Joff Wild

Ralph Eckardt of 3LP Advisors has been in touch with some background and views on the Microsoft v i4i case that the US Supreme Court has agreed to hear, and which could see a reduction in the standard for invalidating a patent in the US. Unlike me, Ralph is wise enough not to make a call on what the justices will decide, but he does believe that whatever happens Microsoft will lose:

Microsoft’s argument is that the standard of evidence for invalidating a patent based on prior art that was not before the PTO should be lower (‘preponderance’) than if the PTO has already reviewed the prior art. On the specifics of the case, Microsoft has already presented this art to the Patent Office twice through re-exam requests (see here and here).

Microsoft put the key patent through re-exam and presented this art. The patent came through with all claims confirmed patentable. They then requested a second re-exam of the same patent which was denied just the other day. This latest denial is remarkable since the hurdle for granting a re-exam request is incredibly low (>95% of all re-exam requests are granted). So on the specific facts of the case, it appears MSFT has already lost. If the SC comes back and says that the lower Court should use the ‘preponderance’ standard for art that the PTO hasn’t yet considered, then the lower Court will STILL have applied the right standard and the CAFC decision will likely stand as is.

I can make no predictions about the way the Supremes will rule on this case, but with regard to the specific case, it seems to me that MSFT has already lost. However, there is certainly room for divergent opinions on that. The big issue that could make it go otherwise is the fact that re-exams (by law) can only address prior publications and patents. They cannot consider prior use or products offered for sale. Obviously all of those items can be used to invalidate a patent in the court. I haven’t studied this case in great detail, so I’m sure that MSFT and its many, highly-paid lawyers have lots of argument that they believe can tip the scales and they would disagree with my view that “MSFT has already lost”. That said, they lost at the District Court, every element of that loss was confirmed at the CAFC, they have already taken two shots at killing the patent through re-exam (although they can still appeal the rejection of the re-exam request), so I continue to believe that they are arguing long after the case has been decided.

My belief is that they are simply using the court system to delay the injunction, and create leverage in a negotiation which will ultimately result in a settlement. The cost of keeping this case going (to MSFT) is minimal compared to the cost of settlement and business interruption so they will probably run this all the way to the end unless they find common ground on a settlement before then. Remember that they appealed this very same issue to the Supreme Court in the Z4 case, but they withdrew their request for cert before it was considered because they settled the case.

Ralph also picks up on my blog about Microsoft's Novell patent purchase and what I had to say about both the price and the possibility of there having been an auction:

It would be gross negligence on the part of the broker and the management not to offer those assets to the obvious buyers like IBM and OIN. I assume that they had an opportunity to review and bid on those assets. OIN specifically is ill equipped to acquire assets in that valuation range, so it doesn’t surprise me at all that MSFT would be the highest bidder. $450M is a lot of money. There are very few companies that are willing and able to pay that kind of money for patents even if they are essential to Linux. If you have $450M in loose change in you pocket, you could have a reasonable chance of acquiring the entire Nortel portfolio, and we know that they include standard essential patents that read on LTE and WiMax which will soon cover many billions of dollars of handset and wireless service revenue. When I saw this news, my reaction was that the price was at the high end of the expected range. I would not have concluded that this was “a great bargain”, it just seems like the market price to me.