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This page is devoted to news, tips, and any other information the Project Management community may find useful or interesting.

The Word on Patent Law Suits

The U.S. Supreme Court ruled on Monday, November 29th 2010, that Microsoft would be allowed to appeal a District Court ruling that awarded a small Toronto, Canada, based company $290M for patent infringement. The appeal will be heard by the Supreme Court; no date was announced for that hearing. The small Canadian company doing the suing is i4i headquartered at 116 Spadina Avenue in Toronto. The company is small, having a workforce of just 30 employees. The concept that it could be owed $290M for any kind of business losses the patent infringement could have caused seems a bit extreme.

The i4i patent in question covers technology created by i4i (x4w) that allows a user to separate the XML mark-up language embedded in Word documents from the document which makes editing the document easier. Documents are marked up with XML for the purposes of making documents "machine" readable which makes them exchangeable over the internet. x4w allows a user to strip the XML language from a document, edit it without interference, and then re-introduce the XML. Microsoft developed a similar tool and packaged it with MS Word 2003 and 2007. The District Court ordered Microsoft to strip the feature from their Word products and gave them 90 days to remove any versions containing the feature from store shelves. This was in addition to the monetary award.

Microsoft is seeking to have the judgment overturned based on their claim that they had a patent on the same functionality as i4i and that the Patent Office made a mistake in granting i4i the patent. Although I fail to see how a court can be expected to pass judgment on something as technical as a patent, Microsoft will be asking the Supreme Court to consider that as a factor when deciding their appeal.

I'm not certain how litigious i4i is. I don't believe they are involved in any other law suits of any description at this time. Microsoft, on the other hand, is on more familiar ground. They have been very active in the area of law suits over patent infringements, both as plaintiffs and defendants. Among others they are involved with, or have been involved with, are: Salesforce.com, VirnetX, Apple (through their partner, HTC), TomTom (the automotive GPS maker), Linux (through TomTom), Belkin, and Primax. This certainly doesn't make them particularly litigious when you compare them with the likes of Apple, but certainly does keep an army of patent lawyers busy.

We can blame the legal system for this situation, or we can blame the Patent Office, but how about the major players in the high tech sector taking a little responsibility? I'm not suggesting that no-one should avail themselves of legal help if they suffer business losses from patent infringement, but surely there is a simpler, less expensive way to resolve the situation. i4i initiated the law suit but I don't know what preceded that action. Reaching out to Microsoft to give them the opportunity to propose a resolution would be one step. I would think that an opportunity to partner with Microsoft in some way could be advantageous to i4i. From Microsoft's point of view, I'm sure they would not want to feel that they were being blackmailed into offering i4i a huge cash settlement but could they have made i4i an offer that would have made both companies happy and provided Microsoft with access to technology that could increase sales? For a company that prides itself on innovation, I would think that crafting a solution shouldn't be beyond their capabilities.

Much has been made of using law suits as a warning to other companies, sending the message: "back off or we'll use the courts to crush you with huge settlements". Corporations who are tempted to go that route should pause to look at the long term consequences. The advent of the "patent troll" is one consequence. Patent trolls buy patents from small companies, or bankrupt companies not with the intent of manufacturing them but of using them to launch law suits. A classic example of this was the settlement of $612.5M paid by RIM to patent troll NTP. The success of law suits to gain awards for patent infringement has spawned an industry whose sole purpose is to launch patent law suits.

Courts have a role to play here as well. The possibility that i4i actually suffered $290M in damages as a result of Microsoft infringing on their patent is extremely remote. Even worse was the judgement of $612.5 paid by RIM to NTP. While this was not a court awarded settlement, it was precipitated when a judge ruled that it would not wait for a Patent Office investigation before it ruled on a settlement. The judge denied all of RIM's requests and what was at stake was RIM's primary product, the Blackberry. RIM felt that settling for $612.5M was a safer course of action than to chance a court decision that would have taken the Blackberry off the market. Courts in the U.S. have recently taken the actual damages suffered by a plaintiff into consideration, with the result that patent trolls have seen their awards reduced. The courts can take this a step further by letting the Patent Office settle these disputes when the plaintiff is not actually generating revenue with its invention.

The legal system has generated an atmosphere in which litigants who are willing to gamble a relatively tiny amount on legal fees and court costs can win huge settlements if a jury likes their case. That doesn't mean that corporations must contribute to the feeding frenzy. It's time for corporations who feel that they own a patent that has been violated to let their R&D and marketing organizations work out a solution with their opponent. It's time for corporations who are informed of a possible infringement of a competitor's patent to make an honest effort to resolve the issue with the competitor before calling in the lawyers. Mediation is used to resolve many other disputes. Why not try it here? There is a sound business case to be made for this approach. Corporations who are on the winning side of a huge settlement today may find themselves on the losing side tomorrow, take Microsoft as a case in point.

It's up to the courts and Patent Office to resolve the problem of the patent trolls. One way to stop these people dead in their tracks is to have the Patent Office review and approve, or disapprove, the transfer of a patent much the same way that car registrations are transferred. The difference being that the Patent Office could deny the transfer of a patent unless the new owner could prove the ability to manufacture the invention. Another solution would be to grant a patent holder a period of time to develop the invention. If they have not developed it within that window, the patent would be denied. The Patent Office can also help the courts here by expediting reviews of patents that are the base for infringement law suits. One of the reasons that the courts denied RIM's request to wait for such a review was the Patent Office's estimate that it would take 10 years to complete! The similarity between 2 patents is what is at stake in most of these cases. Whether the similarity constitutes an infringement should be decided by the patent experts. The courts can also help by limiting the amounts awarded to successful patent trolls. $612.5M for a company that produces absolutely no product, other than patents? You're smoking your socks!

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