How to sue Microsoft - and win

By Cindy Waxer, contributing writer


TORONTO (CNNMoney.com) -- For a tiny Toronto software manufacturer nestled in the city's grimy garment district, winning a $290 million court judgment against Microsoft is more than simply a long-awaited victory.

"It's a battle cry for the entrepreneur and every small company," trumpets Loudon Owen, i4i's chairman, just hours after learning of the U.S. federal appeals court's decision.

i4i.03.jpg
i4i Chairman Loudon Owen and founder Michael Vulpe

That cry was closer to a whimper two years ago when i4i, a 30-person document collaboration firm, sued Microsoft (MSFT, Fortune 500), claiming it violated a patent with features found in Word 2003 and Word 2007. The offending technology lets users edit XML, a computer programming language that customizes the way a document's contents are interpreted and displayed.

In August 2009, a Texas jury agreed with i4i, ordering Microsoft to pay $290 million in damages and stop selling Word in the U.S. Although Microsoft appealed that decision, a federal appeals court upheld the judgment on Tuesday, issuing an injunction that bars Microsoft from selling versions of Word that contain the offending patent technology. The court's ruling takes effect on Jan. 11, 2010.

i4i's legal victory is being touted as a modern-day tale of David and Goliath. So how does a tiny software outfit in Canada defeat one of the world's best-known corporate behemoths?

Underdogs, take note. Here's a road map for waging war against a giant -- and winning.

Protect your property. Despite applying for a U.S. patent in 1994, i4i wasn't issued the patent -- No. 5,787,449 -- until 1998. Owen says that the time-consuming process is a necessary evil in today's ultra-competitive climate.

"It doesn't come easy, it doesn't come cheap and it's not simple," he says. "But there are very valid remedies [for infringement] if you file your patents and protect your intellectual property upfront."

Prepare your case. When it comes to taking on a company the size and stature of Microsoft, don't expect legal eagles to bang down your door.

Instead, Owen says, "we assembled the [patent infringement] claim, the background and the history in an extraordinarily detailed, analytical way. We prepared the case as best we could independently before meeting with leading counsel and luminaries in the industry."

Don't lose track of your day job. A much-ballyhooed, two-year legal battle against Microsoft can significantly distract employees and completely consume a company's top brass.

To keep operations up and running, Michel Vulpe, i4i's chief technology officer and founder, kept employees informed of the case's progress, "but not mired in details." The company laid plans at the start to guard against letting its legal proceedings encroach on operational activities. That meant frequently reassuring clients about i4i's future and quelling employee concerns.

Pick your battleground. i4i's decision to have its case heard in a U.S. District Court for the Eastern District of Texas -- where neither i4i nor Microsoft has its headquarters -- prompted many legal and tech pundits to cry foul.

"Typically, the court in Tyler, Texas, is one that a lot of companies seek out for high-tech cases," says Tim Hickernell, an analyst with Info-Tech Research Group in London, Canada. "The perception is that folks in Tyler aren't very technically oriented."

In fact, 358 of the 2,866 cases related to copyrights, patents and trademarks were filed in the district in 2008, according to the Administrative Office of the U.S. Courts.

However, the Washington federal appeals court's upholding of the ruling this week "removes any perception that the Tyler jury didn't know what it was doing," says Hickernell.

"It's absolutely a complete and utter vindication of the judgment," says Owen.

Be prepared to pay the price. Two years spent in and out of courts across the U.S. cost i4i $10 million in legal fees. That doesn't account for the legal battle's considerable toll on the company's ability to focus on product development, marketing, and innovation -- activities that are primary drivers for a small business.

"[A lawsuit] is a complete and utter commitment," says Owen. "It's not something to be taken lightly. The deposition process, the cross-examination, the whole series of allegations -- it's a very tough process to go through."

In response to the ruling in favor of i4i, Microsoft said in a statement that it's "considering our legal options, which could include a request for a rehearing by the Federal Circuit Court of Appeals."

In the meantime, Vulpe says, "We're still sitting. We'll be jumping when the Maple Leafs win a game."

Or maybe when a check for $290 million arrives in the mail. To top of page

Questions & Answers



QHow does a florist sell more in this economy? We changed our business to designing weddings and events only, as the everyday flowers are not selling. We had to throw out too much product at the end of the week -- flowers are perishable! More
Get Answer
- The Flower Lady, Suwanee, Ga.
Just the hot list include
Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Overnight Avg Rate Latest Change Last Week
30 yr fixed3.80%3.88%
15 yr fixed3.20%3.23%
5/1 ARM3.84%3.88%
30 yr refi3.82%3.93%
15 yr refi3.20%3.23%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 32,627.97 -234.33 -0.71%
Nasdaq 13,215.24 99.07 0.76%
S&P 500 3,913.10 -2.36 -0.06%
Treasuries 1.73 0.00 0.12%
Data as of 6:29am ET
Company Price Change % Change
Ford Motor Co 8.29 0.05 0.61%
Advanced Micro Devic... 54.59 0.70 1.30%
Cisco Systems Inc 47.49 -2.44 -4.89%
General Electric Co 13.00 -0.16 -1.22%
Kraft Heinz Co 27.84 -2.20 -7.32%
Data as of 2:44pm ET
Sponsors

Sections

Bankrupt toy retailer tells bankruptcy court it is looking at possibly reviving the Toys 'R' Us and Babies 'R' Us brands. More

Land O'Lakes CEO Beth Ford charts her career path, from her first job to becoming the first openly gay CEO at a Fortune 500 company in an interview with CNN's Boss Files. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.