Microsoft has lost its Supreme Court appeal to overturn a long-running $290 million (£177 million) i4i patent infringement case.
The Justices voted unanimously in favor of i4i.
"This case raised an important issue of law which the Supreme Court itself had questioned in an earlier decision and which we believed needed resolution," a Microsoft spokesperson told IDG.
"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 wanted the high court to lower the standard of proof required to overturn a patent. The change would have made it easier to overturn so called "bad" patents, an abundance of which plague the software industry. But it also potentially would have made it easier to overturn any patent.
Some of the opinion issued by individual Justices on Thursday could still make it easier to overturn patents, said David Long, a patent attorney at Dow Lohnes PLLC. "The Supreme Court decision in general is no surprise, but it will have some huge ripples.
The Supreme Court increased the jury's role to weigh what the Patent Office did and did not consider in granting the patent. And Justice Breyer's concurrence goes further as to the detail of the jury verdict and may make it easier to invalidate patents."
Justice Breyer wrote, "Courts can help to keep the application of today's 'clear and convincing' standard within its proper legal bounds by separating factual and legal aspects of an invalidity claim say, by using instructions based on case-specific circumstances that help the jury make the distinction .
"By preventing the 'clear and convincing' standard from roaming outside its fact-related reservation, courts can increase the likelihood that discoveries or inventions will not receive legal protection where none is due."
Microsoft's case rested on a couple of ideas. It argued that i4i sold the technology prior to submitting it for a patent and that the validity of the patent should also be questioned because i4i "never gave the source code for the product and didn't have it available at trial making for "a compelling case why it doesn't make sense to give this deference to the patent office ... they never had the source code," Andy Culbert, associate general counsel at Microsoft, previously told Network World.
I4i chairman, Loudon Owen, called Microsoft's argument "utter nonsense" adding, "It is incorrect and it is another unsubstantiated Microsoft allegation/declaration to say i4i sold their product and did not patent the invention within the one-year time limit. This is wrong."
The court seemed to agree with i4i, rejecting Microsoft's arguments. In the court opinion issued today, the Justices summarize their reasons for rejecting Microsoft's argument: "According to Microsoft, a defendant in an infringement action need only persuade the jury of an invalidity defense by a preponderance of the evidence.
"In the alternative, Microsoft insists that a preponderance standard must apply at least when an invalidity defense rests on evidence that was never considered by the PTO in the examination process. We reject both contentions. ... Our pre-1952 cases never adopted or endorsed the kind of fluctuating standard of proof that Microsoft envisions."
In 2007, i4i sued Microsoft for infringement over a method of parsing XML called "custom XML". Microsoft typically tries to settle such cases, and tried to settle this one, too. On May 20, 2009, i4i won a $290 million judgment against Microsoft, which included an injunction to stop selling Word.
Microsoft has long since removed the technology from Word but continued to fight i4i, believing that this was a weak patent that should never have been granted. Microsoft twice sought an administrative reexamination by the USPTO of the patent, and the USPTO upheld its validity both times.