How Microsoft Can Solve its Word Patent Problem
Microsoft can likely sidestep a recent injunction by a Texas federal judge that bars the company from selling Word with an "easy technical workaround," a patent attorney said today.
"The injunction doesn't apply to existing product that has already been sold," said Barry Negrin, a partner with the New York firm Pryor Cashman LLP who has practiced patent and trademark law for 17 years.
"Headlines that say Microsoft can't sell Word are not really true," said Negrin, pointing out that the injunction granted by U.S. District Court Judge Leonard Davis on Tuesday only prohibits Microsoft from selling Word as it exists now after Oct. 10. "All Microsoft has to do is disable the custom XML feature, which should be pretty easy to do, then give that a different SKU number from what's been sold so it's easy to distinguish the two versions."
Microsoft does not need to provide an update to users running already-purchased copies of Word 2003 and Word 2007, the two versions that Davis barred the company from marketing after it lost a patent infringement case brought by Toronto-based i4i in 2007. Those copies' infringements have already been "paid for" by the $200 million in damages, and another $12 million in damages from the jury verdict in May until this week.
In May, a jury awarded i4i $200 million in damages for infringing an i4i patent; Davis tacked on additional damages and interest to bring the total to nearly $300 million.
"If I were Microsoft, I would be a lot more upset with the jury award than the injunction. [The latter] is annoying, but there should be some easy technical workarounds," said Negrin.
Microsoft has said it will appeal the verdict, but it has not put a timetable on that move.
An appeal could take one to two years, said Negrin. "I'd put the over-under at 18 months," he said, noting that much more complex patent cases with more patents and more claims work their way through the appeals process in longer time frames.
But he declined to put a number on Microsoft's chances of getting the verdict and thus the injunction, overturned on appeal. "That really depends on the issues they plan to raise," Negrin said. "I'd expect them to raise invalidity of the patent."
However, a 2006 Supreme Court ruling that set aside a lower court's injunction against eBay in a patent dispute over its "Buy It Now" auction feature may favor Microsoft. In that decision, the Supreme Court said lower courts must use a four-factor test when considering patent injunctions.
"One of the four is that the public interest is not disserved with the injunction," said Negrin. But with the numbers of Word users and the possible disruption to business if the company did stop selling the product in two months, Microsoft may be able to make the case that the injunction is not in the public interest. "That may depend on how Microsoft wants to paint how easy it is, or not, to change Word," Negrin continued.
The bigger factor, he said, is whether i4i can be adequately compensated without the injunction -- in other words, by money. "It might be difficult for i4i to argue that $290 million is not adequate compensation," Negrin said.
Other options -- including arguing for a stay of the injunction or even some kind of settlement with i4i -- are probably off the table. "The district court judge already denied a request for a stay," Negrin observed. Although Microsoft can avoid paying the $290.6 million to i4i when it appeals by posting a bond, "It has no right to ask for a stay of the injunction," he added. "But it can still ask the court of appeals for the federal circuit for a stay of the injunction."
But a settlement -- something many bloggers have bandied about as a possible Microsoft exit strategy -- is very unlikely. "Any settlement [Microsoft] could have gotten before would have been a hell of a lot smaller than it is now," said Negrin. "It's almost too late to settle this with i4i. Microsoft's lost all around at the district court level."
Negrin called the $291 million judgment high. "But it's not insanely high. It's not beyond the pale," he said.
Davis' injunction forbids Microsoft from selling Word 2003, Word 2007, Word for Mac 2008 and presumably Word 2010 when it ships next year, if the applications let people create custom XML documents.
"Microsoft has to appeal," Negrin noted. "They really don't have a choice. And given that the landscape of patent law may be changing, the federal circuit or the Supreme Court might be more inclined for relief."
Working against Microsoft, however, is that it was hit with "willful infringement" of the i4i patent, the factor that contributed another $40 million in damages to what the jury awarded.
"i4i claims it presented internal e-mails within Microsoft where [employees] said that they would go ahead with the custom XML feature, even as they acknowledged the i4i patent," said Negrin. "And i4i maintains it even tried to pitch their technology to Microsoft, but Microsoft said, 'thanks, but no thanks.'"
Court documents in the case refer to a 2001 meeting between i4i and Microsoft representatives, held at Microsoft's Redmond, Wash. headquarters.
"Microsoft has a reputation for squashing the little guys," Negrin said.