Microsoft Loses Patent Case in Victory for Smaller Entities

NEW YORK (TheStreet) -- The U.S. Supreme Court ruled unanimously on Thursday that Microsoft must pay $290 million to a small Toronto software company called i4i.

Justice Sonia Sotomayor wrote the opinion of the court, which upheld in an 8-0 vote part of the 1952 Patent Act that required "clear and convincing" evidence to overturn a patent.

"As stated, the first paragraph of statute 282 provides that '[a] patent shall be presumed valid' and '[t]he burden of establishing invalidity of a patent or any claim thereof shall rest on the party asserting such invalidity,'" Sotomayor wrote.

Microsoft's (MSFT) claim was that it should only need a "preponderance" of evidence -- think something of a majority, or 51% -- to prove i4i's patent invalid, but Sotomayor's point was that Congress' enacted law explicitly stated a higher standard of proof.

The case already had been argued before a Texas federal jury and a U.S. District Court, with i4i winning damages in both decisions.

"While the outcome is not what we had hoped for, we will continue to advocate for changes to the law that will prevent abuse of the patent system and protect inventors who hold patents representing true innovation," Microsoft said in a statement.

The patent at stake was for technology i4i said it owned that Microsoft had used in Word 2003 and Word 2007 that allowed users to easily edit XML, which is computer code interpreted by Web pages.

"This is a big case for patent holders" because "it makes patents more valuable, basically," said Tim Maier, managing partner for intellectual property law firm Maier & Maier, PLLC in Alexandria, Va. "It's a big victory for [small entities]"

Large companies frequently battle to protect their patents, in fact Apple has been notorious for going on the offensive to protect its proverbial turf.

The Microsoft Corp v. i4i Limited Partnership case joins a rich history of patent cases that dealt with the same precedent.

Sotomayor cited the ruling of American Hoist & Derrick Co. v. Sowa & Sons, Inc. -- in which the judge who presided over the case also happened to have drafted the 1952 Act -- and said its interpretation had not wavered through cases in over 30 years. Other cases that cited statute 282 included Ultra-Tex Surfaces, Inc. v. Hill Bros. Chemical Co. in 2000 and ALZA Corp. v. Andrx Pharmaceuticals last year.