i4i L.P. v. Microsoft Corp.: Mum’s the Word for Microsoft’s XML Functionality

i4i L.P. v. Microsoft Corp., No. 6:07CV113 (E.D. Texas Aug. 18, 2009). Final Judgment and Injunction

On August 11, 2009, Judge Davis of the Eastern District of Texas entered final judgment awarding i4i L.P., a Canadian company, approximately $290 million in damages and interest for Microsoft’s willful infringement of i4i’s XML patent. The court also issued a permanent injunction ordering Microsoft to stop selling Word 2003 and 2007 within 60 days unless the infringing functionality has been removed.

Commentators have weighed in on the impact of the injunction and the award. Ars Technica summarizes the order and the background of the case, Patently-O summarizes the injunction, and Peter Zura summarizes Judge Davis' opinion. ZDNet and ArnNet both argue that the injunction is ultimately unlikely to stop sales of Word.

U.S. Patent No. 5,787,449 (“’449 patent”) uses a “metacode map” to process and store the content of a text document separately from the metacode “architecture” of the document. Using this metacode map, a word processor program can manipulate the document structure independently of the document’s content. On May 11, 2009, a jury found that the ’449 patent was valid and infringed by Microsoft’s Word 2003 and 2007 programs, and awarded $200 million in damages. The jury also found that this infringement was willful, leading Judge Davis to add an additional $40 million penalty to the damages verdict. The Judge also added almost $12 million in post-verdict damages, $39 million in pre-judgment interest, and an injunction preventing Microsoft from selling any version of Word containing the infringing XML functionality.

Microsoft had moved for judgment as a matter of law (JMOL) to overturn the jury verdict, or in the alternative, for a new trial. They requested JMOL on the issues of direct infringement, indirect infringement, the willfulness of the infringement, and the validity of the ’449 patent. Because he found that there was a legally sufficient basis for a reasonable jury to find as they did, Judge Davis denied each motion.

Judge Davis rejected Microsoft’s proposed standard for willful infringement because it could be met “if and only if a defendant failed to present valid defenses during the infringement proceedings.” In essence, Microsoft was arguing that their presentation of a colorable defense to infringement, Judge Davis’ ultimate invalidation of some of i4i’s claims, and the necessity of obtaining a jury verdict to determine whether infringement was actually taking place, all indicate that they couldn’t have willfully infringed because they had a reasonable belief that they could obtain a favorable verdict. Judge Davis dismissed this argument because willful infringement is determined by under a different standard, whether “a reasonable person would [or should] have appreciated a high likelihood that acting would infringe a valid patent.”

Although the finding of willful infringement authorized Judge Davis to treble the damages award, the amount of punitive damages awarded depended in part by the judge’s opinion of how strong the evidence of willfulness is. Judge Davis pointed out that Microsoft was fully aware of the ’449 patent, made no investigation as to whether they were infringing the patent or not, and did so with the bold intention to “move competitors’ XML product to obsolescence.”

Judge Davis also justified the willfulness penalty because Microsoft’s attorneys repeatedly tried to malign i4i by comparing them to bankers receiving a government bailout. As Judge Davis explained, because these arguments were “persistent, legally improper, and in direct violation of the Court’s instructions,” Microsoft’s trial misconduct also support enhancement. Despite the strong case, Judge Davis chose to enhance the damages to a total of only $240 million of the maximum allowable $600 million, and did not award attorney’s fees.

Although Judge Davis’ order and injunction are unlikely to stop Microsoft’s sales of Word and may not even prevent them from using XML functionalities not covered by the ’449 patent, perhaps it will cause Microsoft to think twice before targeting patent-protected applications for their huge-market-share-induced obsolescence.