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.


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.

4 May 2011

Who Can Win The Cold War Of Software Patents?

Looking out for Bilski: software patents v. FOSSphoto © 2010 opensource.com | more info (via: Wylio)

You know it already: Google got hit by a software patent (5,893,120).
Well, that was the decision of the court at first instance and Google is expected to appeal it, but nevertheless it must have hurt. Not the loss of USD 5 Million which Google can easily reimburse out of its petty cash account.
It is about more, far more.

According to Florian Mueller of FOSS Patents the decision is highly significant and will put all of Linux into doubt. On the other side there is Dana Blankenhorn who, citing the CTPN decision, disagrees.

Either way, the question here is why does a case like this attract such attention? I guess the reason lies in that it deals with the highly controversial issue of software patents…

What Are Software Patents All About?

A citation from Van Lindberg’s book  Intellectual Property and Open Source provides for a very good answer: Patents are the most expensive and powerful weapons in an IP arsenal. For some companies, particularly pharmaceutical companies, patents are the lifeblood of invention and the key to profitability. For other companies, particularly software companies, patents are the rough equivalent of madly proliferating nuclear weapon arsenal.

It is obvious: the current legislative framework in which software companies work and compete, allows the patenting of software-related inventions. As a matter of fact, software companies appear to amass software patents not to market and sell them, but to either drive a competitor out of business or to prevent that their competitors drive them out of business.

Having read this, you truly felt the frosty breeze of the Cold War, did you not?

Let me even further amplify this feeling: the Nuclear Non-Proliferation Treaty (NPT) signed during that time between the nuclear powers stands a good comparison to the nowadays patent cross-licensing agreements entered into by technology giants such as Microsoft, Apple, HP and Google.

But even when a nation has a

Powerful Nuclear Arsenal

it is still vulnerable to non-conventional attacks or asymmetrical threats of non abiding adversaries. Last two decades’ terror acts were a good demonstration thereof. They were not performed by the armed forces of “competing” nations, but rather by decentralised rogue organisations.

Likewise, Google’s participation in cross-licensing agreements or patent pools could not hold it harmless from the claims of Bedrock Computer Technologies (BCT).
But who or what is BCT?
It is not a technology vendor, but a so called non-practicing entity (NPE). Or a patent troll, if you prefer. Other such trolls that have gained public attention in recent time are NTPi4i and Acacia.

The end of the Cold War was accompanied by the rise of rogue organisations I mentioned above.
By the same token, patent infringement proceedings under the involvement of patent trolls emerged in the last couple of years. NPE v RiM, Software Tree (an Acacia affiliate) v Red Hat or i4i v Microsoft, to mention some.
Is this a sign that the software patent cold war is over? Well, not really and Nokia’s patent infringement lawsuit against Apple is a good demonstration. Will there be a winner? I strongly doubt it.

What does it mean? It means that the economy simply needs

Another Solution

Something in the sense of the SALT and START treaties which heralded the end of the Cold War. In addition, the economy needs protection against patent trolls whose objective is not to drive innovation but rather the opposite of it.
We as individuals and consumers have also a great interest in finding a solution since we pay the price of its procrastination.

The US Supreme Court missed its historical opportunity In Re Bilski.
Will it err also in i4i v Microsoft?

I hope not and will therefore provide it with a piece of advice, thereby citing (a portion of) the statement of Adobe’s Douglas Brotz during a hearing before the USPTO:

Let me make my position on the patentability of software clear. I
believe that software per se should not be allowed patent protec-
tion.  I take this position as the creator of software and as the
beneficiary  of the rewards that innovative software can bring in
the marketplace...
The problems inherent in certain aspects of  the  patent  process
for  software_related inventions are well_known, the difficulties
of finding and citing prior art, the problems of obviousness, the
difficulties of adequate specifications for software are a few of
those problems. However, I argue that software should not be  pa-
tented,  not  because it is difficult to do so, but because it is
wrong to do so.