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Patents are thought of by some as hardware focused and used by the big guys to intimidate with petty lawsuits. In reality, of course, patents are used for much more. They are used to help secure financing, attract M&A interest, create partnerships, and more. From 2007 to 2011, a particularly interesting patent lawsuit took place that showcases just how strategic patents can be. i4i Limited, a Canadian company, sued Microsoft over a patent it owned relating to custom XML encoding, which Microsoft used in Word. In the end, Microsoft lost and had to pay $200 million in damages and was nearly restricted from selling Word over a feature used by almost none of its users. It is a fascinating tale of how software patents used to work, especially as they are coming back into vogue.
XML stands for eXtensible Markup Language. As the name suggests, it is a computer programming markup language, which means that it defines a set of rules for encoding documents that is readable both by machines and humans. The primary benefit of XML is that is organizes information and metadata between disparate systems. As one might imagine, using XML well requires the creation of a custom XML schema for a particular use case. So Microsoft, which produces the world’s most popular word processor, built a custom XML tool into its word processor in 2007 after hinting in that direction since 2003. That said, this was a tool for power users, and was only used by a small percentage of its user base.
Unfortunately for Microsoft, a small company called i4i Limited had filed for patent 5,787,449, which specifically covered a method claim for using custom XML for word processing.
From there, Microsoft went on a harrowing path to rid itself of the ‘449 patent almost immediately. First, Microsoft tried to invalidate the patent by filing for re-examination of the patent in an ex parte proceeding with USPTO, citing prior art as invalidating the patent under novelty grounds. In 2010, USPTO rejected Microsoft’s attempt on all claims, and Microsoft responded by appealing to the Commissioner, twice, both of which failed. At the same time, i4i sued Microsoft in the Eastern District of Texas, which is among the most pro-patent courts in the country, and won a $240 million judgment against Microsoft in 2009 in a jury trial. Microsoft played hard ball during the case—in fact, $40 million of that judgment was imposed by the court as punishment for continually arguing that i4i was a patent troll in a manner that was “persistent, legally improper, and in direct violation of the Court’s instructions” even though i4i had a (niche) operating business. Ironically, Microsoft had just been granted a patent for processing XML files in documents. More powerfully, i4i won an injunction against Microsoft, the first-ever injunction ever sustained against the Word product, which was upheld on appeal at the Federal Circuit and even the Supreme Court. Ultimately, i4i was paid $200 million and Microsoft removed custom XML from Word. To this day, Word does not support this feature, even though the ‘449 patent is expired. At the time, software was primarily sold on discs; overnight, each of those copies became illegal.
The legacy of the i4i case is complex. At the time, many commentators observed that this was not the case of a patent troll: i4i sold real XML solutions to pharmaceutical companies and Microsoft had a reputation for being aggressive with intellectual property. That said, had Microsoft and i4i come to blows in 2017 rather than 2007, perhaps it might have been different. The ‘449 patent reads much like the type of abstract software patents that were struck down in the classic case Alice Corp. v. CLS Bank International (2014), which held that many types of software patents were abstract ideas and unpatentable subject matter. This case was also took place before the America Invents Act of 2011. The original remedy—an injunction against selling Microsoft Word over a feature used by a tiny minority of users unless the product was modified within 60 days—was viewed as extreme and held up as an example of the need for patent reform. As Congress considers the Patent Eligibility Restoration Act, it should remember what these types of lawsuits were like, given that it would make cases like i4i v. Microsoft more common.
Gripping Gazette entries
US 11767041 B2: A digital method of controlling railroads from BNSF
US 2023/0315152 A1: A patent application from Microsoft for hot-swappable batteries for AR glasses
US 20230315201 A1: The patent application for Apple’s groundbreaking Vision Pro eye-tracking technology
Latter-day litigation
Google LLC v. Sonos Inc., N.D. Cal., No. 20-cv-06754, 10/6/23: In a shocking turn of events, Judge William Alsup invalidated several Sonos patents in its ongoing patent battle against Google; Sonos vowed to appeal while Google called for patent reform
Schwendimann v. Neenah, Inc. No. 2022-1333 (Fed. Cir. Oct. 6, 2023): The Federal Circuit upheld multiple IPRs
IPR2022-00449 – Guardant Health Inc v. University Of Washington et al.: Guardant Health, a leading liquid biopsy company, failed to invalidate multiple patents
Eventful expirations
US 7468363 B2: A key patent for Celgene’s REVLIMID, a drug with a controversial patent thicket that was covered by NPR
US 6629324 B1: A therapeutic pillow to relieve stress on the ears, while most focus on the neck
US 6629337 B2: A special door hinge meant for cars to open their doors more than 90 degrees
Notable news items
CareDx v. Natera, a contentious 101 case, had cert rejected by the Supreme Court (SCOTUS Blog)
The number of 5G wireless patents is skyrocketing, with Huawei leading the way (Light Reading)
The European Union is considering an overhaul of essential patents rules (Law360)
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