Top court hears Microsoft appeal on i4i patent

Microsoft Corp urged the U.S. Supreme Court on Monday to make it easier to challenge some patents as part of its appeal of a record $290m jury verdict for infringing a small Canadian software firm's patent.

An attorney for the world's largest software company argued that the court should reject the long-held requirement that a defendant in a patent infringement case must prove by clear and convincing evidence that a plaintiff's patent is invalid.

Thomas Hungar, an attorney for Redmond, Washington-based Microsoft, said a lower standard should be used, which could make some patents more vulnerable to legal challenge while promoting innovation and competition.

An Obama administration lawyer and Seth Waxman, an attorney for the Toronto-based i4i, said Congress has accepted the standard in effect for at least the past 28 years, that it was correct and that it was based on long-settled precedent.

The Supreme Court justices questioned all three attorneys closely and gave no clear indication during arguments of how they would rule. A decision is expected by the end of June.

The legal battle stemmed from a federal jury's award of $290m to i4i after finding Microsoft had infringed its patent relating to text manipulation software in 2003 and 2007 versions of Word, Microsoft's word processing application.

A U.S. appeals court upheld the award and the U.S. Patent and Trademark Office upheld the validity of the i4i patent. Microsoft continued to dispute those decisions, but removed the contested features from its current software.

In appealing to the Supreme Court, Microsoft said it wanted a new trial.

After the arguments, Loudon Owen, i4i's chairman, expressed confidence his company will prevail. "We thought it went very well," he said.

"Microsoft did not present either policy or legal reasons that would justify any changes to the law, particularly the sweeping change they now apparently seek," Owen said.

Several justices asked about a Supreme Court precedent from 1934 that could cast doubt on Microsoft's argument. "What do we do?" Justice Elena Kagan asked. "One answer to that question is we go with our prior precedent."

Justice Ruth Bader Ginsburg also cited the 1934 ruling and asked whether Congress had ever introduced legislation to change the standard. Hungar replied it had not.

Justice Stephen Breyer asked whether the current system protected not only inventions that deserve protection, but also those that may not deserve it. "We're trying to get a better tool if possible to separate the sheep from the goats," he said.

Justice Sonia Sotomayor asked whether the dispute could have been resolved with different jury instructions.

The case was heard by eight of the nine Supreme Court members. Chief Justice John Roberts, who owns Microsoft stock, recused himself from the case. If the justices split by a 4-4 vote, then the ruling against Microsoft would be upheld.

The Supreme Court case is Microsoft Corp v. i4i Limited Partnership and Infrastructures for Information Inc, No. 10-290.

(Published by Reuters - April 18, 2011)