Washington backs i4i in Microsoft court fight

For the record.

Washington backs i4i in Microsoft court fight
OMAR EL AKKAD AND TECHNOLOGY REPORTER
Globe and Mail Update
Published Monday, Mar. 21, 2011 2:26PM EDT
Last updated Monday, Mar. 21, 2011 2:34PM EDT

The U.S. government has come out in support of a small Toronto software manufacturer in its years-long legal battle against technology giant Microsoft Corp. (MSFT-Q25.330.532.14%)

Washington is among almost two dozen groups and individuals that recently filed 22 amicus briefs in support of Toronto-based i4i Inc., which sued Microsoft for patent infringement. Nineteen venture capital firms and various companies – including 3M – have also written briefs in support of i4i.

The case has dragged on for four years, and is set to go before the U.S. Supreme Court in April. The central issue in the argument is whether the court should lower the standard for invalidating a patent. Loudon Owen, i4i’s chairman, argues a ruling in favour of Microsoft could result in a cataclysmic and ultimately negative shift of the U.S. patent system.

“Now the very individuals, organizations and companies that create new jobs are facing an unprecedented change in the law and the sudden disruption and devaluation of the patent system,” he said. “i4i’s position, which is that patent owners should to be able to rely on established patent law, has received a groundswell of diverse support from the United States government itself as well as from an enormous range of other leaders, inventors, investors and experts.”

Although it has lost a number of cases leading up to the Supreme Court review, Microsoft has no shortage of support from its own big-name backers. A number of technology giants, including Google Inc. (GOOG-Q577.1316.072.86%), Yahoo Inc. (YHOO-Q16.360.332.06%) and Facebook, have previously signalled their support for the company.

The case began in March, 2007, when i4i took Microsoft to court, alleging that a feature in the Microsoft Word software related to XML technology infringed on its intellectual property.

Since then, the Toronto firm has been largely victorious in court. In August, 2009, a federal court awarded i4i about $290-million (U.S.) in damages. The court also ruled that Microsoft could no longer sell versions of its software that included the infringing technology as of January, 2010, an order with which Microsoft has since complied.

Microsoft appealed the ruling, but the appeal was rejected in December of 2009. The company applied for a rehearing the following year, but that application was also denied. The U.S. patent office also rejected a request from Microsoft to once again re-examine the i4i patent.

In November, the top court in the country agreed to hear the case, likely marking the final chapter of what has become a lengthy, costly and possibly precedent-setting case. The Supreme Court is expected to begin hearing oral arguments in the case on April 18, and deliver a verdict by the end of June, according to i4i.

Should the court side with the Toronto firm, i4i will finally receive the money that lower courts awarded to it previously.Should the court side with Microsoft, the decision could fundamentally alter patent infringement standards in the U.S., making it easier to declare a patent invalid. Both sides essentially argue that a ruling against them would result in a stifling of innovation.

For the U.S. government, supporting i4i was likely prompted by the impact that a Microsoft court victory could have on the power of the U.S. Patent and Trademark Office.

“The clear-and-convincing-evidence standard best accommodates the interests implicated by validity challenges,” the government said in its brief. “A contention that a patent is invalid is in essence a collateral attack on the PTO’s prior administrative action, and it therefore implicates principles of deference to agency authority and expertise.”

For the venture capital firms backing i4i, the issue is clear-cut: weaker patent protections could significantly impact the value of their investments.

“Confidence that a new start-up company’s innovative technology will enjoy patent protection is critical to a venture capital firm’s decision to invest in that company,” the firms said in their brief. “Replacing the clear-and-convincing standard for overcoming the presumption of a patent’s validity with a preponderance standard would dramatically duce investment in the innovative companies that drive our Nation’s economic growth.””

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