Microsoft Submits Opening Brief in i4i Appeal
Microsoft submitted its opening appeal brief on Tuesday and the CAFC set oral argument on its motion to stay Judge Davis' order enjoining further distribution of infringing copies of Microsoft's multi-Billion dollar WORD product. Oral argument on Microsoft's motion to stay and on Microsoft's motion for an expedited consideration of the appeal is set for September 23, 2009.
An East Texas jury found that WORD infringed i4i's patents covering the use of XML technology, Judge Davis granted i4i's motion for an injunction, stopping any further distribution of infringing copies of WORD. That order will take effect sometime in October unless the CAFC steps in to stay the injunction.
Microsoft's arguments on appeal are summarized by the below preliminary statement taken from its opening appeal brief. I only got through part of the preliminary statement. The rest will be saved for another post. One of the problems I have with this brief is that the preliminary statement is too long and the brief raises too many issues. But I know that writing an appeal brief is a lot harder than critiquing one. This brief would have been especially hard to write with so many lawyers weighing in.
"In patent cases, even more than most, the trial judge’s role as a gatekeeper is
crucial. As gatekeeper, the judge must define the metes and bounds of a patent
through claim construction and then ensure that the evidence presented by the
parties’ numerous experts is both reliable and rooted in the facts of the case at
hand. And after the jury has rendered its verdict, it is the judge who . . . must ensure that the verdict is adequately supported by the evidence and supportable under the law. ... [this] is especially important in patent cases because of the
delicate balance struck by patent law to achieve its objective of promoting, rather than stifling, innovation. That balance can be lost if the district court does not protect the process, and patent litigation then becomes a tax on innovation rather than its guardian."
This sounds like a "patent law is special" argument, which is particularly out of style right now. And if you don't believe me, just read that last four or five Supreme Court opinions. The better argument is the good old-fashioned "junk science" argument, that the verdict cannot be supported by expert testimony that is fundamentally flawed at its premise, and that in view of shaky, but arguably admissible expert testimony, the judge's role to scrutinize the evidence allegedly supporting the verdict is critically important.
"This case stands as a stark example of what can happen in a patent case
when a judge abdicates those gatekeeping functions."
The "gatekeeping function" language sounds like an evidentiary challenge. An uphill battle because the standard of review is abuse of discretion. I suggest leading with an argument where the reviewing court is not so constrained in their ability to find error.
"The district court’s errors in this case began when it accorded a critical claim
term no meaning whatsoever, effectively erasing it from the patent. That
impermissible claim construction, in turn, enabled the plaintiffs to present to the
jury a theory of infringement that contradicted not just the asserted patent’s
specification, but also its prosecution history, and, indeed, its very title."
OK, now we are getting somewhere. A claim construction argument. CAFC has plenary review. This should be front and center. Get rid of this "gatekeeping" stuff.
"The court’s failure to act as a gatekeeper extended to Microsoft’s validity
defenses as well. After Microsoft invoked the on-sale bar with the inventor’s prelitigation statements that showed his invention to have been “implemented” and
sold before the critical date, the inventor insisted that he had lied to investors about his pre-sale invention date and that the invention really came later, and that
Microsoft could not prove otherwise because he had “discarded” the source code
of that product. In the absence of corroboration, an inventor’s manifestly self interested testimony should be insufficient as a matter of law to save his patent. But the district court demurred and sent the question to the jury."
Even this slanted account raises a number of factual questions in my mind. This statement does not convince me that there was an absence of evidence supporting plaintiff's theory. Especially in view of Microsoft's elevated burden of proof to prove invalidity by clear and convincing evidence.
"By the time the plaintiffs presented their damages case, the district court had
abandoned even the semblance (really?) of gatekeeping. Plaintiffs sought to quantify instances of indirect infringement—their royalty base—through a survey of 988 businesses. That survey garnered just 46 individual respondents, who then were paid to guess how many other persons in their place of employment used Microsoft Word in a manner similar to the alleged infringing implementation. Of those 46 respondents, 19—less than half—were aware of any such use of Word. And even they supplied inconsistent or confused responses, so plaintiff’s expert simply changed the data—all according to so-called principles of “data imputation,” of course. When his manipulations were done, he testified that the 19 responses to his survey proved that 1.85 million Word users infringed plaintiffs’ patent—nearly 100,000 for every usable response."
Was i4i supposed to put all 1.85 million users on the stand? There has to be some recognition that a survey can be a reasonable way to quantify the level of inducement, especially in view of what I'm sure were piles of statements in instruction manuals and "help menus" from Microsoft explaining just how WORD can be used to infringe the patent.
"Plaintiffs then extrapolated that the 1.85 million infringing uses supposedly demonstrated by the survey had grown to 2.1 million in the six months before trial. When Microsoft challenged the survey as inherently unreliable, the district court offered the clearly erroneous response that fundamental admissibility considerations such as whether a survey respondent has personal knowledge of facts surveyed and whether the results were manipulated went only to the weight of the evidence."
Sounds like great cross examination. But the jury didn't buy it.
"If this survey passes muster, there are no limits to what “evidence” can be presented to lead juries astray, and patent law suffers."
Again, if Microsoft is right here, all law suffers, there is nothing special about patent law when it comes to the application of the FRE, or at least the Supreme Court is inclined to say that there is nothing special about patent law.
"A similar fate befell Microsoft’s challenge to plaintiffs’ Georgia-Pacific
analysis. Plaintiffs’ expert concluded that, in a hypothetical negotiation, Microsoft would have agreed to a royalty rate of $98—more than half of the current retail price of Word 2007. Wagner reached this conclusion by applying the much maligned “25 percent rule of thumb” to the hypothetical profit one might have
received if Microsoft’s profit margin applied to an unrelated third-party’s radically dissimilar product .... But the district court ... permitted the expert to testify that a “reasonable royalty” was $200,000,000."
Again, great cross material, but the appellate court is constrained by the standard of review. Also, Mike Wagner's testimony has been admitted in probably more than one hundred IP cases. Maybe he went wrong in this case, I don't know, but it would be a rare event to exclude his testimony.
OK, I'm getting tired here, and will deal with the rest of the preliminary statement in another post
i4imicrosoftappealbrief.pdf
An East Texas jury found that WORD infringed i4i's patents covering the use of XML technology, Judge Davis granted i4i's motion for an injunction, stopping any further distribution of infringing copies of WORD. That order will take effect sometime in October unless the CAFC steps in to stay the injunction.
Microsoft's arguments on appeal are summarized by the below preliminary statement taken from its opening appeal brief. I only got through part of the preliminary statement. The rest will be saved for another post. One of the problems I have with this brief is that the preliminary statement is too long and the brief raises too many issues. But I know that writing an appeal brief is a lot harder than critiquing one. This brief would have been especially hard to write with so many lawyers weighing in.
"In patent cases, even more than most, the trial judge’s role as a gatekeeper is
crucial. As gatekeeper, the judge must define the metes and bounds of a patent
through claim construction and then ensure that the evidence presented by the
parties’ numerous experts is both reliable and rooted in the facts of the case at
hand. And after the jury has rendered its verdict, it is the judge who . . . must ensure that the verdict is adequately supported by the evidence and supportable under the law. ... [this] is especially important in patent cases because of the
delicate balance struck by patent law to achieve its objective of promoting, rather than stifling, innovation. That balance can be lost if the district court does not protect the process, and patent litigation then becomes a tax on innovation rather than its guardian."
This sounds like a "patent law is special" argument, which is particularly out of style right now. And if you don't believe me, just read that last four or five Supreme Court opinions. The better argument is the good old-fashioned "junk science" argument, that the verdict cannot be supported by expert testimony that is fundamentally flawed at its premise, and that in view of shaky, but arguably admissible expert testimony, the judge's role to scrutinize the evidence allegedly supporting the verdict is critically important.
"This case stands as a stark example of what can happen in a patent case
when a judge abdicates those gatekeeping functions."
The "gatekeeping function" language sounds like an evidentiary challenge. An uphill battle because the standard of review is abuse of discretion. I suggest leading with an argument where the reviewing court is not so constrained in their ability to find error.
"The district court’s errors in this case began when it accorded a critical claim
term no meaning whatsoever, effectively erasing it from the patent. That
impermissible claim construction, in turn, enabled the plaintiffs to present to the
jury a theory of infringement that contradicted not just the asserted patent’s
specification, but also its prosecution history, and, indeed, its very title."
OK, now we are getting somewhere. A claim construction argument. CAFC has plenary review. This should be front and center. Get rid of this "gatekeeping" stuff.
"The court’s failure to act as a gatekeeper extended to Microsoft’s validity
defenses as well. After Microsoft invoked the on-sale bar with the inventor’s prelitigation statements that showed his invention to have been “implemented” and
sold before the critical date, the inventor insisted that he had lied to investors about his pre-sale invention date and that the invention really came later, and that
Microsoft could not prove otherwise because he had “discarded” the source code
of that product. In the absence of corroboration, an inventor’s manifestly self interested testimony should be insufficient as a matter of law to save his patent. But the district court demurred and sent the question to the jury."
Even this slanted account raises a number of factual questions in my mind. This statement does not convince me that there was an absence of evidence supporting plaintiff's theory. Especially in view of Microsoft's elevated burden of proof to prove invalidity by clear and convincing evidence.
"By the time the plaintiffs presented their damages case, the district court had
abandoned even the semblance (really?) of gatekeeping. Plaintiffs sought to quantify instances of indirect infringement—their royalty base—through a survey of 988 businesses. That survey garnered just 46 individual respondents, who then were paid to guess how many other persons in their place of employment used Microsoft Word in a manner similar to the alleged infringing implementation. Of those 46 respondents, 19—less than half—were aware of any such use of Word. And even they supplied inconsistent or confused responses, so plaintiff’s expert simply changed the data—all according to so-called principles of “data imputation,” of course. When his manipulations were done, he testified that the 19 responses to his survey proved that 1.85 million Word users infringed plaintiffs’ patent—nearly 100,000 for every usable response."
Was i4i supposed to put all 1.85 million users on the stand? There has to be some recognition that a survey can be a reasonable way to quantify the level of inducement, especially in view of what I'm sure were piles of statements in instruction manuals and "help menus" from Microsoft explaining just how WORD can be used to infringe the patent.
"Plaintiffs then extrapolated that the 1.85 million infringing uses supposedly demonstrated by the survey had grown to 2.1 million in the six months before trial. When Microsoft challenged the survey as inherently unreliable, the district court offered the clearly erroneous response that fundamental admissibility considerations such as whether a survey respondent has personal knowledge of facts surveyed and whether the results were manipulated went only to the weight of the evidence."
Sounds like great cross examination. But the jury didn't buy it.
"If this survey passes muster, there are no limits to what “evidence” can be presented to lead juries astray, and patent law suffers."
Again, if Microsoft is right here, all law suffers, there is nothing special about patent law when it comes to the application of the FRE, or at least the Supreme Court is inclined to say that there is nothing special about patent law.
"A similar fate befell Microsoft’s challenge to plaintiffs’ Georgia-Pacific
analysis. Plaintiffs’ expert concluded that, in a hypothetical negotiation, Microsoft would have agreed to a royalty rate of $98—more than half of the current retail price of Word 2007. Wagner reached this conclusion by applying the much maligned “25 percent rule of thumb” to the hypothetical profit one might have
received if Microsoft’s profit margin applied to an unrelated third-party’s radically dissimilar product .... But the district court ... permitted the expert to testify that a “reasonable royalty” was $200,000,000."
Again, great cross material, but the appellate court is constrained by the standard of review. Also, Mike Wagner's testimony has been admitted in probably more than one hundred IP cases. Maybe he went wrong in this case, I don't know, but it would be a rare event to exclude his testimony.
OK, I'm getting tired here, and will deal with the rest of the preliminary statement in another post
i4imicrosoftappealbrief.pdf
posted by Mark P. Walters @ 6:20 PM
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