The U.S. Supreme Court determined last Thursday that Microsoft must pay $290 million to i4i for violating its patent. The proceedings began nearly four years ago in 2007 when i4i accused Microsoft of using its patented Custom XML (later called Content Control) technology in Office 2003, 2007, and in Vista. The battle, however, was fought over more territory than just Custom XML.
The story begins in 2000 when Microsoft and i4i were discussing a joint business venture. i4i had been given the patent on custom XML in 1998. Nothing became of the discussions, but in 2001 Microsoft began discussing the use of XML in the next version of Word. When Word 2003 was published, i4i’s business began to shrink.
The courts found that this patent infringement was willful. This is not the first time Microsoft has willfully infringed upon patents. In fact, there have been a number of patent infringement cases in the past, most notably those of Stac Electronics, Carlos Amado who developed software to transfer data between Excel and Access, Eolas, and TomTom. Currently there are over 50 patent infringement cases against Microsoft.
i4i sued Microsoft in 2007 which resulted in the district court in Texas penalizing Microsoft with a $290 million compensation fee and with the removal of Microsoft Word from the market. After being unsuccessful in getting the case reviewed in the Federal Court of Appeal they took it to the Supreme Court where proceedings began last November.
Microsoft had a broader goal in mind as explained in a great article by Patently-O. The position held support from pharmaceutical companies, Apple, Intel, Cisco, Ebay, Netflix, and Toyota. The software giant’s goal was to lower the standard for patent invalidation. Currently, there is a strict burden of proof on those seeking to invalidate a patent. Where this strict ruling becomes problematic is when new information is discovered after the patent’s approval that would make the patent invalid, as in the case of i4i.
As the Guardian explains, the i4i patent was invalid because it violated the law that inventions cannot be on sale more than a year before filing a patent. The amicus brief issued by Cisco, Netflix, Toyoto, and others, summarizes this idea well,
The Court of Appeals for the Federal Circuit applies a strict, unyielding rule that catapults the private interests of certain patent owners above the broader interests of the public as a whole. Its rule is that trial courts must always apply a “clear and convincing evidence” standard to all patent invalidity challenges, even those never considered by the PTO, and even when based on facts the patent applicant concealed from the PTO. This strict rule favoring patent owners distorts multiple parts of the Patent Act.
The opposing party which includes i4i, 3M, IBM, Dupont, and others argue from the firmer foundation of precedent. Some uphold that the “Microsoft plan” is fundamentally unfair since it would give patent challengers the upper hand. In i4i’s brief, the “Microsoft plan” is hit hard, “Microsoft thus asks this Court to depart from settled precedent [of over 150 years] to effect a radical change in patent law-an area in which stability and predictability are paramount.” They go on to state that the Microsoft plan “contradicts every holding of this Court regarding the standard to prove invalidity,” and warn that it would drain the PTO of any significance.
Ultimately, the Microsoft plan did not prevail and the company found themselves paying up the $290 million penalty. Microsoft did not have sufficient evidence that they held the custom XML technology before i4i, and the longstanding patent review standards were upheld. Although only eight of the nine justices upheld i4i’s position, the one that did not, Chief Justice John Roberts Jr., had significant investments in Microsoft, as the Guardian notes. In any event, time will show how the use of Custom XML technology will be impacted.