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The court upheld the strict legal standard that needs to be met when a patent is declared invalid by a jury in court.
When juries are asked to decide in a court case whether they think the patent office should not have granted a patent on an idea, they're required by jury instructions to consider evidence that would be "clear and convincing" rather than just by a preponderance of the evidence.
In the course of defending itself against a patent infringement lawsuit from a small Canadian consulting firm in Toronto, Microsoft had argued that that standard was too high, and that juries should be allowed to use the lower preponderance of evidence standard.
Microsoft had argued that the U.S. Patent and Trademark Office issues too many 'bad' patents on ideas that shouldn't have been patented, and that the high legal standard protecting these bad patents is threatening innovation.
The Obama administration stepped in in March to oppose Microsoft's argument. The Justice Department told the court that it should defer to the USPTO and uphold the standard.
In an opinion written by Justice Sonia Sotomayor, the court said it wasn't in a position to evaluate Microsoft's policy arguments about the impact that the legal standard is having on innovation.
The justices noted that Congress has had many opportunities in the past 30 years to change the legal standard but that "through it all, the evidentiary standard adopted ... has gone untouched."
What made the case especially interesting were the facts in this particular dispute.
The disputed patent covers a specific configuration for editing custom XML, a computer mark-up language. Its owner, i4i, sued Microsoft for patent infringement in 2007 for selling a version of its Word processing program that incorporated the idea without licensing it.
Microsoft had argued that the patent wasn't valid because there was evidence that showed that i4i had been selling its product a year before it applied for the patent.
The USPTO does not grant patents on ideas that have been sold or used for a year before an application.
However, the source code was destroyed before i4i filed for the patent, so Microsoft had nothing other than individual testimonies to prove its contention that i4i had sold a version of its patented product more than a year before it filed for a patent.
Microsoft says that the $290 million it now owes i4i for infringing the patent is the largest patent infringement verdict ever on appeal.
The company is still appealing the validity of the patent in a proceeding at the USPTO, and it's lobbying for patent reform in Congress.
"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 spokesman said in an e-mailed statement. "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."
A sweeping overhaul of the nation's patent laws is expected to be enacted by the end of the summer.