudon Owen, chair- man of i4i, says the legal changes Microsoft is proposing would prove disastrous to all patent holders and could have profound social ramifi cations. "In the event the larger accused infringer and defendants are able to invalidate patents based upon the proposed change in the law and the new standard, it's going to make it tremendously diffi cult, and at some levels simply im- practical, to consider enforcing a patent," he says. "And if you can't enforce it, why get it? And if you can't get a patent and can't enforce it, why bother inventing?" A key issue at the appeal will be the top court's handling of Mi- crosoft's argument that i4i's patent was invalid because the Toronto company had sold a product cov- ered by the patent more than a year before fi ling it. But because the code that was the subject of the dispute was destroyed, an evi- dentiary battle ensued. Th e court used a standard of clear-and-convincing evidence, which the jury ruled Microsoft had failed to meet. Th e company now wants the top court to lower the bar of validity and base rulings on a preponderance of evidence. 'The Federal Court doesn't stumble upon itself to adopt what the U.S. court says,' notes Trent Horne. In Microsoft's petition to the Supreme Court fi led in August by Th omas Hungar of Gibson Dunn & Crutcher LLP, it argued the U.S. Patent and Trademark Offi ce currently faces a rush of patent applications like never before. Hungar said the offi ce is now dealing with almost twice as many applications than it did 10 years ago with more than 485,000 of them in a single year. He suggested this deluge "has overwhelmed the resources of the [offi ce's] examiners" and pointed to a report stating an examiner spends just 18 hours on a single application. Moreover, Hungar maintained in the petition that it's diffi cult for examiners to receive dependable information about the technology being submitted. "When coupled with sig- nifi cant information asymme- tries, the examiners' limited time predictably and inevitably results in an increasingly large number of mistakes, some of them glaring," he wrote. Th at, he said, means it's more important for patent litigation to be used eff ectively to topple erroneous decisions to grant pat- ents. However, the rate at which invalid patents have been up- held has "increased signifi cantly" since the federal circuit court ad- opted the clear-and-convincing evidence standard in the early 1980s, Hungar wrote. "Th e standard of proof that courts apply to invalidity defenc- es thus directly aff ects whether patent litigants can cull invalid patents from the modern patent thicket and, less directly, wheth- er our patent system is calibrated to promote progress in the useful arts or to stifl e it." Microsoft's petition also highlighted a Federal Trade Commission review of the U.S. patent system that con- cluded that the clear-and- convincing evidence standard threatened to stifl e progress. 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