Appellate Court Enforces Permanent Injunction against Microsoft Word

By Dennis Crouch

i4i Limited Partnership v. Microsoft Corp. (Fed. Cir. 2009) (Judges Schall, Prost, & Moore; opinion by Judge Prost)

The i4i district court decision created some turmoil this past summer when the Eastern District of Texas court ordered Microsoft to stop selling versions of its flagship MS Word product that infringe i4i’s patent covering xml editing technology. The injunction was stayed pending appeal, but now the Court of Appeals for the Federal Circuit (CAFC) has affirmed the lower court’s findings of validity and willful infringement and its award of enhanced damages and permanent injunctive relief. The only modification made by the court was to push-back the effective date of the injunction from sixty-days to five months (from the original order). Thus, “[t]he injunction’s effective date is now January 11, 2010.”

To be clear, the permanent injunction “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.” Beginning January 11, 2010, Microsoft will be prohibited from “(1) selling, offering to sell, and/or importing into the United States any infringing Word products with the capability of opening XML files containing custom XML; (2) using Word to open an XML file containing custom XML; (3) instructing or encouraging anyone to use Word to open an XML containing custom XML; (4) providing support or assistance that describes how to use Word to open an XML file containing custom XML; and (5) testing, demonstrating, or marketing Word’s ability to open an XML file containing custom XML.”

Because the injunction only applies to future purchasers, Microsoft does not need to back-fix its already-distributed software. Rather, it only needs to ensure that software sold on or after January 11, 2010 is non-infringing. Microsoft may request another emergency stay of relief in order to seek en banc review of the decision. However, that process has a low likelihood of success. Because of the large damage award of $240 million, Microsoft will likely push-forward with requests for rehearing en banc and eventually a petition for a writ of certiorari to the U.S. Supreme Court.

Judging Injunctive Relief: A patentee seeking a permanent injunction must show that (1) it has suffered an irreparable injury due to the infringement; (2) remedies available at law (typically monetary damages) are inadequate to compensate for that injury; (3) considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) the public interest would not be “disserved” by a permanent injunction. eBay, 547 U.S. at 391. Here the irreparable harm was proven by “evidence that Microsoft’s infringement rendered i4i’s product obsolete for much of the custom XML market, causing i4i to lose market share and change its business strategy to survive.” Monetary damages were inadequate because “a loss of market share, brand recognition, and customer goodwill” typically defy valuation “particularly when the infringing acts significantly change the relevant market, as occurred here.” The balance of the hardships favor i4i because the patented technology is “central” to i4i’s business, but only a small factor in Microsoft’s business. Here, the court held that the “cost of redesigning the infringing products” is irrelevant to the hardship consideration. “Microsoft is not entitled to continue infringing simply because it successfully exploited its infringement.” Likewise, the public interest favors upholding patent rights especially here where the injunction is of a “narrow scope.” “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.”

Notes:

38 thoughts on “Appellate Court Enforces Permanent Injunction against Microsoft Word

  1. MaxDrei,

    Please keep in mind the human element – high minded ideals of legal and procedural order, efficiency and predictability will always take a back seat to the quirks of human nature.

    I believe this falls under Murphy’s law 352(a)(6).

  2. Why on earth? For reasons (I had thought) of legal and procedural order, efficiency and predictability.

    If obviousness is a legal judgment based on underlying facts, then the appeal instance ought not to be re-deciding those facts.

    The appeal court can’t observe the demeanour of the key witnesses, as they undergo cross-examn. So, on fact-finding, the appeal instance is at a disadvantage, relative to the jury. Why then shouldn’t it be a good move, to cut back on the amount of de novo fact-finding at the CAFC?

  3. (H)I-Max

    One thing I need help with: when is it “lasses” and when is it “lassies?”

    Some of us senile-status folks of American-origin grew up with a 1950′s TV show called “Lassie”, about a really smart but terminally constipated dog that they never once had to clean up after in years of weekly episodes. So, we are totally confused as to the proper use of this UK term.

    Is not “lass” the singular? But “lassie” sounds singular, too. If we could sort that out, lasses viz-a-viz lassies should be a cakewalk.

    Do you have any reliable UK-speaking colleagues of whom you could make a discrete inquiry?

  4. “We’re agreed. All this de novo” stuff really has to stop”,…”

    Why on earth would this ever happen? That would be like asking MaxDrie to stop commenting on the US patent system.

  5. Thanks Babel. All that stuff about eggs is entertaining. I suppose it is because people so often end up with egg on their faces.

    Do they have strategy meetings at CAFC level. I’m thinking that if they were to convene a meeting at which they agree something like:

    “Right then, lads and lasses. We’re agreed. All this de novo” stuff really has to stop”,

    and the I4I case is next up for decision, then is it any wonder…..?

  6. Max, I’m always being ironic, but not in this instance. You’ll have to ask the MS suits, maybe on their lunch break at T.J. Maxx, why they did and didn’t do a lot of what they did and didn’t do.

    They also did not challenge the evidence for obviousness with a pre-judgment JMOL, so the panel essentially rubber-stamped the not-invalid-for-obviousness verdict.

    First time I’ve ever seen a CAFC panel bothered by a little thing like following the rules of procedure when it comes to making a call on obviousness. They usually flush the jury verdict and make the determination de novo.

    I hear what you’re saying about the anti-Goliath bias; that D/G dynamic had to play a big part. For instance, the Court allowed i4i’s royalties at $98 per unit, which seems to me to be breathtaking for s/w that only edits XML code packaged in WORD that you can buy retail for $150. And the Court apparently glossed over David’s (i4i) mendacity on the stand. So I think Goliath’s boorish behavior cost him a hunk of change in addition to a well-placed rock in the head.

    I don’t understand why, if one is entitled to $98 out of every copy of WORD sold, one would want a permanent injunction. Talk about killing the goose that lays the golden egg . . .

    As to the patent validity question raised by Mr. Jones, my point is that at this point in the game, when you have just scored a $240 million verdict on your patent, validity is no longer determined by Section 35 of the USC. Any patent that makes you money is per se valid.

    However, those with more wisdom and litigation experience than I have will point out that you shouldn’t count your fat ladies before their eggs have sung, or something. A lot of legal fees will be generated before this baby is put to sleep. So the value of the judgment is dropping all the time and the chance of the USSCt stepping on the golden eggs laid by the goose after the fat lady sings looms.

    Sorry about the runaway egg metaphors. I’ve got goose-egg on the mind for some reason.

  7. The force of the contribution from Carl Hilton Jones is somewhat weakened by his inability to spell “intelligent”. But nevertheless, Babel Boy, when an issued claim (arguably obvious)comes under validity attacks, how much enhanced are its chances of surviving those obviousness attacks when:

    a) it is technology a judge and jury can’t understand

    b) it has survived rigorous examination of patentability by the specialists at the PTO

    c) it is asserted by David, against Goliath

    d) the fresh evidence, that the PTO had not seen, of what was already within the state of the art, is what witnesses assert happened, long years earlier

    e) there is no sign of David having conducted himself inequitably, but

    f) there is evidence that Goliath infringed willfully.

    You see what I’m suggesting: that when patents are litigated like this, it is quite likely that a claim can survive, a claim that for the PHOSITA (like Mr Jones, perhaps) contains matter that would have been 100% obvious to him/her.

    I understand that re-exam is increasingly favoured. Seems logical to me. Opponents at the EPO are also enjoying better chances, these days, to get duly issued claims duly revoked.

    PS Why is it odd that MS did not appeal the factual basis for enhanced damages. Looks pragmatic to me. Or are you being ironic?

  8. Carl Hilton Jones said:
    “The ruling seems quite correct, except for the FACT that the i4i patent is clearly invalid and no honest, reasonable, and intellegent [sic] person could possibly claim otherwise.”

    i4i just whacked down $240 million on this “invalid” patent. It passed examination, Markman, jury trial, JMOL, and a CAFC that included Moore. How valid can a patent get? What are you looking for, a Moonbeams endorsement of a s/w method?

    Paul F. Morgan said:
    “Whether “240 million is a lot” or not depends on whether it is a lot or not for i4i, the injured party, not the overall size or the overall revenues of the defendant, which is irrelevant.”

    You are correct only so far as the $200 million economic damages goes. The $40 enhanced damages is based in part on the size of the infringer. In addition to the Bott factors the court looks at size of the D, misconduct during litigation, etc. So the enhanced damages are virtually samey-same as punitives, including ability to pay.

    Oddly, MS’ suits did not appeal the factual basis for enhanced damages.

    Would love to know who MS trial counsel were and where they’re working now. T.J. Maxx or Targets, likely.

    Also, did Finnegan represent i4i at trial? Their suits, whoever they were, did a fine job.

    Posted by: Babel Boy | Dec 27, 2009 at 04:40 PM

  9. I must admit, I was (pleasantly) surprised by this:

    “It was proper for the district court to consider evidence of past harm to i4i. Past harm to a patentee’s market share, revenues, and brand recognition is relevant for determining whether the patentee “has suffered an irreparable injury.” Id. at 391 (emphasis added); see, e.g., Acumed, 551 F.3d at 1328-29 (considering the relevance of past licensing decisions in assessing irreparable injury); Voda v. Cordis Corp., 536 F.3d 1311, 1329 (Fed. Cir. 2008) (concluding that the patentee “had not identified any irreparable injury to himself”); Innogenetics, N.V. v. Abbott Labs., 512 F.3d 1363, 1379-80 (Fed. Cir. 2008) (analyzing whether the patentee “had been irreparably harmed”). 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. Considering past harm to a patentee does not establish a “general rule” or rely on the sort of “broad classifications” rejected by the Supreme Court in eBay; not all patentees will be able to show injury, and even those who do must still satisfy the other three factors. Cf. eBay, 547 U.S. at 393-94.”

    I had, mistakenly it seems, assumed that MS would be successful in its argument that once they destroyed a competitor such that they are NO LONGER in the market, they don’t need an injuction.

    This portion of the opinion was completely unexpected.

  10. Paul,

    Hopefully, But in my opinion, you can never remove enough “steam” from S.515/H.R. 1260, given who’s pumping it in!

  11. “What was the Republican plan? Oh right: do nothing because what’s good for insurance companies is good for America. And Obama wants to kill your grandma.”

    Took the bait (hook, line and sinker) eh, MM?

  12. Re: “Between this decision and the one in Lucent Technologies, you’re definitely correct in your point. Maybe these two cases will take some “steam” out of the damages provision currently in S. 515/H.R. 1260.”
    Hopefully yes, thanks, but was not most of the “steam” already removed from patent reform damages legislation by the Senate Judiciary Committee compromise that would merely require judges to pay more attention to legally proper jury instructions and testimony, as in this case?

  13. But then again, may be not for a Congress that is intent on passing a health care bill that’s a 2000+ page monstronsity that no one understands, is rife with “vote buyout” provisions, and is opposed by a great majority of the American public

    What was the Republican plan? Oh right: do nothing because what’s good for insurance companies is good for America. And Obama wants to kill your grandma.

  14. “Seemed to me they only said the analysis would be different in that they could look at the facts, but I didn’t see anything saying that the outcome would be different.”

    NightWriter,
    Yes, but doesn’t Prost admit that the damages are high on pg. 37? If they had the opportunity to review the findings that went into the damages calcuation, there is no way i4i ends up with 240 million.

  15. “This CAFC decision provides an unusually thorough review of the infringement damages calculations and its supporting trial evidence.”

    Paul,

    Between this decision and the one in Lucent Technologies, you’re definitely correct in your point. May be these two cases will take some “steam” out of the damages provision currently in S. 515/H.R. 1260. But then again, may be not for a Congress that is intent on passing a health care bill that’s a 2000+ page monstronsity that no one understands, is rife with “vote buyout” provisions, and is opposed by a great majority of the American public

  16. Whether “240 million is a lot” or not depends on whether it is a lot or not for i4i, the injured party, not the overall size or the overall revenues of the defendant, which is irrelevant. [Otherwise why not just sue the Government?] The “pick the deep pockets” theory may be one way some lawyers pick whom to sue first, but it is not a basis for damage recovery. This CAFC decision provides an unusually thorough review of the infringement damages calculations and its supporting trial evidence.

  17. caju By implication you agree i4i has a worthy patent.

    Apparently this poor fellow is incapable of reading more than one sentence of a several-sentence comment.

  18. That’s a catchy web site, Dennis (Kearns). But what on earth is it for? Also, you might want to know that clicking the HOME button takes you to a dead end.

  19. ” Monetary damages were inadequate because “a loss of market share, brand recognition, and customer goodwill” typically defy valuation “particularly when the infringing acts significantly change the relevant market, as occurred here.”
    “…is not entitled to continue infringing simply because it successfully exploited its infringement.”

    Apparently the Court had no interest in this type of thinking in Kearns v. Auto Industry. It might have made a better movie and a better world.

  20. MM: “But wait! I thought the eBay decision rendered patents worthless and destroyed the small inventor.”

    By implication you agree i4i has a worthy patent. Interesting, considering your past positions on 35 USC 101, 102, 103… Seems shifty to me.

  21. >>Microsoft filed a pre-verdict JMOL w/r/t/ >>damages, the outcome could have come out >>differently.

    Seemed to me they only said the analysis would be different in that they could look at the facts, but I didn’t see anything saying that the outcome would be different.

  22. Strange responses to this CAFC decision and its accurate report here by Dennis must be due to this decision clearly disproving erronious views that the Sup. Ct. eBay decision would prevent small [but real] companies from getting patent infringement injunctions as well as large damages against large companies? I.e., failure to confirm “end of the world disaster” predictions for any changes in patent law?

  23. Is it me, or does it seem like Microsoft has recourse against its counsel. The opinion makes it a big point to mention that had Microsoft filed a pre-verdict JMOL w/r/t/ damages, the outcome could have come out differently.

  24. The ruling seems quite correct, except for the FACT that the i4i patent is clearly invalid and no honest, reasonable, and intellegent person could possibly claim otherwise. However, since judges are incompetent in the mathematics of computation, we continue to get scores of irrational and logically inconsistent rulings in the area of the computer sciences.

  25. There is some troubling language in the opinion re certain things being “issues of fact.” For example, the Court says that whether certain prior art contained a “metacode map” was an issue of fact — but that is wrong. But looking at the opinion, it appears that the question was really whether the prior art, as described by certain witnesses, would properly be understood to come within the scope of the claim term “metacode map” — that is a pure issue of claim construction, and the Court should have treated it as such and nto gotten into the “issue of fact” cop-out.

    Otherwise, the opinion seemed correct both on the law and, more importantly, on what’s right (ie MS was fully aware of the technology and appeared to have copied it from the plaintiff; so it’s hard to get too worked up over them having to pay for it — as opposed to those, like RIM, who faced patents that they never heard of.)

  26. Why prevent word from doing something that notepad is able to do?

    Is this about editing XML, which is just text, or parsing XML, which is something every web browser does all the time?

    What makes word so special?

  27. Apparently, according to Mooney, tinfoil hats are in season and all the rage on his steam grate this year…

    Particularly interesting is his need to immediately comment.

  28. Anyone have any thoughts on MS’s failure to file a pre-verdict JMOL on damages? It seems like that will cost MS tens of millions of dollars.

  29. This decision has some good language in it, regarding business goodwill, development costs, business strategy, and the general public interest in patents.

    Exactly the type of ammunition that JAOI was probably hoping for…

    All to be erased on further appeal, of course.

  30. But wait! I thought the eBay decision rendered patents worthless and destroyed the small inventor.

    I guess not.

    I disagree with the court’s findings regarding validity but it appears that Microsoft made its bed early. Oh well. You go to court with the lawyers you have, as Rummy might say.

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