The Prior Art

Supreme Court Rules Against Microsoft in i4i Case

By Andrew Goldberg

In a unanimous decision that won't be well-received by tech industry heavyweights, the U.S. Supreme Court ruled this morning against Microsoft in the closely watched Microsoft v. i4i case, rejecting the software giant's argument to lower the evidentiary requirement to invalidate a patent.

The decision, which upholds the $290 million verdict against Microsoft won by the small Toronto-based i4i software company in the Eastern District of Texas, solidifies existing precedent and leaves intact the 28-year-old standard applied by the Federal Circuit in patent infringement cases.

"Congress specified the applicable standard of proof in 1952 when it codified the common-law presumption of patent validity," Justice Sonia Sotomayor wrote for the Court. "Since then, it has allowed the Federal Circuit's correct interpretation of §282 to stand. Any recalibration of the standard of proof remains in its hands." [ Download Microsoft v. i4i Supreme Court Decision]

Thomas  G. Hungar, a partner in the Washington, D.C. office of Gibson, Dunn & Crutcher, argued the case for Microsoft.  Seth Waxman, a partner in the Washington, D.C. office of Wilmer Cutler Pickering Hale and Dorr represented i4i, which was represented at trial by McKool Smith and before the U.S. Court of Appeals for the Federal Circuit by Finnegan, Henderson, Farabow, Garrett & Dunner. Microsoft was represented at trial and before the Federal Circuit by Weil, Gotshal & Manges.

Microsoft, along with such heavy-hitting amici as Google, Apple, Verizon, and HP, had advocated for the adoption of the lower preponderance standard in patent cases, arguing that the heightened standard insulated "bad patents" from invalidity challenges and stifled innovation. The Obama administration backed i4i, which warned that a lower standard would too easily allow juries to overturn the wisdom of the experts at the PTO. Lower the standard for invalidating a patent, Microsoft and its allies argued, would level the playing field to give patent infringement defendants a fairer shake in litigation.

But the Supreme Court said it was up to Congress to weigh such considerations. "We find ourselves in no position to judge the comparative force of these policy arguments," wrote Sotomayor, adding, "Congress has amended the patent laws to account for concerns about 'bad' patents, including by expanding the reexamination process to provide for inter partes proceedings. Through it all the evidentiary standard adopted in §282 has gone untouched."

The legal battle between the world's largest software maker and i4i (which stands for "infrastructures for information") began in 2007 when i4i sued Microsoft for infringing its patented XML editing feature in Microsoft Word. Microsoft, the jury found, willfully infringed i4i's patent when it installed its own XML editing features in Word 2003. The six-day trial in Tyler, Texas resulted in a $290 million verdict for i4i, which, like the company's patent, was later upheld by the Federal Circuit.

Microsoft, which was also permanently enjoined by the district court from selling versions of Word that infringed i4i's patent, has since removed the disputed features from its software. Now, the software giant will have pay the damages.

 

 

 

 

 

 

Recent Patent Litigation Weekly Columns

 

Much of the patent news that was published on this blog has been moved to the IP Insider section of the Corporate Counsel website. Here's a list of the last several Patent Litigation Weekly columns—

 

Oct. 25, 2010: Big Patent-Licensing Deals Push Acacia Earnings to a Stunning High

No one has filed more patent lawsuits against corporate America than Acacia Research. But Acacia CEO Paul Ryan says corporations are embracing, not rejecting, his business — and the company's new numbers prove it.

 

Oct. 18, 2010: Call it the Canadian Bilski

Citing U.S. patent laws, rejecting the European view, and opening the door to a potential rush on business-method patents up north, a Canadian judge says Amazon's controversial 'one-click'

 

Oct. 4, 2010: NPE Makes Offer Some Companies Can Refuse

Offered the chance to cough up $80,000 apiece to license a patent once held by Intellectual Ventures, drugmaker Novartis and auto parts manufacturer Tenneco decided to fight back instead.

 

Sept. 27, 2010: Uniloc Keeps Filings Software Suits, and NPE Patents Fare Poorly at Trial

Undeterred by its district court loss to Microsoft — and waiting on a Federal Circuit appeal in any case — Uniloc sues dozens of companies for 'software activation.' Plus, a new study shows that troll patents don't hold up at trial.

 

Sept. 20, 2010: Skyhook Takes a Shot at Google

This week: The search giant faces a new kind of patent lawsuit — one brought by (imagine!) an actual competitor in an increasingly important space — smartphones

 

Sept. 13, 2010: Costco v. Omega — The Patent Angle

The world's largest chipmaker hopes to use a Supreme Court case about Omega watches to 'correct' the Federal Circuit's rules on international patent exhaustion

 

Aug. 30, 2010: Inside Google's Second Patent Trial

Earlier this month, lawyers from Google and Yahoo dismantled a notorious Spangenberg patent. That leaves Google's perfect troll-fighting record intact.

 

Eben Moglen on Bilski, software patents, and big pharma

This interview is part of a series following the Supreme Court's Bilski decision, which left the laws on what you can get a patent on largely as they are, after a four-justice minority failed to ban "business method" patents.

Columbia Law School professor Eben Moglen heads the Software Freedom Law Center (SFLC) and wrote the group's amicus brief in Kappos v. Bilski. [PDF]

Moglen's position on the subject of software patents—that they should be banned—is, to say the least, outside the mainstream in legal circles. It has, however, garnered support among software developers and other techies, especially those who work in the world of open-source and free software.

Moglen's critique of the patent system extends well beyond the software issues he writes about, however. He suggests, for instance, that the 20-year monopoly granted by a patent is the product of a bygone era. And though he rejects the notion that he is "anti-patent," he says that the patent monopoly grant should be subject to a rigorous cost-benefit analysis, not simply handed out at the "monopoly window" that he believes the current Patent and Trademark Office represents.

The Prior Art interviewed Moglen about his views on the Bilski decision, the future of software patents, and how patents affect innovation.

Q: What's your opinion of the Bilski decision?

The decision is one of those that clearly shows why it has come down on the last day of the term after being argued early. When you see a case like that come down, one of the things that occurs to you is that a majority has fallen apart. The justices agreed about less than they thought.

The Post-Bilski landscape: Why some tried, but failed, to ban "business method" patents

It’s not a stretch to say that many members of the patent bar were relieved when the U.S. Supreme Court finally issued its decision in Bilski v. Kappos late last month. Considering that plenty of those lawyers—and the clients they represent—feared an opinion that would severely restrict what kind of technology is worthy of patent protection. As it turns out, those fears were misplaced.

Almost as soon as the decision came down Monday, The Prior Art’s inbox was filling up with e-mails from lawyers and law firm publicists offering expert commentary on what it all meant. (By the end, the number of pitches had hit nearly 40). One e-mail, from Goodwin Procter’s Stephen Schreiner, contained a statement that typified the joyous tone of the patent bar’s broader reaction. Schreiner said the Court had “launched the United States Patent System into the Information Age with the Bilski v. Kappos decision today....Rejecting the chorus from some demanding the Patent System be limited to Industrial Age technology, the Court answered with a flat ‘no,’ finding patents are available for software, business methods, medical diagnostic techniques, and other products of the Information Age.”

But while Justice Anthony Kennedy’s controlling opinion may not do much to change the status quo when it comes to the patent system, the more interesting Bilski story is one of an important "almost"—an "almost" that by all indications was hard-fought.

Indeed, for some folks—including those who hoped the Court would use the case to limit what they see as a plague of spurious patent litigation—this has to be a particularly painful “almost.”

Supreme Court Decides Bilski: Stevens and Allies Try to Ban "Business Method" Patents, but Fail to Get Fifth Vote

In the last batch of opinions to which he will ever contribute, retiring U.S. Supreme Court Justice John Paul Stevens fell one vote shy in his goal of moving methods of doing business outside the scope of the country’s patent system. And he marked the occasion by weighing in with a concurring opinion that reads an awful lot like a dissent.

Ultimately, despite widespread speculation that Stevens would cap his distinguished career by writing the majority opinion in Bilski v. Kappos, Justice Anthony Kennedy wound up as the author of the controlling opinion in the closely watched patent case.

While all nine justices agreed that the “invention” at issue in the case—a method for hedging weather-related risk in energy trading developed by Bernard Bilski and Rand Warsaw—was too abstract to merit patent protection, only four signed on to Kennedy’s opinion.

That opinion held that the "machine-or-transformation" test for patentability--created by the U.S. Court of Appeals for the Federal Circuit in its Bilski decision--was a "useful clue" when gauging a subject’s patentability but shouldn't be considered the only applicable test.

Read More: Court's Opinion (pdf)

Odom Weighing In On Bilski for Oregon? That's News to Oregon

The Bilski case is heading towards a resolution at the Supreme Court, and 44 amicus briefs already await the justices—with more to come.

One of those briefs is from Gary Odom. Odom is a litigation consultant who claims he invented, and now owns a patent on, the idea of customizable tool groups in software. He has sued Microsoft, and 28 smaller software companies, demanding royalties be paid to him.

Odom's amicus brief for the Bilski case has garnered some attention, owing to the fact that Odom seems to be claiming the brief is actually on behalf of the entire State of Oregon, where he resides. See the front page of the brief [pdf], which states "Brief For The State of Oregon." There's no other reference to the state anywhere in the brief, and no Oregon state lawyers are listed as coauthors.

In fact, no lawyers' names are in the brief at all. Odom is not an attorney, and his coauthor, Jordan Kuhn, is a Colorado patent agent. They describe themselves as "patent practitioners" and Odom also identifies himself as "an inventor and patent holder."

When TPA called Odom today, he wouldn't talk about the brief, saying only "I'm not available right now" before hanging up. Follow-up e-mails and phone calls to Odom and Kuhn went unreturned. In a blog post about Bilski, Odom works his way through a few scatological metaphors before calling his own brief "cogently potent in its brevity and conservatism."

Tony Green, a spokesman for the Oregon Attorney General, said no one in his office had heard of Odom's purported statewide representation before TPA called. "It is our preference that people accurately convey who they're writing an amicus brief on behalf of," says Green. "We neither authorized this or had any knowledge of it."

But Green wasn't overly concerned, since the Supreme Court's Bilski docket clearly states that the brief is on behalf of only Odom and Kuhn, not the state. "It's clear they understand who this is from," says Green.

Chief Justice Roberts' recent comment on the Federal Circuit

IPLB.com published my article on the certiorari grant in the Bilski case on Monday. Since I was looking through oral arguments for hints about what justices might think about the state of the patent system, it makes sense to include this as well. It doesn't say anything about patents per se, but shows what Chief Justice Roberts might think of the top patent court.

Carlsbad Tech., Inc. v. HIF Bio, Inc. involved a patented invention, but the issue before the Supreme Court was not a patent issue; it involved federal vs. state jurisdiction. From the oral arguments held on February 24:

Mr. Rhodes: I can't suggest what the Court might finally decide other than to say that -- that, again, the circuit courts of appeal have uniformly applied this. They seem to be --

Chief Justice Roberts: Well, they don't have a choice, right? They can't say, I don't like the Supreme Court rule so I'm not going to apply it, other than the Federal Circuit.

(Laughter in the court.)

This rebuke seems to indicate that as Roberts sees it, the Federal Circuit has a habit of blowing off Supreme Court precedent. That little aside could have deeper meaning in light of the court's decision to take up Bilski.

This was initially reported on Hal Wegner's patent news list shortly after argument. Argument transcripts in the case can be viewed at oyez.org.

 

Method Men? Handicapping Bilski at the Supreme Court

When the Federal Circuit issued the landmark Bilski decision, some folks were ready to call it the death of (most) business method patents, or even software patents—that view was a bit premature, because the law was still unsettled. Now, with the nation's top court now looking to take up the Bilski case, it's really unsettled.

Even if Sotomayor joins the court and is a strongly pro-patent judge, for those hoping for stronger limits on what can be patented, there are still ways to count to five. Several justices have, in other cases, dropped hints about what’s on their minds when it comes to the nation’s patent system.

The Court has taken four patent cases in recent years. Every time, the justices voted by a wide margin to limit the power of patents. The Federal Circuit’s Bilski decision [PDF] now at issue got rid of "pure" business method patents (without defining what they are), while signaling that lower courts should rein in patents in related areas such as software. The Federal Circuit did not, however, say how tightly to pull those reins.