he Supreme Court on Monday heard oral arguments in the massive patent dispute between Microsoft and Canadian software company i4i. According to i4i, XML-related features of Microsoft Word infringe one of its patents. Microsoft is on the hook for more than $200 million in damages if the Supreme Court does not see things Redmond’s way.

The argument focused on the standard of evidence for invalidating patents. Right now, a defendant seeking to invalidate a patent faces a high burden of proof. Microsoft argues that the bar should be lower. The decision will hardly transform the patent system, but a ruling for Microsoft would add another notch to the Supreme Court’s patent-reform belt.

Microsoft’s last stand

According to i4i, XML-editing features in Microsoft Word infringe on US Patent No. 5,787,449, which the company received in 1998. The patent covers a method of manipulating the structure of a document separately from its content. The dispute came to a head in 2009 when a federal jury in the patent-loving Eastern District of Texas awarded i4i $200 million in damages. The judge ordered Microsoft to stop selling Microsoft Word, but Microsoft convinced an appeals court to put that ruling on hold, and Microsoft has since reengineered Word to avoid i4i’s patent. So the current case does not threaten the availability of Word, but it will determine whether Microsoft is forced to write i4i a nine-figure check.

The United States Court of Appeals for the Federal Circuit affirmed the lower court’s ruling in December 2009. With all its other appeals exausted, Microsoft asked the Supreme Court to review the case. Its petition focused on a relatively narrow question: whether the United States Court of Appeals for the Federal Circuit, which hears all patent appeals, had chosen the wrong standard of proof for invalidating a patent. The Federal Circuit requires defendants to provide “clear and convincing evidence” that a patent is invalid.

Patent law gives firms one year from the public disclosure of their invention to file for a patent. Redmond argued that i4i itself had sold a product that served as prior art for the invention more than a year before its patent application. If true, that would make i4i’s patent invalid. Microsoft’s expert witness used statements in the product’s manual to argue that the product likely constituted prior art. But i4i argued that only the product’s source code could meet the “clear and convincing evidence” standard for invalidating a patent. And conveniently for i4i, the source code was no longer available.

So Microsoft asked the Supreme Court to rule that a lower standard, “preponderance of the evidence” was more appropriate for finding a patent invalid. This lower standard of proof is used in other areas of patent law, such as proving infringement. The higher standard is based on the idea that the patent had already been studied by a skilled examiner at the patent office. But in this case, the prior art Microsoft was presenting had not been available to the patent examiner, so Microsoft argues that deference doesn’t make much sense.

via Microsoft urges SCOTUS to make patents easier to kill.