The Supreme Court on Monday heard oral arguments in the massive patent dispute between Microsoft and Canadian software company i4i. According to i4i, XML-related features of Microsoft Word infringe one of its patents. Microsoft is on the hook for more than $200 million in damages if the Supreme Court does not see things Redmond's way.

The argument focused on the standard of evidence for invalidating patents. Right now, a defendant seeking to invalidate a patent faces a high burden of proof. Microsoft argues that the bar should be lower. The decision will hardly transform the patent system, but a ruling for Microsoft would add another notch to the Supreme Court's patent-reform belt.

Microsoft's last stand

According to i4i, XML-editing features in Microsoft Word infringe on US Patent No. 5,787,449, which the company received in 1998. The patent covers a method of manipulating the structure of a document separately from its content. The dispute came to a head in 2009 when a federal jury in the patent-loving Eastern District of Texas awarded i4i $200 million in damages. The judge ordered Microsoft to stop selling Microsoft Word, but Microsoft convinced an appeals court to put that ruling on hold, and Microsoft has since reengineered Word to avoid i4i's patent. So the current case does not threaten the availability of Word, but it will determine whether Microsoft is forced to write i4i a nine-figure check.

The United States Court of Appeals for the Federal Circuit affirmed the lower court's ruling in December 2009. With all its other appeals exausted, Microsoft asked the Supreme Court to review the case. Its petition focused on a relatively narrow question: whether the United States Court of Appeals for the Federal Circuit, which hears all patent appeals, had chosen the wrong standard of proof for invalidating a patent. The Federal Circuit requires defendants to provide "clear and convincing evidence" that a patent is invalid.

Patent law gives firms one year from the public disclosure of their invention to file for a patent. Redmond argued that i4i itself had sold a product that served as prior art for the invention more than a year before its patent application. If true, that would make i4i's patent invalid. Microsoft's expert witness used statements in the product's manual to argue that the product likely constituted prior art. But i4i argued that only the product's source code could meet the "clear and convincing evidence" standard for invalidating a patent. And conveniently for i4i, the source code was no longer available.

So Microsoft asked the Supreme Court to rule that a lower standard, "preponderance of the evidence" was more appropriate for finding a patent invalid. This lower standard of proof is used in other areas of patent law, such as proving infringement. The higher standard is based on the idea that the patent had already been studied by a skilled examiner at the patent office. But in this case, the prior art Microsoft was presenting had not been available to the patent examiner, so Microsoft argues that deference doesn't make much sense.

A blizzard of briefs

As is common in Supreme Court patent cases, Microsoft v. i4i attracted an huge number of amicus briefs. A coalition of 18 large companies—including Google, Wal-Mart, the New York Times, and Red Hat—and two trade associations filed a brief siding with Microsoft.

The Electronic Frontier Foundation, Public Knowledge, and the Apache Software Foundation also took Redmond's side, arguing that the case had particular significance for the free software community. They argued that the high standard for invalidating patents puts open source projects at a particular disadvantage because their records tend to be less comprehensive and well-organized than the records of proprietary software projects. This is particularly unfair because there is a lower standard—"preponderance of the evidence"—to prove infringement. And a plaintiff can compel the defendant to disclose a project's current source code as part of the discovery process. The result, the groups said, is a game of "gotcha" in which it's easier to use a project's records to prove that it is currently infringing a patent than to use those same records to prove the patent is invalid.

The Obama administration sided with i4i, arguing that the courts should preserve the "clear and convincing" standard while giving added weight to evidence that had not previously been considered by a patent examiner. The United States also noted that defendants have the option to seek re-examination of a patent by the Patent and Trademark Office if they discover new evidence of prior art.

The Canadian firm also enjoyed the support of the American Intellectual Property Law Association, which urged the court to preserve the "clear and convincing" standard for proving patent invalidity. The AIPLA touted the "deep historical roots of the heightened evidentiary standard." Other parties supporting i4i included Intellectual Ventures, the pharmaceutical industry, and 3M—all firms that rely heavily on patent protection.

Oral arguments

Much of Monday's oral arguments focused on Radio Corporation of America v. Radio Engineering Laboratories, a 1934 case in which Justice Benjamin Cardozo wrote that patents had a "presumption of validity, a presumption not to be overthrown except by clear and cogent evidence." The circumstances of the RCA case were somewhat different, in that the case involved a dispute among multiple inventors arguing about who had invented a technology first. But Microsoft's attorney, Thomas Hungar, was forced to concede that ruling for Microsoft would likely mean contradicting the RCA decision. Hungar argued that provisions of the 1952 Patent Act already superseded Justice Cardozo's 1934 ruling.

Next up was i4i's attorney, Seth Waxman. Justice Ginsburg pressed him to respond to Microsoft's argument: "the whole reason for this clear and convincing standard" is the patent office's superior judgement, but "if they haven't judged anything, what is the justification for continuing to have the clear and convincing standard?"

Waxman responded that "the harm from an erroneous determination is hugely asymmetrical." That is, no matter how many times a patent is found valid, a patent holder only has to suffer one finding of invalidity to lose it. But Justice Breyer retorted that it might be "a worse disaster for the country to have protection given to things that don't deserve it."

The Obama administration was represented by Deputy Solicitor General Malcolm Stewart, who urged the court to preserve the current "clear and convincing" standard.

The hearing was dry even by the standards of Supreme Court oral arguments. Chief Justice Roberts, who sometimes brings moments of levity to the court's proceedings, recused himself due to his substantial Microsoft stock holdings. The funniest line of the hour came from Justice Alito. Waxman responded to a question from Alito by saying he found one of Alito's prior opinions (when he was on a lower court) "particularly persuasive." Alito shot back: "I've gotten a lot smarter since then."

A decision is expected by the end of June.

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