i4i Decision Will Benefit Canadian Companies with U.S. Patents

Unlikely to Have Impact on Canadian Patent Cases

The Supreme Court of the United States has released its decision in Microsoft Corp. v. i4i Limited Partnership. i4i, a Toronto company, prevailed and can now collect its record-setting $290-million judgment.

The case is of interest to Canadian business as Canadians file twice as many patent applications in the U.S. as they do in Canada. Canadians are frequent users of the U.S. Patent Office in part because the market is significantly larger and also because the process of moving a patent from an application to grant is often faster in the U.S.

To obtain patent protection, an invention must be new and not obvious. Under American law, patent protection is not available if the claimed invention was on sale in the U.S. more than one year before the filing of the patent application. This is commonly referred to as the on-sale bar.

The burden of proving invalidity rests on the person making the allegation, usually the defendant in an infringement case. Courts in the U.S. have consistently ruled that the invalidity defence must be proved by "clear and convincing evidence". The basic proposition is that the Patent Office was presumed to do its job.

i4i's patent claimed an improved method for editing computer documents. It sued Microsoft for intentional infringement, claiming that certain Microsoft Word products infringed the patent.

Microsoft argued that i4i's patent was invalid because of the on-sale bar. Specifically, Microsoft alleged that i4i sold a program known as S4 more than a year before the patent application was filed, and this invalidated the patent. The source code for the S4 software was destroyed years before the commencement of the litigation. There was a factual dispute as to exactly what was in that software.

Microsoft argued at trial and appeal that because the S4 software was not considered by the patent examiner, the clear and convincing standard should not be applied. It would be unfair to presume that the examiner did a thorough job when an important piece of the puzzle was missing. The Supreme Court ruled that the clear and convincing standard applied, even for prior art that was not considered by the examiner; the standard of proof does not rise and fall according to the facts of the case.

This is not to say that the argument cannot be presented to the jury in future cases. The Supreme Court noted that a jury may be instructed to consider that the Patent Office did not have the opportunity to evaluate certain evidence before granting the patent. A jury may be asked to consider whether the evidence is materially new and, if so, to consider whether an invalidity defence has been proved by clear and convincing evidence. In this case, Microsoft did not ask for such a charge to the jury at the initial trial. Having not raised this in the first instance, the Supreme Court found it was too late to now say that such a charge should have been given. It is expected that such instructions to a jury will address concerns raised by Microsoft and its supporters that innovation will be dampened by insulating undeserving patents from robust invalidity challenges.

While this decision will certainly benefit Canadian companies that own U.S. patents, it is unlikely to have an impact on how Canadian courts decide patent cases. The clear and convincing standard has never been applied in Canadian patent law. Moreover, Canadian courts give limited consideration to what happened in the Patent Office during the prosecution of a patent.