Thursday, December 24, 2009

Microsoft smoked at CAFC in i4i/Word case

A news report states:

Microsoft Corp., the world's biggest software maker, must alter its popular
Word software or stop selling the product after it lost an appeal of a $200 million
patent-infringement verdict.

The conclusion of the CAFC's decision in the Microsoft/i4i case states:

The district court’s claim construction is affirmed, as are the jury’s findings of
infringement and validity. The district court did not abuse its discretion in admitting i4i’s
evidence as to damages or in granting enhanced damages. Finally, we affirm the entry
of the permanent injunction as modified herein.

Microsoft's lawyers did not do well.

As to anticipation, the CAFC stated:

Microsoft’s contention regarding a prima facie case and i4i’s “rebuttal”
misunderstands the nature of an anticipation claim under 35 U.S.C. § 102(b).
Anticipation is an affirmative defense. See, e.g., Electro Med. Sys., S.A. v. Cooper Life
Scis., Inc., 34 F.3d 1048, 1052 (Fed. Cir. 1994). We do not agree that i4i was required
to come forward with corroboration to “rebut” Microsoft’s prima facie case of

The Finnigan case was cited by the CAFC:

To support its argument that S4 practiced the ’449 patent, Microsoft offered
testimony by a former i4i employee and its expert. i4i responded with evidence,
specifically testimony by S4’s inventors, that S4 did not practice the claimed method.
Though we require corroboration of “any witness whose testimony alone is asserted to
invalidate a patent,” Finnigan Corp. v. Int’l Trade Comm’n, 180 F.3d 1354, 1369-70
(Fed. Cir. 1999) (emphasis added), here the inventor testimony was offered by i4i in
response to Microsoft’s attack on the validity of the ’449 patent. It was not offered to
meet Microsoft’s burden of proving invalidity by clear and convincing evidence. Cf.
TypeRight Keyboard Corp. v. Microsoft Corp., 374 F.3d 1151, 1159-60 (Fed. Cir. 2004);
Tex. Digital Sys., Inc. v. Telegenix, Inc., 308 F.3d 1193, 1217 (Fed. Cir. 2002); Finnigan,
180 F.3d at 1367. We know of no corroboration requirement for inventor testimony
asserted to defend against a finding of invalidity by pointing to deficiencies in the prior
art. Accordingly, we hold that corroboration was not required in this instance, where the
testimony was offered in response to a claim of anticipation and pertained to whether
the prior art practiced the claimed invention.

As to infringement:

We will uphold such a verdict if there was sufficient evidence to support any
of the plaintiff’s alternative
factual theories; we assume the jury considered all the evidence and relied upon a
factual theory for which the burden of proof was satisfied. See Northpoint Tech., 413
F.3d at 1311-12.


Microsoft’s argument fails to
distinguish between defects in legal theories and defects in the factual evidence. In this
case, the jury was instructed that it could rely on any of three legal theories—direct,
contributory, or induced infringement. All of these theories are legally valid and the
corresponding instructions on each were proper. Because the jury could not have relied
on a legally defective theory, the only remaining question is whether there was sufficient
evidence to support either of i4i’s independently sufficient legal theories, contributory
infringement or induced infringement.1 We conclude that there was.

Of evidence:

Daubert requires the district court
ensure that any scientific testimony “is not only relevant, but reliable.” Id. at 589; see
also Kumho Tire Co. v. Carmichael, 526 U.S. 137, 141-42 (1999). When the
methodology is sound, and the evidence relied upon sufficiently related to the case at
hand, disputes about the degree of relevance or accuracy (above this minimum
threshold) may go to the testimony’s weight, but not its admissibility. Knight v. Kirby
Inland Marine Inc., 482 F.3d 347, 351 (5th Cir. 2007); Moore v. Ashland Chem. Inc., 151
F.3d 269, 276 (5th Cir. 1998) (en banc).

The CAFC cited Georgia-Pacific:

To support his royalty calculation, Wagner adjusted the baseline royalty rate of
($96) using the factors set out in Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F.
Supp. 1116, 1120 (S.D.N.Y. 1970)3


At their heart, however, Microsoft’s disagreements are with
Wagner’s conclusions, not his methodology. Daubert and Rule 702 are safeguards
against unreliable or irrelevant opinions, not guarantees of correctness. We have
consistently upheld experts’ use of a hypothetical negotiation and Georgia-Pacific
factors for estimating a reasonable royalty.


In making sales, Wagner
explained that Microsoft’s biggest competitor is always itself: Microsoft has to convince
consumers to purchase new versions of its products, even if they already have a
“perfectly good” copy of an older version. To incentivize users to upgrade, Wagner
testified that Microsoft included new features at no additional cost, making it difficult to
value the new features.


The existence of other facts, however, does not mean that the facts used
failed to meet the minimum standards of relevance or reliability. See Fed. R. Evid. 702
advisory committee’s note. Under Rule 702, the question is whether the expert relied
on facts sufficiently related to the disputed issue.


As the Supreme Court explained in Daubert, “[v]igorous cross-examination,
presentation of contrary evidence, and careful instruction on the burden of proof are the
traditional and appropriate means of attacking shaky but admissible evidence.” 509
U.S. at 596. Microsoft had these opportunities, and ably availed itself of them.
Microsoft presented expert testimony and attacked the benchmark, survey, and
calculation’s reasonableness on cross-examination. Cf. Micro Chem., 317 F.3d at

As to the injunction against Microsoft concerning Word:

The scope of this injunction is narrow, however. It applies only to users who
purchase or license Word after the date the injunction takes effect. Users who
purchase or license Word before the injunction’s effective date may continue using
Word’s custom XML editor, and receiving technical support.


While we conclude that the injunction’s effective date should have been five
months, rather than sixty days, from the date of its August 11, 2009 order, we affirm the
district court’s issuance of a permanent injunction and otherwise affirm the injunction’s
scope. Below, we address each factor in turn.


Accordingly, we modify the injunction’s effective date from “60 days from the date of this
order” to “5 months from the date of this order.” Cf. Canadian Lumber Trade Alliance v.
United States, 517 F.3d 1319, 1339 n.22 & 1344 (Fed. Cir. 2008) (modifying an
injunction’s terms on appeal); Forest Labs., Inc. v. Ivax Pharms., Inc., 501 F.3d 1263,
1271-72 (Fed. Cir. 2007) (modifying an injunction’s terms on appeal). The injunction’s
effective date is now January 11, 2010.

See also

Questionable news coverage of i4i and Microsoft

The Washington Post noted:

But there also seems to be solid evidence that Microsoft knew about i4i's work before adding these features to Word.


So here's the upshot: Microsoft spends some time and money removing a feature most people don't use but doesn't have to stop selling its product, i4i gets a moment in the headlines and a decent payday, patent lawyers rack up billable hours, and most consumers never notice the difference.


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