Supreme Court to Review Largest Award Ever Given in Patent Infringement Case

(Photo by: Tsukubajin)

Back in November, the Supreme Court granted certiorari in Microsoft v. i4i. The small Canadian company sued Microsoft for patent infringement and was awarded $290 million in damages. Microsoft claims that standard of proof was misapplied in this case.

The dispute arose in 2007 after i4i claimed that Microsoft misused its patent in Word 2004 and 2007. The patent is for text manipulation software which Microsoft has since stopped including in its program. In 2009, the trial court awarded i4i $290 million in damages. Microsoft appealed the decision which was later affirmed. The Supreme Court announced its decision to hear the case sometime in 2011. Chief Justice Roberts has already recused himself because he owns Microsoft stock.

With the support of technology titans Yahoo, Apple, Google, HP, and Facebook behind them Microsoft is hardly the only one advocating for a change. Microsoft’s defense was that the patent was invalid. The current standard for proving that defense is by “clear and convincing evidence.” It has been the standard for the past 26 years. Microsoft defended its position by saying there was evidence that there was a prior offer of sale that the US Patent and Trademark Office did not consider. In light of that, Microsoft believes the standard should have been lowered to the normal “preponderance of the evidence” standard in civil cases.

If the Supreme Court decides to lower the standard for patent infringement defenses, it will have a dramatic effect on patents. Courts will be put in a position to invalidate a high number of patents. It will make it more likely that good patents will be invalidated as courts are flooded with patent legislation. Furthermore, a lower standard will make patents more susceptible to infringement. Proponents are quick to respond that it is also more likely to invalidate bad and questionable patents as well. Some commentators feel that this is a case of big business attempting to impose its will on small, individual patent holders and inventors.

Whichever side the Court comes down on, there will be significant benefits and drawbacks. This highlights the need for real reform at the US Patent and Trademark Office. If the USPTO had the resources to efficiently and properly research each application, then the courts could give greater deference to an issued patent. This would reduce litigation by making rulings more predictable and give businesses a clearer picture of the bounds of their IP rights. Even after centuries of patent case, standards are still unclear, leading to many lower court decisions being overturned. Microsoft v. i4i is another example of why the courts are not the proper place to determine a patent’s validity.