The U.S. Patent and Trademark Office's recent confirmation of the validity of a patent that netted i4i Limited Partnership a $290 million infringement judgment against Microsoft Corp. means the U.S. Supreme Court is likely Microsoft's last hope to overturn the judgment.

On May 11, i4i announced that the PTO affirmed the patentability of all the claims in its patent for processing and storing information about electronic documents' structure. In its lawsuit, i4i claimed that Microsoft Word 2007 infringed that patent, and Microsoft had requested a re-examination in the hopes that the PTO would declare the patent invalid. The PTO has yet to issue a formal certificate confirming the patent's validity, but the agency informed Canadian software company i4i of its notice of intent to issue an ex parte re-examination certificate on April 28.

In an e-mailed statement, Kevin Kutz, Microsoft's director of public affairs, said that while the company is disappointed, "there still remain important matters of patent law at stake, and we are considering our options to get them addressed, including a petition to the Supreme Court."

Microsoft's bid to use its request for a patent office re-examination of i4i's patent "has failed in a dramatic way," said i4i's lawyer for the re-examination, Rob Greene Sterne, founder of Washington-based Sterne, Kessler, Goldstein & Fox.

Microsoft filed its PTO re-examination request before the jury verdict but well into the lawsuit, probably as a backup plan in case it lost the lawsuit, Sterne said. "Microsoft, I'm sure, assumed that they would win the re-exam or create significant difficulties for i4i in the re-exam that would drive a better settlement," he said.

Lawyers say that unless Microsoft finds grounds for a motion for relief from judgment, such as newly discovered evidence or fraud, the U.S. Supreme Court is its last avenue.

Microsoft is "pretty much at the end of their line" unless the Supreme Court takes its case as one of the handful of patent matters the Court hears each year, said Thomas Engellenner, the co-chair of the patent practice group at Boston's Nutter, McClennen & Fish. Engellenner wasn't involved in the case.

"It's a long shot," Engellenner said. "The legal issues they would be seeking cert on largely revolve around how much discretion the appeals court could give to jury verdicts. It seemed like a pretty straightforward appeal decision."

Engellenner also doesn't think the Supreme Court would want to review the damages awarded to i4i.

On April 1, the U.S. Court of Appeals for the Federal Circuit denied Microsoft's petition for an en banc rehearing of earlier rulings upholding a lower court's $290 million patent judgment against Microsoft.

On March 10, the Federal Circuit replaced its original Dec. 22, 2009 ruling with additional guidance on willful patent infringement. Like its predecessor, the March 10 ruling upheld the Eastern District of Texas' $290 million patent judgment against Microsoft and ruled that Microsoft must stop selling an infringing version of Microsoft Word 2007 as of Jan. 11.

The PTO's affirmation of i4i's patent claims is also significant because patent lawsuit defendants are increasingly asking the PTO to re-examine whether the patent holder's patent is invalid.

Two types of re-examinations requested by defendants have climbed sharply in recent years. Requests for so-called inter partes reexaminations, which can be initiated only by the accused patent infringer, have spiked by 337 percent from 59 in fiscal year 2005 to 258 in fiscal year 2009, which ended last Sept. 30. Inter partes re-examinations allow third parties to participate in the re-examination, which is based solely on paper submissions and not testimony.

The PTO's ex-parte re-examinations can be launched by patent owners or by third parties — typically accused infringers — but third party requests also jumped. Ex parte re-examinations involve only the patent holder and the patent office. In fiscal year 2009, 591 third parties asked for an ex-parte re-examinations, 65 percent more than the 358 third parties who requested reexamination in fiscal 2005.

Re-examinations started by accused infringers are popular because the "conventional thinking is that patent office is biased against the patent owner," said Sterne. But the i4i example signals that the PTO is "becoming more nuanced and balanced, and bias that exists against the patent owner, which is of great concern to patent owners, is abated."

Sterne said that's particularly true in ex-parte re-examinations, the type Microsoft initiated against i4i. "i4i has gotten all of its claims confirmed in the first go-around," Sterne said. "That's a very strong signal for Microsoft that the patent is strong."

Source: Corporate Counsel