Wednesday, December 23, 2009

i4i v. Microsoft

This case involved an invention for editing custom XML, a markup language, in which the “improvement stems from storing a document’s content and metacodes separately.” The jury found claims infringed and not invalid and awarded $200 million. The district court added $40 million in enhanced damages plus a permanent injunction going forward. Below are excerpts concerning some of issues considered.

Claim Construction

“Because the claims themselves do not use the word ‘file’ and the specification discloses embodiments where the storage format is not a file, we conclude that ‘distinct’ does not require storage in separate files.” “In evaluating whether a patentee has disavowed claim scope, context matters.” “The statements Microsoft now plucks from the prosecution history do not ‘clear[ly] and unmistakabl[y] disavow’ storage means that are not files.” (p. 9.)

“[N]ot every benefit flowing from an invention is a claim limitation.” (p. 10)

Permissive Language Alert. “The specification’s permissive language, ‘could be edited,’ ‘can be created,’ and ‘ability to work,’ does not clearly disclaim systems lacking these benefits.” (p. 11.) As such, there were “no statements that unequivocally narrow the claims.” (p. 11.)

Review of Obviousness Limited Without a JMOL. “The extent to which we may review the jury’s implicit factual findings depends on whether a pre-verdict JMOL was filed on obviousness. In this case, Microsoft has waived its right to challenge the factual findings underlying the jury’s implicit obviousness verdict because it did not file a pre-verdict JMOL on obviousness for [certain prior art] references. … [A] party must file a pre-verdict JMOL motion on all theories, and with respect to all prior art references, that it wishes to challenge with a post-verdict JMOL. Microsoft’s pre-verdict JMOL on anticipation … was insufficient to preserve its right to post-verdict JMOL on a different theory (obviousness), or on different prior art …. Accordingly, we do not consider whether the evidence presented at trial was legally sufficient to support the jury’s verdict. Our review is limited to determining whether the district court’s legal conclusion of nonobviousness was correct, based on the presumed factual findings.” (p. 14.)

Corroboration. “[W]e 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.” (p. 18.) The court was distinguishing the corroboration requirement that applies when “any witness whose testimony alone is asserted to invalidate a patent.” (p. 18.)

Contributory Infringement. “In assessing whether an asserted noninfringing use was ‘substantial,’ the jury was allowed to consider not only the use’s frequency, but also the use’s practicality, the invention’s intended purpose, and the intended market.” (p. 25.)

Damages: Review Limited Because Microsoft Did Not File Pre-Verdict JMOL. “Although Microsoft now objects to the size of the damages award, we cannot reach that question because Microsoft did not file a pre-verdict JMOL on damages.” (p. 36.) The court would not consider whether the damages award was excessive because “Microsoft waived its ability to have us decide that question by failing to file a pre-verdict JMOL on damages. Fed. R. Civ. P. 50(a), (b).” (p. 36-37.) “Instead of the more searching review permitted under Rule 50(b), we are constrained to review the verdict under the much narrower standard applied to denials of new trial motions. This standard is highly deferential: we may set aside a damages award and remand for a new trial only upon a clear showing of excessiveness. To be excessive, the award must exceed the maximum amount calculable from the evidence.” (p. 37.) Since it didn’t, the award was affirmed, though the court suggested it might have reached a different result under the other standard of review, sufficiency of the evidence.

Permanent Injunction

Past Harm Is Relevant to Irreparable Harm. “Although injunctions are tools for prospective relief designed to alleviate future harm, by its terms the first eBay factor looks, in part, at what has already occurred.” (p. 43)

Remedies at Law. “Difficulty in estimating monetary damages is evidence that remedies at law are inadequate.” (p. 44.) Microsoft took a large percent of the market and i4i had to change its business model.

Public Interest Satisfied by Narrow Scope. “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.” (p. 42.) “The injunction’s narrow scope substantially mitigates the negative effects on the public, practically and economically. By excluding users who purchased or licensed infringing Word products before the injunction’s effective date, the injunction greatly minimizes adverse effects on the public.” (p. 45.)

Date Injunction Begins. The court changed the effective date of the injunction based on the evidence presented to the district court. But since this change was applied to the district court’s order, the end result is that the injunction will take effect in a few weeks of this decision.