Justices question Microsoft's vision of patent law

U.S. Supreme Court justices questioned Monday whether they should side with Microsoft and weaken the legal standard needed to invalidate a patent, with some justices suggesting there are alternatives to changing established law.

But in a case that could make it easier for defenders in infringement lawsuits to invalidate patents, justices also asked tough questions of Seth Waxman, the lawyer for software vendor i4i, which sued Microsoft in 2007 over its patent on an XML editor.

Microsoft, which lost a US$290 million decision in a U.S. district court, has argued that i4i began selling a product with the XML editor included a year before it applied for the patent. The U.S. Patent and Trademark Office (USPTO) didn't consider this so-called prior art in granting the patent, but the district court should have, Microsoft lawyer Thomas Hungar argued Monday.

Instead of requiring Microsoft to present "clear and convincing evidence" that the patent was invalid, the district court should have allowed the jury to consider a less difficult standard, the "preponderance" of evidence, Hungar said.

But recent U.S. case law seems to support the tougher standard, Justice Ruth Bader Ginsburg told Hungar. Ginsburg pointed to a 1934 case, RCA v. Radio Eng'g Labs, as establishing a long tradition of requiring patent defendants to present clear and convincing evidence that a patent is invalid.

But in the Patent Act of 1952, the applicable law, Congress did not require a "clear and convincing" evidence standard, Hungar argued. That standard has "no moorings in the statute and no moorings in common sense," he said.

Justice Stephen Breyer suggested there may be strong reasons to stick with the "clear and convincing" standard. When the USPTO grants invalid patents, it hurts the U.S. economy, but having a patent ruled invalid does irreparable damage to the patent holder, he said.

"What we're trying to do is get a better tool ... to separate the sheep from the goats," Breyer said. "What is that tool?"

Breyer questioned whether Microsoft's problem would be resolved through the current patent re-examination process at the USPTO and judges that keep a tight rein on juries.

The re-examination process doesn't consider prior art and several other reasons to invalidate a patent, Hungar said.

Breyer argued the other side of the point with i4i's Waxman. "In today's world, where nobody understands these technologies anyway," it would be worse for the USPTO to grant bad patents than to overturn some legitimate patents, he suggested.

A change in the standard would "marginalize" the USPTO, Waxman argued. Congress is currently working on legislation that would allow new ways to challenge patents, he noted.

"Congress is on the job," he said.

The U.S. Department of Justice also argued against Microsoft. The current standard is "part and parcel" of patent law, said Malcolm Stewart, deputy solicitor general at the DOJ.

Representatives of both Microsoft and i4i said they were encouraged by Monday's arguments before the Supreme Court.

A decision for the lesser standard would be "devastating" to inventors, said Loudon Owen, i4i's chairman. The case will determine "whether or not innovation will be able to continue to exist on the pace and scale that it has to date," he said. "What Microsoft is looking to do is completely disrupt the patent system we have today."

Microsoft's assertions that i4i included the XML editor in a product before applying for the patent and that it destroyed source code are "utter nonsense," Owen added.

The case will have a huge impact on the U.S. economy, said Brad Smith, Microsoft's general counsel. The economy "depends on having a healthy patent system," he said. "A healthy patent system requires that we both have the ability to protect patents that deserve protections and that we have the ability to weed out those that do not."

Smith discounted the i4i argument that a new standard for invalidating patents would hurt innovation. Microsoft is one of the largest patent holders in the U.S., he said.

"If we're prepared to stand here and ... defend our patents under a preponderance-of-evidence standard, then anyone should be able to do the same thing," Smith said. "We have as strong an interest in a strong patent system as anybody."

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is grant_gross@idg.com.

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