Microsoft: Word patent ruling, injunction 'miscarriage of justice'

Lower court judge let trial 'run amok,' company argues in appeal of $290M award

Microsoft Corp.'s lawyers late yesterday said the verdict that awarded a Canadian developer nearly $300 million in damages and resulted in an impending ban on sales of the company's popular Word software was a "miscarriage of justice."

In a brief filed with the U.S. Court of Appeals for the Federal Circuit, Microsoft asked the three-judge panel to overthrow a Texas court's verdict and quash the injunction that prohibits the company from selling current versions of Word 2003 and Word 2007 in the U.S. after Oct. 10.

Software development company i4i Inc., which first accused Microsoft of patent infringement in 2007, wasted no time in firing back.

"The appeal brief filed by Microsoft is an extraordinary document," said i4i's chairman, Loudon Owen, in an e-mailed statement. "It captures the hostile attitude of Microsoft toward inventors who dare to enforce patents against them. It is also blatantly derogatory about the Court system."

Microsoft's brief is the first step in a fast-track process approved last week after Microsoft appealed the May jury verdict that found the company guilty of patent infringement. Two weeks ago, U.S. District Court Judge Leonard Davis, who oversaw the case, awarded i4i more than $290 million in damages and interest, and blocked Microsoft from selling Word in its current form.

An oral hearing for the appeal is slated for Sept. 23, after i4i files its response and Microsoft is given a chance to rebut.

Yesterday, Microsoft castigated Davis for the way he handled the trial. "This case stands as a stark example of what can happen in a patent case when a judge abdicates [his] gatekeeping functions," Microsoft said. "If the district court had been more faithful to its role as gatekeeper, it should have recognized a trial run amok and interceded to prevent a miscarriage of justice."

The 84-page brief, thick with legal citations of prior cases, continued to attack Davis' judgment during the case, saying that he failed to properly instruct the jury, awarded "enhanced" damages of $40 million -- which was $15 million more than i4i had asked for -- and added the injunction against selling Word.

"This is not justice," Microsoft said. "If district courts are free to admit theories of infringement that nullify a patent's claim terms, specification, prosecution history, and title; if they will allow an inventor to validate his patent by testifying without corroboration that he lied about the date of conception & then patent litigation will be reduced to a free-for-all."

Attorneys for Microsoft also argued that Davis should not have issued the injunction that bars Word sales. Citing a Supreme Court ruling from 2006 that set aside a lower court's injunction against eBay in a patent dispute over its "Buy It Now" auction feature, the lawyers said i4i had failed to present evidence that justified Davis' injunction.

In its decision, the Supreme Court said that lower courts must use a four-factor test when considering patent injunctions.

Microsoft said that i4i "utterly failed to meet [the burden of irreparable harm]" and did not "present a shred of evidence on its alleged loss of brand share." The company also argued that the damage to i4i had occurred in the past, and that i4i's software was complementary to Word, not a competitive product.

Its lawyers also complained that the injunction was unfair. "Given that i4i does not even have a stand-alone product that could compete with Word on the market, while Microsoft would lose its significant investments in creating the custom XML functionality of Word and would have to invest significant resources in redesigning it, the balance of the equities plainly favors Microsoft," the company's brief said.

Finally, Microsoft claimed that Davis overlooked the public interest, one of the four factors cited by the Supreme Court in the eBay decision. "The public interest thus favors a final -- and better-tested -- determination of validity before Microsoft and its distributors are forced to incur additional costs in redesigning Word, and removing the current copies of Word from the market," stated the brief.

During the trial, Microsoft said it would take five months to craft new versions of Word that omitted the offending "custom" XML feature. For its part, i4i countered that it could be done much faster than that with a software patch.

"The injunction should be vacated," Microsoft concluded in its brief. "The judgment should be reversed and the case remanded with instructions to enter judgment of noninfringement and invalidity."

If Microsoft fails to convince the Court of Appeals to either overturn the verdict or issue a stay on the injunction, it will have to pull Word 2003 and Word 2007, and the corresponding editions of its Office suite that include Word, from the U.S. market in just over six weeks. Computer makers would also not be able to bundle Office 2003 and Office 2007, even trial versions, with new PCs sold after Oct. 10. In a motion it submitted last week, Microsoft warned of chaos if that happened.

"Microsoft and its distributors (which include retailers such as Best Buy and OEMs such as HP and Dell) face the imminent possibility of a massive disruption in their sales," Microsoft said in the motion.

On Monday, both Dell Inc. and Hewlett-Packard Co. asked permission to file amicus curiae, or "friend of the court," briefs in support of Microsoft's motion to stay the injunction.

"We believe the court erred in its interpretation and application of the law in this case and look forward to the Sept. 23 hearing before the U.S. Court of Appeals, said Microsoft spokesman Kevin Kutz today.

"We do not have the gargantuan financial resources of Microsoft, but i4i has the protection of fairness under the U.S. justice system. Microsoft is not above the law," said i4i's Owen. "We firmly believe the decision of the jury and judge in the United States District Court was correct on the facts and we shall prevail on appeal."

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