Add-on maker i4i: Microsoft destroyed its market to compete with it

The central question with regard to the i4i patent infringement case, which Microsoft is now appealing, is whether the Canadian software firm and one-time Microsoft partner had a legitimate and exclusive right in 2001 to produce XML authoring tools that enabled markup code to be distinguished from content. In its response to Microsoft's appeal filed Tuesday (PDF available here), as first reported by TechFlash blogger Todd Bishop, i4i says it knew Microsoft had been trying to build an XML authoring tool for Microsoft Word, but in the absence of one had deferred to i4i as a preferred provider.

Only during an April 2001 joint presentation of Word's and i4i's functionality to a US government customer, i4i says, did Microsoft learn that i4i had a patent on its metadata/content separation technology. And only after that time did Microsoft apparently pursue a course to compete with i4i using the basic concepts of that technology.

"An internal notice sent before the meetings described i4i as a 'Microsoft Partner' and described i4i's patented product as 'the simplest way to enable your entire workforce -- non-technical as well as technical -- to create XML collaborative content without a costly investment in proprietary software and training,'" reads i4i's response to Microsoft's appeal. "During the meetings, i4i provided sales kits that contained an 'i4i at-a-glance datasheet identifying the '449 patent and describing i4i's business and product. An i4i representative, Keith Thomas, discussed the architecture of i4i's product, explaining how it separated markup from the content of a document and enabled Word to act as an XML editor, and provided a demonstration. Thus, Microsoft learned about i4i's product and the '449 patent."

The response claims that Microsoft's sales representative for the government, Mark Belk, contacted i4i at the time to say that his customers were pleading with him to provide Microsoft-made custom solutions for their needs for custom XML authoring tools. Belk needed to defer to someone, the claim continues, since Microsoft had no such tool -- despite a plea from no less than company chairman Bill Gates for its creation -- and i4i was his choice.

But just days apparently after learning of the patent and its separation concept from i4i for the first time through this meeting, i4i says, Microsoft circulated memos to Belk and other officials, indicating it was now Microsoft's goal to "eventually make obsolete any competitive attempts by third parties to conquer that market," according to a citation directly from one Microsoft memo. Reads one e-mail from a program manager at the time to Belk, "If we do the work properly, there won't be a need for [i4i's] product."

In i4i's response, it acknowledges it knew of Microsoft's desire to create a general purpose XML editing tool of its own, despite its inability to present one at the time. It alleges that Microsoft was only able to do so after learning of the patented technology through the meeting.

The strategy i4i attempts to portray for the Appeals Court is one where Microsoft creates opportunities for functionality by nurturing new companies such as i4i as partners, then once their markets grow to some level of fruition, destroys those new markets through the use of general-purpose products that use the new companies' techniques, but which customers come to expect from Microsoft since it is the more prominent entity.

Microsoft's appeal last month does not address the issue of when it learned of the i4i patent's existence, but points out that i4i only chose to claim patent infringement in 2007, four years after the release of Microsoft's first XML authoring tool, and well after i4i had already congratulated Microsoft for producing the tool it knew it was going to produce. Specifically, Microsoft argues that the very title of i4i's patent refers to the manipulation of separated code, thereby implying that such separation is a pre-existent technique.

Last month's appeal with the Federal Circuit also contends that i4i's patent concerns a methodology for implementing a technique, the concept of which was already in wide use by many other manufacturers, and does not cover the technique; it goes on to contend that Word 2003's methodology is different from i4i's.