Patent expert gives Microsoft edge after Supreme Court hearing

But Canadian company i4i's chairman says, 'We'll win'

Attorneys for Microsoft and a small Canadian company argued before the U.S. Supreme Court today, each hoping to gain an advantage in a long-running patent infringement lawsuit.

One observer said the questions asked by the Justices led him to think that they were leaning toward Microsoft's position.

"The Justices had more questions for i4i's counsel," said Steve Chang, a Washington D.C. attorney with Banner & Witcoff who specializes in patent litigation. Chang sat in on the oral arguments before the Supreme Court.

"[Associate Justice Samuel] Alito specifically said that he had problems with i4i's interpretation of the statute," said Chang.

"A presumption normally doesn't have anything to do with clear and convincing evidence," said Alito today. "Most presumptions can be disproved by much less than clear and convincing evidence. So how do you read that in your position into the language of the statute?"

Loudon Owen, chairman of i4i, strongly disagreed with Chang's take on today's hearing.

"We must have been reading different tea leaves," said Owen in an interview. "[The Justices] asked very good questions of both sides, but we didn't hear a single compelling argument from Microsoft."

Other Justices also weighed in with multiple questions, said Chang, including Associate Justices Ruth Bader Ginsburg and Elena Kagan.

According to a transcript of the hearing (download PDF), only Associate Justice Clarence Thomas did not question the parties today. Chief Justice John Roberts has recused himself from the case.

Chang acknowledged that oral arguments are unreliable predictors of how the Court will eventually rule. "All you can get out of these is what questions the Justices have," said Chang, "but whether those questions are simply vetting their own opinions they have already formed or making points to their colleagues, that's hard to read."

The one thing both sides have agreed on is that the case is very important to patent law and its future application.

"Industry watchers have described [this] as the most important and far-reaching intellectual property case of the year," said a statement from the chief counsels of Microsoft, Apple, Cisco and Facebook. "We could not agree more."

Apple, Cisco and Facebook were among several large technology companies that filed amicus curiae, or "friends of the court," briefs in support of Microsoft. Other firms and organizations that did the same included the Electronic Frontier Foundation, EMC, Google and SAP.

"That's the only thing we agree on," said Owen. "If the Court rules for Microsoft, it would mean a massive change in the established patent law, and [be] extremely detrimental to innovation."

Dozens of companies and groups have filed amicus curiae briefs in support of i4i, among them large pharmaceutical corporations, universities and venture capital firms.

The case, which began in 2007 when i4i sued Microsoft in a Texas federal court, could relax the burden of proof currently on the alleged infringer, said Chang. Under current practice, an accused infringer must show "clear and convincing evidence" that the patent is invalid.

Microsoft has suggested that the burden of proof should instead be lowered to "a preponderance of the evidence."

If the Court rules for Microsoft, said Chang, "it would immediately make it easier to challenge the validity of a patent."

Microsoft has argued that i4i should not have been granted its patent because it was selling software that relied on the technology before it applied to the U.S. Patent and Trademark Office.

That prompted Associate Justice Antonin Scalia to question Microsoft's counsel today.

"Are you going to argue for all the time, in which case, you can appeal to the general rule that we always apply, or are you going to say, oh, yes, we won't apply it normally but only when the prior art hadn't been considered?" Scalia asked Thomas Hungar of the Washington D.C. law firm Gibson, Dunn & Crutcher, who represented Microsoft. "I mean, you -- you can't ride both horses. They're going in different directions," said Scalia.

i4i's lawsuit originally attracted interest because of an injunction issued in 2009 that was to bar Microsoft from selling its popular Word software. The injunction was suspended after Microsoft threatened that sales chaos would result, and several major computer makers, including Hewlett-Packard and Dell, stepped forward to say the same.

An appeals court agreed, and gave Microsoft five months to modify Word. In January 2010, the company shipped an update to Word 2007 that removed the custom XML tagging technology i4i asserted was covered by its patent.

Microsoft was also told to pay i4i nearly $300 million in damages and interest.

"We're confident that we'll win because we've had a consistent stream of successes," i4i's Owen said today as he ticked off the original ruling in U.S. District Court, and an appeal it won later.

While some observers have characterized the legal battle as one between technology Davids and Goliaths, neither Chang or Owen bought into that today.

"Originally it was a David and Goliath case, but now it's David plus a bunch of Goliaths," said Owen.

"This is a battle between the industry and a small, narrowly-defined group of opponents that have a lot of money, don't believe in patents and have a large market share that they want to protect," Owen said.

Hungar disputed that, noting that Microsoft has a broad patent portfolio, and so has no interest in seeing the law weakened. Instead, he argued, a lowering of the burden of proof bar would bolster, not diminish, the value of patents.

"If the Court rules in Microsoft's favor, it would be a significant improvement to the patent system," said Hungar in a post-hearing interview. "Many, many patents would continue to be validated. Only illegitimate patents would not be enforced."

Microsoft's contention is that i4i's patent is among the latter.

"The current 'clear and convincing evidence' standard is actually harmful to innovation," said Hungar, because companies are unable to use technology that has been improperly awarded patents, resulting in laying out licensing fees that should instead be spent on research and development.

"All [a ruling in favor of Microsoft] would do is lead to the invalidation of some patents that shouldn't have been awarded in the first place," Hungar said.

The Supreme Court is expected to hand down its ruling by June, when its current session ends.

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer or subscribe to Gregg's RSS feed . His e-mail address is gkeizer@computerworld.com.

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