I4i Limited v. Microsoft Corporation (JWB)

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The Case

  • I4I Limited Partnership, Plaintiffs-Appellees, v. Microsoft Corp., Defendant-Appellant
  • i4i owned patent for editing custom XML, brought suit against Microsoft, alleging custom XML editor in certain versions of Word infringed
  • Jury found Microsoft liable for willful infringement, awarded $200 million in damages to i4i
  • District Court denied Microsoft’s motions for judgment as a matter of law and motions for new trial (found right to challenge validity of patent had been waived)
    • District Court only awarded $40 million in damages, granted permanent injunction (Microsoft can’t continue to sell)
  • On appeal, Microsoft challenges jury verdict and injunction
  • CAFC affirms permanent injunction, modify its effective date

Background

  • a tag indicating that “717 Madison Pl. NW” is an address might appear as <address>717 Madison Pl. NW</address> where “address” is the tag's name and “<” and “>” are the delimiters
  • Custom XML, the ‘449 patent applied for in 1994, allows users to create and define their own tags
    • defines “metacode” as “an individual instruction which controls the interpretation of the content of the data.”
  • “Separate storage of a document's structure and content was an improvement over prior technology in several respects. Importantly, it has allowed users to work solely on a document's content or its structure”

  • i4i alleged that Microsoft infringed claims 14, 18, 20, by making, using, selling Word products capable of processing/editing custom XML

Ruling

  • (1) Microsoft challeneged DC’s construction of claim term ‘distinct’, (2) challenges jury’s validity finding, (3) argues jury’s infringement finding must be set aside because it was unsupported, (4) challenges damages award, (5) challenges issuance of permanent injunction

Construction of Claim

  • the term “distinct” is used to describe how the metacode map and the mapped content are stored (“distinct storage means”)
  • Microsoft argued this implied that (1) metacode and content were stored in separate files, not just separate portions of computer memory; (2) both can be edited independently
    • district court rejected both of Microsoft's proposed limitations
  • 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
  • “independent manipulation” is a benefit of separate storage, but not itself a limitation
    • the specification refers to “separate,” rather than “independent,” manipulation of the document's architecture and content
    • If they had meant independent manipulation, they would have claimed it as such

Validity

  • Questions of non-obviousness, that it was a combination of Rita/DeRose with Kugimiya, are all matters of fact
  • CAFC must rule in favor of jury’s verdict for matters of fact (JMOL) – rule in favor of i4i
  • Microsoft argued that S4 software anticipated ‘449 patent
    • S4 was destroyed after project with SEMI was completed, so only inventor’s testimony could be evidence
    • Microsoft said this was insufficient evidence for rule of validity
  • Burden of proof for anticipation is not on i4i, it’s on Microsoft
  • Conclude that there was sufficient evidence for a reasonable jury to find that it was not anticipated

Infringement

  • When instructing jury, words “component” was used rather than “material or apparatus”, which is what should be used according to statutory section 271
    • Microsoft argues this gives them right to re-trial
  • The difference would likely not have affected outcome, as jury probably would not have noticed difference (terms were used interchangeably throughout trial) – the jury was properly instructed
  • Microsoft argues that the general verdict must be set aside unless both of i4i's alternative legal theories, contributory infringement and induced infringement, are supported by substantial evidence.
    • We disagree: the verdict must be upheld if substantial evidence supports either legal theory.
  • the jury could have reasonably concluded that the custom XML editor had no substantial, noninfringing uses and that Microsoft knew that the use of the custom XML editor would infringe i4i's patent

Damages

  • i4i expert Wagner arrived at $98 royalty rate, times the 2.1 million Word products used in infringing manner = $200 million
  • Microsoft's disagreements are with Wagner's conclusions, not his methodology
  • the facts were drawn from internal Microsoft documents, publicly available information about other custom XML editing software, and a survey designed to estimate the amount of infringing use
  • the district court did not abuse its discretion in admitting Wagner’s expert testimony on damages
  • 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

Willfulness

  • Whether infringement was willful is a question of fact – submitted to the jury, which answered in the affirmative
  • Appellate review can only determine if the verdict is supported by substantial evidence
  • “Infringement is willful when the infringer was aware of the asserted patent, but nonetheless “acted despite an objectively high likelihood that its actions constituted infringement of a valid patent.””

  • A reasonable jury could have concluded that Microsoft “willfully” infringed the ′ 449 patent based on the evidence presented at trial

Permanent Injunction

  • While we conclude that the injunction's effective date should have been five months, rather than sixty days, from the date of its August 11, 2009 order, we affirm the district court's issuance of a permanent injunction and otherwise affirm the injunction's scope
  • i4i lost a market share due to Microsoft’s infringement, became obsolete
  • district court found that “Microsoft ha[d] presented evidence that it may take five months to implement any injunction.”


Class Notes

  • XML allows user to edit tags (<address><office><zipcode></zipcode></office></address>, etc)
  • i4i owned patent and won in the trial against Microsoft
  • patent allowed user to work on both XML and content separately

U.S. Code

  • Section 271 – Infringement of patent
    • liable for infringement if makes, uses, offers to sell, or sells any patented invention
    • actively inducing infringement of a patent shall be liable as an infringer
    • if the only way to use a device would be to infringe on a patent, must have knowledge that the use would be infringing
  • Section 284 – Damages
    • can get a reasonable royalty or compensation for losses
    • can increase up to three-fold for circumstances such as willfulness
  • Section 283 – Injunction
    • principle of equity to prevent violation of any right secured by patent
    • example from criminal law: restraining order