Last updated: June 10, 2011 6:21 am

Microsoft loses Supreme Court patent appeal

Microsoft has lost a high-profile appeal to the US Supreme Court that will force it to pay $290m in damages and could tilt the balance in other patent cases against deep-pocketed defendants.

The country’s top court upheld lower court decisions that Microsoft’s widely used Word software had contravened a patent held by I4i, a small Canadian software company.

The case had become the lightning rod in the US for the issue of whether rich companies were being held hostage by opportunistic “patent trolls”, who are accused of using a lax patent system to extract large payments.

By deciding against Microsoft, the Supreme Court has rejected an attempt to extend the defences that companies could use to protect themselves against attack, according to patent experts.

“I’m sure the [trolls] are rejoicing and the defence bar are scratching their heads,” said Paul Devinsky, a senior partner at McDermott Will & Emery, a law firm in Washington.

Microsoft had argued that the level of proof usually required to overturn a patent in the US was too high and that it should only need to meet a lower standard in order to have I4i’s patent thrown out.

Compared with the “clear and convincing” evidence that US courts usually require, Microsoft argued for a standard of proof under which it would only have needed to show that a “preponderance” of the evidence was in its favour.

The lower standard would have left defendants in patent suits needing to show that more than 50 per cent of the evidence supported their cases, compared to the 70-80 per cent requirement under the “clear and convincing” test, said Mr Devinsky.

Justice Sonia Sotomayor, explaining the court’s unanimous decision, said that only Congress could overturn the current standard.

In a statement, Microsoft said: “While the outcome is not what we had hoped for, we will continue to advocate for changes to the law that will prevent abuse of the patent system and protect inventors who hold patents representing true innovation.”

Microsoft’s legal setback removed a hope that an earlier Supreme Court case could be turned to their advantage by other defendants. In the earlier decision, KSR v Teleflex, the court had appeared to suggest that a lower standard of proof should be accepted in some cases. In the latest decision, however, the court explicitly rejected that view.

“This case raised an important issue of law which the Supreme Court itself had questioned in an earlier decision and which we believed needed resolution,” Micrsosoft said.

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