Microsoft was one of the parties in a number of important information technology cases over the past year.  On June 9, 2011, the Supreme Court continued its seemingly annual review of Federal Circuit patent law in deciding the i4i case.  There the Court affirmed the Federal Circuit’s “clear-and-convincing” standard of proof required for challenges to the validity of a patent.  In the i4i case, the Federal Circuit affirmed the district court’s judgment of willful infringement and its $240 million damages award.  i4i had alleged that certain versions of Microsoft Word produced since 2003 contained an infringing custom XML editor.  Lowering the standard to a preponderance of evidence—as Microsoft requested—would have decreased the strength of a patent owner’s case in litigation.

In another case involving Microsoft, the Federal Circuit started building on last year’s Bilski case in which the U.S. Supreme Court affirmed a Federal Circuit ruling that Bilski’s business method was not patent-eligible subject matter under 35 U.S.C. § 101, but rejected the Federal Circuit’s reasoning.  In the Research Corporation case, the Federal Circuit held that the digital imaging process claims at issue were patentable subject matter because they represent “functional and palpable applications in the field of computer technology” and were not a manifestly abstract idea.

In yet another case involving Microsoft, the Federal Circuit continued to force cases out of patentee-friendly U.S. District Court for the Eastern District of Texas.  In that case, a patent owner’s attempt to manipulate the venue choice by incorporating an affiliate office in Tyler, Texas, without employees was rejected.

While remaining engaged with patent issues, the U.S. Supreme Court declined review of the Harper case, a case in which Whitney Harper was accused of infringing copyrights by making unauthorized copies through online downloading.  Harper was denied the opportunity to pursue an innocent infringer defense.  In a dissent from the Court’s denial of certiorari, Justice Samuel A. Alito Jr. addressed the issue of whether consumers are actually notified of the copyright status of computer files, which are usually not accompanied by credits and other information.

Also, there seems to be a trend for federal judges to refuse to impose large damages awards on individual file sharers, even if such awards are supported by federal statute.  For example, in the Tenenbaum case, the district court ruled that a jury’s $675,000 statutory damages award was unconstitutionally excessive because it was far greater than necessary to serve the government’s legitimate interest in compensating copyright owners and deterring infringement.

The long-brewing controversy over Google’s massive digitizing of books failed to reach resolution when the district court refused to approve the terms of a proposed $125 million settlement of class action claims brought by groups of authors and publishers against Google since they were not “fair, adequate, and reasonable” with respect to the rights of members of the relevant class not represented by the parties.

The Supreme Court also declined review of a Second Circuit ruling favorable for online intermediaries.  In the eBay case, the Second Circuit had found the online auction site operator was not liable for trademark infringement or dilution—either directly or secondarily—based on some sellers’ listing of counterfeit Tiffany jewelry, because it takes action when it has knowledge of fraud with regard to any specific listing.

In the keyword trademark case Rosetta Stone, Google’s AdWords program was at the forefront.  The district court ruled that Google was not directly, vicariously, or contributorily liable for its sale of trademarks—specifically those of the language learning software company Rosetta Stone—as advertising keywords, because the keywords serve an essential function in the Google search engine.  The court applied the functionality doctrine and held that Google’s sale of keywords containing marks owned by Rosetta Stone was unlikely to confuse sophisticated consumers searching for products.  The case was appealed to the Fourth Circuit where the case has attracted amicus briefs from many parties including eBay.

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