What began as a dispute between a small Canadian software company and Microsoft Corp. has morphed into a U.S. Supreme Court case that has the potential to fundamentally overhaul the country's patent system.
The U.S. top court has agreed to review a patent infringement case filed against Microsoft by Toronto-based i4i Ltd. - a case that Microsoft lost both initially in court and subsequently on appeal.
The case dates back to March, 2007, when i4i first took court action. The Toronto company alleged that a feature in Microsoft's popular Word software infringed on its intellectual property.
In August, 2009, a federal court awarded i4i about $290-million (U.S.) in damages and issued an injunction against Microsoft that was to take effect in January, 2010, effectively banning the software giant from selling versions of Word with the disputed technology as of that date.
Microsoft appealed the lower-court ruling, but the appeal was rejected last December. The company applied for a rehearing this year, but that application was also denied. The U.S. patent office also recently rejected a request from Microsoft to once again re-examine the i4i patent.
The Supreme Court's decision to review the case represents a rare courtroom success for Microsoft, and again prolongs the dispute. However, it appears that this will be the Redmond, Wash.-based company's final avenue of appeal in the case.
Microsoft's appeal to the top court essentially asks the court to consider setting a less-stringent standard for invalidating a patent. Currently, companies in Microsoft's position are required to show "clear and convincing" evidence to invalidate a U.S. patent.
Microsoft argues that the current system disproportionately favours patent holders in some cases.
"We are gratified by the court's decision," David Howard, Microsoft's corporate vice-president and deputy general counsel for litigation, said on Monday. "It's a clear affirmation that the issues raised in this case are critical to the integrity of our patent system."
A number of large software and hardware manufacturers, including Google Inc. and Yahoo Inc., support Microsoft's legal challenge.
However, i4i chairman Loudon Owen argues that Microsoft's court challenge could "dramatically change the effectiveness and health of the U.S. patent system" by making it easier for alleged violators to convince a court to rule a patent invalid.
As such, Mr. Owen said, it would be less useful for inventors to patent their creations in the first place, and subsequently more difficult to take alleged violators to court.
"What's the point of getting a patent if you can't enforce it?" he said. "This goes to the heart and soul of the U.S. patent system."
Mr. Owen said the Supreme Court hearing should begin next March or April, with a judgment likely to be issued in the summer. If Microsoft were to lose the case, i4i would finally be able to collect its $290-million in damages.
Microsoft removed the contested features from its software last January.