Microsoft-i4i fight has big patent implications

November 29, 2010

What has been an interesting side show over the last few years, has taken on a much greater significance with the latest news that Microsoft’s appeal of a patent win by software minnow i4i will be heard by the Supreme Court.

When the two combatants eventual square off in Washington, D.C. sometime next spring, tech companies large and small will be closely following every legal punch thrown.

In the Microsoft camp will be heavyweights Google and Yahoo and trade groups such as the Computer & Communications Industry Association.

In the i4i corner will be all small firms who have ever patented a piece of software. Ironically this used to include Microsoft.

Loudon Owen, i4i’s chairman and CEO, was not surprised by the support Microsoft has received from Google and other tech giants in this fight.

“If a company already has a massive market share and a balance sheet that’s bigger than some small countries then, of course, it’s in their interest to maintain that position,” he said. Owen added it’s i4i’s assertion that the patent system is geared to help “innovative companies trying to acquire market share” to disclose their technology publicly in return for legal protection for their patents.

Many large firms view the U.S. patent system with some degree of skepticism, believing it leads to small firms patenting a piece of software in order to leverage it for a financial windfall at a later date.

“It’s a clear affirmation that the issues raised in this case are critical to the integrity of our patent system,” said David Howard, Microsoft’s deputy general counsel for litigation, in a statement. “We look forward to presenting our case to the Supreme Court.”

Last week Microsoft tried unsuccessfully to have the U.S. Patent and Trademark Office dismiss i4i’s patent, originally awarded in 1998. It was Microsoft’s third attempt in the last six months.

In 2009 a Texas jury awarded Toronto-based i4i $290 million after finding that Microsoft had infringed the i4i patent relating to text manipulation software in the 2003 and 2007 versions of Word.

“It’s a very very important case,” said Owen, who added he was “confident” i4i would win again when the case appears before the U.S.’s highest court. “It may look like an innocuous legal evidentiary standard, but in fact it has the potential to very very dramatically affect the health of the U.S. patent system and decrease the value of patents.”

Patent lawyer Mark Walters, who works for Seattle-based law firm Frommer Lawrence & Haug LLP, was surprised the Supreme Court took the case, as it has a history of ignoring them. But Walters did note the Supreme Court has recently been hearing more cases, pointing to the patent fights involving Stanford University vs Roche Molecular Systems and Global-Tech Appliances vs SEB.

“It maybe signals a new interest on the part of the Supreme Court in patent law,” said Walters, adding it may be an attempt to redress a patent system that some perceive to be out of balance. “The worry is that patents will be held with such little value that it will chill investment in new technologies and our country will lag behind other parts of the world.”

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