10 June 2011

Where “Preponderance Of Evidence” Is Not Enough: Microsoft Defeated Before SCOTUS

Image by Matt Wade on Flickr
Supreme Court

The cold war of software patents has reached the status of a nuclear winter: earlier today the Supreme Court of the United States (“SCOTUS”) delivered its ruling in the case of i4i v Microsoft.

Background

Some years ago I blogged on how Microsoft got hit by a software patent.
However, the Redmond company denied infringement and sought a declaration that i4i’s patent was invalid and unenforceable.
Specifically, Microsoft claimed that i4i marketed the software known as S4 more than one year prior to the filing for its statutory protection.

Not surprisingly,  Microsoft contended that a defendant in an infringement action need only persuade the jury of an invalidity defence by a preponderance of the evidence.
In the alternative, Microsoft insisted that a

preponderance standard must apply at least when an invalidity defense rests on evidence that was never considered by the PTO in the examination process.

Nevertheless, Microsoft lost its case before the (patent owners friendly) District Court for the Eastern District of Texas which applied the long-standing jurisprudence of the Federal Circuit according to which

a patent shall be presumed valid and the burden of establishing invalidity rests on the party asserting such invalidity.
Under the Federal Circuit’s reading of §282, a defendant seeking to overcome this presumption must persuade the factfinder of its in-validity defense by clear and convincing evidence.

The Federal Circuit affirmed the decisions of the District Court and granted a certiorari to the Supreme Court which issued the final rejection to Microsoft’s claim of invalidity.

As PatentlyO‘s Dennis Crouch writes, Microsoft will now likely be forced to pay the $250+ million judgment for infringing i4i’s patent.

What Is The Moral Of The Story?

We must not forget that Microsoft was smote and consequently struck down by a patent troll. Since patent trolls are usually interested to sue “infringers” and force them into settlement agreements, I personally wonder why the guys from Redmond did not undertake such an agreement.

I was made aware that the patent troll allegations towards I4I might be unjustifiable.
Indeed and, unlike non-practicing entities, the company appears to have developed a product and established a sizable client base, particularly among pharmaceuticals such as Bayer, Merck and Schwartz Pharma. Obviously, Microsoft had showed an initial interest on I4I’s patented technology, but finally decided not to enter into a commercial agreement. The patent infringement lawsuit was the consequence.

One question remains: why did Microsoft act that way? Did they attempt to establish a new authority with regard to bad patents, since I4I’s patent grant showed some flaws and that remained undisputed before the Supreme Court? Was Microsoft’s challenging of the governing standard of proof, which currently favours patent owners and, their attempt to replace it with a standard more favourable to defendants in patent suits, a part of a larger strategy?

Either way, the creators of Windows failed.

All in all a disappointing decision – the Supreme Court has had a good chance to lower the threshold to invalidate bad patents, but acted pretty much as Pontius Pilate instead:

Congress specified the applicable standard of proof in 1952 when it codified the common-law presumption of patent validity. Since then, it has allowed the Federal Circuit’s correct interpretation of §282 to stand. Any re-calibration of the standard of proof remains in its hands.

Comments (7)

  1. 10 June 2011
    Paul @ ITN Mark said...

    Microsoft just bought Skype a few months ago and from then on, a lot of users experience unusual program crash. I don’t mean to blame Microsoft but its reputation as one of the biggest computer software company is becoming blurry. Just my two cents 🙂

    • 10 June 2011
      Emil A. Georgiev said...

      Dear Paul,

      thank you for coming by and commenting here!

      I also heard of the problems Skype has recently been experiencing, but I have no clue whether they are owing to the Microsoft takeover.

  2. 10 June 2011
    Tom said...

    Hi Emil,

    As someone who is familiar with the i4i company, I just want to clarify that i4i is not a patent troll.

    Patent trolls are”Non-Practicing Entities” who have a business model of buying up patents, then earning revenue from forcing licensing agreements on companies that use, knowingly or not, the IP covered by the patents.

    i4i is a real, operating software company. it was founded in 1993 by programer Michel Vulpe and businessman Loudon Owen, and has been selling software to and providing service to real customers from that time.

    The patent in question was written and applied for by Michel Vulpe himself. i4i didn’t buy its patent, they developed it from the ground up. i4i isn’t staffed by a bunch of lawyers like a patent troll firm. It is staffed by people like Michel Vulpe and his employees who write code and sell it to make their bucks.

    Around 2000, some i4i people met with Microsoft to discuss whether Micorosft would be interested in licensing & deploying the technology. After the usual round of NDAs & discosures, Microsoft said the company wasn’t interested, and i4i thought the matter was over.

    Then i4i’s XML technology appeared in Word 2003.

    Oops.

    All of a sudden this isn’t sounding like a case of an innovative large company getting blindsided by a patent troll appearing out of nowhere.

    • 11 June 2011
      Emil A. Georgiev said...

      Tom,

      I attempted to write you an email, but received the following:

      Technical details of permanent failure:
      Google tried to deliver your message, but it was rejected by the recipient domain. We recommend contacting the other email provider for further information about the cause of this error. The error that the other server returned was: 550 550 Requested action not taken: mailbox unavailable (state 14).

      —– Original message —–

      MIME-Version: 1.0
      Received: by 10.151.87.11 with SMTP id p11mr3708253ybl.11.1307746832766; Fri,
      10 Jun 2011 16:00:32 -0700 (PDT)
      Received: by 10.151.47.2 with HTTP; Fri, 10 Jun 2011 16:00:32 -0700 (PDT)
      Date: Sat, 11 Jun 2011 01:00:32 +0200
      Message-ID:
      Subject: Your comment on the Reguligence Weblog
      From: “Emil A. Georgiev”
      To: xxx
      Content-Type: multipart/alternative; boundary=000e0cd253da6c57c404a56389dc

      Tom,

      thank you for commenting on the Reguligence Weblog!

      I will determine the content of your comment and, if necessary, adapt my
      blog post.

      BR,
      Emil

  3. 22 June 2011
    Tom said...

    Hi Emil,

    Just glanced back @ the comments today. It looks like I might have had a spelling mistake on my email, based on the autocomplete that popped up. Hopefully the address is right now. Can you try re-sending?

    Thanx, Tom

    • 23 June 2011
      Emil A. Georgiev said...

      Tom,

      I should have taken some more sources in consideration when composing this post.

      Thank you once again for your comment – it turns out that the patent troll allegations against I4I might be excessive and hence unjustifiable.
      Consequently, I amended the article.

      BR,
      Emil

  4. 17 January 2012

    […] Where “Preponderance Of Evidence” Is Not Enough: Microsoft …Jun 10, 2011 … Where “Preponderance Of Evidence” Is Not Enough: Microsoft Defeated Before SCOTUS. New here? Feel free to visit the About page and get … […]

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