The patent case between Microsoft and i4i argued yesterday before the Supreme Court could have ripple effects throughout the technology industry, as Microsoft is seeking to make it easier to prove patents aren't valid.
Patent cases take two tacks: the first is that the defendant in a patent infringement case says they didn't infringe the patent. The second is to say that even if the patent was infringed the patent is not valid. The crux of the Microsoft dispute with i4i is a 1994 patent i4i had filed for separating the formatting from text in a word processor. I4i won its case in the Federal District Courts, and Microsoft was ordered to pay $290 million. Microsoft eventually asked the Supreme Court to hear the case.
Up until now the standard of evidence was clear and convincing. This is a step below the reasonable doubt standard used in criminal cases, but more stringent than preponderance of evidence that is normal for civil matters.
I4i says changing the standard of evidence would undermine the presumption that a patent is valid when it is challenged. In addition, i4i says the clear and convincing standard is codified in law and has been since the 1950s. Microsoft wants that standard changed - not only in this case, but across the board.
Changing the evidentiary standard would be a big departure from current practice, which operates under the assumption that patents are valid because the patent examiner did his or her job correctly. Much of the technology industry depends on patents, at least initially. Companies buy and sell their intellectual property on the assumption that the patents will, for the most part, hold up.
But the argument from Microsoft hinges on what happens when the Patent and Trademark Office fails to consider prior art, and in effect, makes a mistake.
The technology industry is currently full of patent lawsuits, for both hardware and software. Notably, several mobile phone makers such as Apple, Motorola, HTC, Nokia and Research In Motion are all entangled in a web of claims. Apple recently filed yet another complaint against Samsung on April 15.
If the justices decide in Microsoft's favor -- by no means a foregone conclusion -- then there will be many companies that could find it harder to defend their intellectual property. Certainly many of the defendants, including Apple (which is defending against suits from HTC, Nokia and Motorola) would be more vulnerable to getting patents overturned.
Paul Allen's company Interval Licensing not only owns hundreds of patents but is suing several companies, Google, AOL and Apple among them. If those patents could be overturned more easily much of the company's litigation strategy would have to be rethought.
During the oral arguments, the justices appeared to be considering those kinds of questions, said Megan La Belle, assistant professor at the Columbus School of Law at Catholic University of America. She attended the arguments, and noted that the justices seemed, for the most part, loath to overturn decades of practice. The principle of stare decisis is very powerful, she said.
As the justices asked questions, La Belle said, Stephen Breyer seemed slightly more sympathetic to Microsoft, noting that the public needs to be protected from bad patents as much as it needs to get the benefit of good ones. But he also asked the attorney for Microsoft if there might be other ways to manage the problem of fixing PTO mistakes. The others, she said, seemed less willing to change precedent very radically. Microsoft will still have to get five justices to agree that the preponderance of evidence standard should govern (there are eight justices hearing this case, because Chief Justice John Roberts recused himself).
La Belle noted that even if Microsoft wins in the Supreme Court, it only means that Microsoft will get a new trial, so it will still have to convince a jury that the patent is invalid.
A decision is expected sometime in June.