Letter from AmeriKat

An i 4 and i

Last week the AmeriKat spent five minutes standing in front of a Sainsbury's self-check out trying to identify a green oblong vegetable in her hand. She knew what it was called in her native tongue, but drew a blank to its identity in England. After a mild panic began to set in, she began to scroll through the list of options. The relief was momentous when she set her eyes upon its Latin alias. The AmeriKat and the English IPKat reader may call this vegetable 'zucchini' and 'courgette' respectively, but if you properly construe this vegetable it will always be a Cucurbita pepo.

Construction was also an issue last week in the Eastern District of Texas, but instead of vegetables (unsuprisingly) it was US Patent No 5,787,449 (the "'449 patent") that was being construed before District Judge Davis in a case brought by i4i Limited against Microsoft. The case focused on a type of structural information called "metacodes”, specifically Extensible Markup Language ("XML") used in electronic documents. The '449 patent covered a method whereby the software can process and store custom XML separately and distinctly from user-imputed content. The separation of the XML is called a "metacode map" which, according to the patent, allows a computer to manipulate the structure of a document without reference to the content entered by the user. On 8 March 2007 i4i, a small Canadian company, filed an action alleging that Microsoft willfully infringed the '449 patent in some of Microsoft's WORD 2003 products and all of WORD 2007. Microsoft countered that its WORD products did not infringe the patent and counterclaimed for invalidity of the '449 patent. After a seven day jury trial in May, the jury returned a verdict finding the patent valid and infringed and awarding i4i $200,000,000 in damages.

The judgment of US District Judge Davis of 11 August 2009 dealt with several motions brought by Microsoft and i4i; Microsoft brought motions for a new trial or motion for judgment as a matter of law regarding willful infringement, indirect infringement, non-infringement, remittitur regarding damages, invalidity of '449 and a motion to stay the injunctive relief. i4i motioned for enhanced damages and attorneys' fees, a permanent injunction and post-verdict damages.

A judgment as a matter of law may not be granted in the Fifth Circuit unless "there is no legally sufficient evidentiary basis for a reasonable jury to find as the jury did" (Hiltgen v Sumrall 1995). Microsoft submitted that no reasonable juror could have found that WORD infringed the '449 patent literally or by the doctrine of equivalents because i4i presented no evidence that the accused WORD products created "a data structure" as required by the court's construction of the claim term "metacode map". The Court had previously construed and instructed the jury that a "metacode map" in the '449 patent meant "a data structure that contains a plurality of metacodes and their addresses of use corresponding to mapped content." "Mapped content" in turn meant "the content of a document corresponding to a metacode map." A "data structure" meant "a physical or logical relationship among data elements designed to support specific data manipulation functions."

An expert for i4i stated that various elements of the WORD products constituted a single data structure because of their physical and logical interrelationships. Microsoft argued that the data structures the i4i expert found could be broken down into smaller logical "data structures". Therefore, since this breakdown into smaller data structures meant there were multiple data structures in WORD's source code, the jury could not find a single "data structure" that "contained a plurality of metacodes and their address of use". As such, Microsoft argued, the jury could not have found direct infringement.

Unfortunately for Microsoft, this definition was never brought up at trial and therefore, following Conoco Inc v Energy & Envtl, Int'l L.L.C. (2006), the Court held that Microsoft hadwaived their right to present new claim construction arguments: their motion in respect of this and infringement by the doctrine of equivalents was thus denied. This theme continued for several more of Microsoft’s motions, where they failed to raise their arguments at trial including their motion relating to indirect infringement and their claims that the '449 patent were invalid.

The AmeriKat was more interested in the motions relating to willfulness and remittitur regarding damages. To succeed in a charge of willful infringement, i4i must show that Microsoft acted with objective recklessness in that they knew or should have known that there was a high likelihood that their actions infringed a valid patent (In re Seagate Tech, LLC (2007)). In reliance of Black & Decker, Inc. v Robert Bosch Tool Corp (2008) Microsoft argued that the objective prong of the willfulness analysis is satisfied only if a defendant fails to present valid defences during the proceedings. Since Microsoft asserted defences at trial, the claim for willful infringement should be barred. However, this issue was not before the court in Black & Decker and, in any event, Black & Decker was distinguished because there the jury found that several of the claims asserted were in fact invalid. This wasn't the case here, where the size of the jury's verdict and the failure of Microsoft's invalidity arguments indicated that Microsoft's defences were so weak as to be rejected "wholesale" and therefore should not be sufficient to act as a bar to a finding of willful infringement.

The Court then said that Microsoft's arguments were "disturbing" in that they invited the Court to "adopt a view of willful infringement that would allow an accused infringer to stay willfully ignorant despite a high likelihood that its actions infringe a valid patent. Such a view would allow an infringer to escape a finding of skillfulness’ regardless of its conduct at the time the infringement began as long as it presented many defences after a formal action was filed. Such a view was inconsistent with Seagate." This motion was therefore also denied.

Microsoft's motion for judgment as a matter of law on the issue of damages and remittitur (where the jury award is unreasonable, a party can apply for a judge to lower the award) of damages centred on the argument that i4i presented inherently unreliable evidence regarding damages which should have been barred under the hearsay rule. The court held, however, that the evidence, which took the form of a survey prepared by one of i4i's experts and used in his testimony, was not governed by the hearsay rule but rather Federal Rule of Evidence 703 which provides that "

facts or data that are otherwise inadmissible shall not be disclosed to the jury by the proponent ... unless the court determines that their probative value in assisting the jury to evaluate the expert's opinion substantially outweighs their prejudicial effect".

In arguing their motion, Microsoft unfortunately relied on Schering Corp v Pfizer (1999) where, although the Court had excluded five surveys from evidence under the hearsay rule, the Court did not discuss Rule 703 save to say, damagingly for Microsoft, that it was an acceptable basis to admit survey evidence. Given that Microsoft did not present any relevant authority for their motion or evidence that supported their argument that the survey methods were unreasonable or unreliable and that none of these arguments were made by Microsoft at the time the survey and testimony were introduced, the Court denied Microsoft's motions on the issue of damages. Consequently, since the issue of damages was denied, so was Microsoft’s request for remittitur.

Things went from bad to worse when i4i's motion for enhanced damages was granted in part. Under 35 U.S.C. 284 a court has discretion to enhance damages by up to a factor of three when there is a finding of willful infringement. Problematic for Microsoft in this determination was the introduction by i4i of an internal Microsoft email from January 2003 which referred to the '449 patent and that this and i4i's technology would be made "obsolete" by the disputed WORD product containing the infringing XML functionality. This email showed that Microsoft knew of i4i's patent but conducted no investigation that could have later formed a good-faith belief of non-infringement. The final nail in the coffin for Microsoft in respect of this motion was the Court's view of the litigation conduct of Microsoft's trial counsel's who, despite the Court's warnings, "persisted in improperly trying to equate i4i's infringement case with the current national banking crisis implying that i4i was a banker seeking a "bailout" in order to appeal to "the jurors' perceived prejudices" by misstating the law. The AmeriKat's favourite portion of the proceedings was when Judge Davis asked counsel to approach the bench warning Microsoft's counsel:

"I don't want to embarrass you in front of the jury, but I would appreciate it if you would clean that up...".

The Court therefore enhanced damages against Microsoft by an additional $40,000,000 to the jury award making a total of $240,000,000 to be paid to i4i.

i4i's motion for a permanent injunction prohibiting the selling of any Microsoft Word 2003 and 2007 products was granted after applying the four factor test provided in eBay Inc v MercExchange (2006), i.e. that a party is entitled to a permanent injunction only if

"(1) the party has suffered an irreparable injury; (2) that remedies at law, such as monetary damages, are inadequate to compensate for that injury; (3) that considering the balance of hardships between the parties a remedy in equity is warranted and (4) that the public interest would not be disserved by a permanent injunction".

The Court was satisfied that i4i's injury was overwhelmingly irreparable by Microsoft's continued infringement, that the "continuing loss of market share, customer goodwill and brand recognition within the market are the type of losses that monetary damages are insufficient to cure", that given Microsoft's dominance in the market the balance of hardships favored i4i, and that "the proposed injunction would have little effect, if any, on the daily operations of Microsoft's current customers". The Court then denied Microsoft's motion to stay the injunction and ordered Microsoft to comply with the injunction within 60 days of the date of the Order.

The judgment shows Microsoft fairing pretty poorly, but Microsoft has faced worse legal battles and managed to come out generally unscathed. Despite the judgment, Microsoft's shares were up more than 2% on 13 August following the announcement that Microsoft's next version of Office 2010 will be released without charge with Nokia phones. In a statement issued last week Microsoft stated that they will appeal this case and implied that they will primarily argue that the '449 patent is invalid. The AmeriKat expects an emergency application to stay the injunction pending the appellate case. The AmeriKat wonders if any readers can hypothesize on the impact that a Court of Appeals judgment against Microsoft will have on OpenDocument Format and other public-domain formatting which uses XML.

When Republicans say "I’m sorry ..."

Last August, Jackson Browne sued Senator McCain, the Ohio Republican Party and the Republican National Committee for copyright infringement, false endorsement and violating his common law right of publicity after his song "Running on Empty" was used without permission in McCain's presidential campaign. The AmeriKat also personally considers the use of songs by political parties to be almost libelous for a musician in some circumstances. Browne's song was used in television and online commercials criticizing President Obama's policy on energy. Following the denial by U.S. District Judge Klausner of the defendants’ motion to dismiss on the grounds of fair use and political speech exemptions, the parties settled with an order to dismiss the case filed on 4 August 2009. The Republican Party has now issued a pledge "to respect and uphold the rights of artists and to obtain permissions and/or licenses for copyrighted works where appropriate."

And you thought English libel awards were high …

After a week long trial five former employees of Georges Marciano, the co-founder of Guess Jeans, were awarded $370 million after Marciano sent emails and letters to law enforcement agencies and other third parties accusing them of fraud and embezzlement, including alleging that they were conspiring to sell pieces of art and wine from his personal collection. After repeatedly failing to show up to court and comply with discovery requests, Marciano was excluded from court by LA County Superior Court Judge Elizabeth White. Marciano is now suing Judge White alleging her conduct violated his First Amendment right and the Fourteenth Amendment right of due process. This case has attracted a lot of media attention in the U.S. which is unsurprising given the scale of damages and if you visit Marciano’s website.