The US Supreme Court on Monday agreed to hear Microsoft's appeal of a $290 million patent infringement judgement that forced the company to revamp its popular Word software earlier this year.
However, a patent expert said that it's unlikely Microsoft would ultimately prevail and get the multi-million dollar judgement overturned.
"This case has potentially great significance, but in all likelihood, the Supreme Court will not completely upend nearly 30 years of US patent jurisprudence," said Barry Negrin, a partner at New York law firm Pryor Cashman LLP who has practised patent and trademark law for over 15 years.
The case, which began in 2007 when Canadian developer i4i sued Microsoft in federal court, resulted in a record judgement against Microsoft last year after a Texas jury held that the company illegally used i4i's XML editing technology in Word.
As part of his final ruling, US District Court Judge Leonard Davis issued an injunction in August 2009 that barred Microsoft from selling Word as of 10 October, 2009. Davis' injunction was postponed after Microsoft threatened that sales chaos would result. Last January, Microsoft stripped the custom XML tagging technology from Word 2007 to meet Davis' delayed deadline. Word 2010, which was officially released to businesses in May 2010, does not include the technology.
Microsoft's appeal to a lower court was rebuffed in March 2010, and in July the US Patent and Trademark Office confirmed the validity of i4i's patent. Last week, the Patent Office denied Microsoft's request for a second re-examination.
In August, Microsoft asked the Supreme Court to consider the case, saying that it should be easier for companies to prove that a patent is invalid. "The question presented is ... whether the court of appeals erred in holding that Microsoft's invalidity defence must be proved by clear and convincing evidence," Microsoft's lawyers wrote in their brief to the Supreme Court.
Microsoft has several major technology companies on its side, including Apple, Facebook, Google, Intel and Yahoo, all of which have filed amicus curiae, or "friend of the court" briefs in support of the Redmond, Wash. developer.
The Electronic Frontier Foundation also filed an amicus curiae brief, claiming that what it called "artificially high standards of proof" required by those challenging patent infringement judgements hampered open-source software development.
"Artificially high standards of proof, such as that advanced by the Federal Circuit, undermine the effectiveness of this review by impeding the ability of parties -- especially parties engaged in developing free and open-source software -- to present effective challenges," the EFF's September 2010 brief stated ( download PDF ).
Negrin said that it while Microsoft may get a favourable ruling from the Supreme Court, and have another shot at overturning the verdict in a lower court or even at retrial, it may not be able to show that i4i's patent is invalid.
"I believe the practical outcome will, at worst, be an express statement of the basic rule that it is easier to invalidate a patent with prior art never considered by the US Patent and Trademark Office [USPTO], or its converse, that it is very difficult to invalidate a patent using prior art already considered by the USPTO," Negrin said in an email reply to questions today.
"Even if Microsoft gets its way at the Supreme Court level, Microsoft may not be able to prove invalidity even by the lower standard of a preponderance of the evidence, rather than the higher clear and convincing evidentiary standard [now in effect]," he added.
Not surprisingly, Microsoft applauded the Supreme Court's decision.
"We are gratified by the Court's decision," said David Howard, Microsoft's deputy general counsel for litigation, in an e-mailed statement. "It's a clear affirmation that the issues raised in this case are critical to the integrity of our patent system."
As it has before, i4i cast Microsoft's continued litigation as a threat to patent holders, especially inventors without deep pockets.
"The attack on patent holders and the adverse implications from the standard Microsoft is proposing is unprecedented and would deal a devastating blow to any US patent holder, large or small," said Loudon Owen, chairman of i4i, in a countering statement. "In light of both the importance of this case, and the facts that have already been tried, i4i is confident we will continue to prevail."
The two companies will bring their arguments before the Supreme Court next spring, with a decision likely by the end of June or beginning of July 2011.