In 1993, Michel Vulpe founded a company called Infrastructures for Information, Inc. Known as i4i, the Toronto company specialized in the delivery of XML-based document processing solutions. In 1994, Vulpe and his business partner, Stephen Owens, filed to patent an invention that made it possible to use consumer word-processing software, such as Microsoft Word, to edit XML and SGML. In patent language, the innovation was a “system and method for the separate manipulation of the architecture and content of a document, particularly for data representation and transformations.” Essentially, Vulpe and Owens’ invention gave regular computer users the ability to create documents with XML functionality, enabling sharing, searching and updating within and between companies, and over the Internet. With his patent application making its way through the US Patent and Trademark Office (USPTO), Vulpe began to seek out likely investors to help grow his company. Thanks to an accidental meeting with investment manager Neil Nisker, Vulpe raised some seed money and won an introduction to Loudon Owen, managing director of venture-capital firm McLean Watson. Vulpe and Owen hit it off, and in 1996, sealed a deal for a $2-million venture-capital investment over a coffee-shop handshake. By 1998, the USPTO had issued patent #5,787,449, recognizing i4i’s innovation as novel, useful and non-obvious (the three pillars of patent eligibility), and granted i4i the exclusive right to capitalize on its innovation in the marketplace.
Vulpe and i4i began to develop solutions for a range of clients based on customized implementations of their patented technology. Almost immediately after the patent was granted, the USPTO itself became one of i4i’s clients. The software helped the government agency implement a new electronic workflow for filing patents by designing a system to guide lawyers and patent agents through the process of creating XML-based patent applications in Microsoft Word.
i4i’s products have been used in the intelligence and defence industries, in aircraft and vehicle maintenance and manufacturing, and in database software for galleries, museums and libraries. Pharmaceutical companies make up one of i4i’s largest client groups. They use i4i’s technology to create product labels, keep track of side effects, drug interactions, dosages, and so on. NASA, the FDA, Bayer, Novartis, Baxter, Boeing, the US Social Security Administration and the US Marine Corps are all customers of i4i.
Between 2000 and 2002, Microsoft was in talks with i4i about joining forces to pitch their combined services to certain clients. Chief among these clients were intelligence officials in Washington who needed to sort through enormous quantities of data related to 9/11. i4i had the tools to distill essential patterns from the data, while Microsoft did not. In the end, Microsoft elected to pursue the project on its own, but provided no clear explanation for the change of heart. At the time, and later via an email exchange, Microsoft representatives acknowledged the value of i4i’s patented technology.
In 2003, Microsoft introduced a version of Word with XML-editing capability. i4i’s share of the market dropped off sharply and the word on the street was that Microsoft was offering the same customizable XML capability as i4i.
Although Vulpe and Owen suspected that Microsoft was infringing on their patent, they had no way of knowing for sure. They couldn’t simply look at Microsoft’s source code because it was proprietary. They painstakingly documented i4i’s interactions with Microsoft, as well as their patent application process and approached a leading patent litigation management firm for help in making their case. Ownership of the patent was transferred to a new entity, i4i LP, and an exclusive license was issued to i4i, Inc. to allow for the company’s ongoing operations. The suit that i4i eventually brought against Microsoft was financed by Northwater Patent Fund, in exchange for an equity stake in the new company. As a partner, Northwater brought important expertise in patent litigation. The case was first filed in May 2007 in the eastern district of Texas. This area of Texas is known for its speedy “rocket docket” treatment of patent infringement cases, and also for its plaintiff-friendly record of case decisions.
A seven-day jury trial began in May 2009 and concluded with the ruling that i4i’s patent was valid and had been knowingly and willfully infringed by Microsoft. The district court awarded i4i US$290 million in damages and Microsoft was issued an injunction against the continued sale of i4i’s patented technology in its products.
Microsoft appealed the decision to the US Court of Appeals for the Federal Circuit. Dell and HP filed amicus curiae briefs alongside Microsoft’s appeal asking the court to overturn the injunction. In December 2009, the appeals court issued a ruling upholding the decision of the district court with one exception; the appeals court extended the grace period within which Microsoft would be forced to comply with the injunction. Microsoft filed a petition with the US Court of Appeals for the Federal Circuit for a rehearing of the case. In June 2011, the US Supreme Court ruled to uphold the verdict against Microsoft for infringing i4i’s patent.
The following key points emerge from i4i’s story:
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