35 U.S.C. § 282 provides that “[a] patent shall be presumed valid” and that “the burden of establishing invalidity of a patent or any claim thereof shall rest on the party asserting such invalidity.” In Microsoft v. i4i, __ U.S. __ (2011), the Supreme Court affirmed the Federal Circuit’s long-standing construction of § 282, which requires invalidity to be proved by clear and convincing evidence regardless of whether the prior art relied upon was considered by the PTO during the patent’s examination.
In 2007, i4i Limited Partnership and Infrastructures for Information Inc. (collectively, “i4i”) sued Microsoft Corp. for willful infringement of i4i’s U.S. Patent No. 5,787,449 (the ‘449 patent), by reason of Microsoft’s manufacture and sale of certain Microsoft Word products. Microsoft counterclaimed and sought a ruling that the asserted patent was invalid and unenforceable.
Microsoft’s invalidity defense alleged that i4i sold a software program, S4, which embodied the asserted patent more than one year prior to the filing of the patent application which eventually issued as the ‘449 patent, and thus the patent was invalid pursuant to the on-sale bar of 35 U.S.C. § 102(b). The fact of that the S4 was sold more than one year prior to the filing of the patent application was undisputed, as was the fact that the prior sale of the S4 program was never disclosed to the PTO. However, the parties disagreed on whether S4 program was an embodiment of the invention claimed in the ‘449 patent. Because the original source code of the S4 was no longer available, the issue turned largely on the testimony of S4’s inventors and the parties’ experts.
At trial, Microsoft objected to i4i’s proposed jury instruction that Microsoft was required to prove the invalidity of the asserted patent by clear and convincing evidence. Instead, Microsoft proposed an alternate jury instruction comprising a hybrid standard of proof, which acknowledged its burden of proving invalidity and unenforceability by clear and convincing evidence, but also having a lesser “preponderance of the evidence” burden of proving invalidity when relying on prior art that was not considered by the PTO during the prosecution of the patent.
Rejecting Microsoft’s proposed jury instructions, the district court instructed the jury that “Microsoft has the burden of proving invalidity by clear and convincing evidence.” The jury found Microsoft to have willfully infringed the i4i patent and that Microsoft had not proved invalidity under the on-sale bar of § 102(b) by clear and convincing evidence. The Federal Circuit found no error with the jury instruction and affirmed. The Supreme Court granted certiorari.
Clear and Convincing Evidence Is Required to Prove Invalidity
Before the Supreme Court, Microsoft argued that a defendant in an infringement action only has a burden of proving the invalidity of a patent by a preponderance of the evidence rather than by the heightened clear and convincing standard. Alternatively, Microsoft argued that the lesser preponderance of the evidence burden should apply where the art was never considered by the PTO during patent prosecution. This argument relied heavily on KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398 (2007), where the Court observed that, in these circumstances, “the rationale underlying the presumption – that the PTO, in its expertise, has approved the claim – seems much diminished.” Id. at 426. Ultimately, the Court rejected both of Microsoft’s positions.
The Supreme Court began its analysis by recognizing that § 282 provides that “[a] patent shall be presumed valid” and that “the burden of establishing invalidity of a patent or any claim thereof shall rest on the party asserting such invalidity.” The Court, however, noted that the statute is silent regarding a standard of proof for establishing invalidity.
Nonetheless, the Court noted that case law from before the statute’s enactment in 1952 recognized that “there [was] a presumption of validity, a presumption not to be overthrown except by clear and cogent evidence.” (Slip op. at 7, citing Radio Corp. of America v. Radio Engineering Laboratories, Inc., 293 U.S. 1, 2 (1934)). The Court then referred to the familiar principle of statutory interpretation that “where Congress uses a common-law term in a statute, we assume the ‘term . . . comes with a common law meaning, absent anything pointing another way.’” (Slip op. at 7.) In this case, the common law term was the phrase “presumed valid,” which carried with it “a heavy burden of persuasion” requiring invalidity to be proved “by clear and cogent evidence.” The Court therefore concluded that § 282 imposes a clear and convincing burden of proof on a party challenging a patent’s validity:
Thus, by the time Congress enacted § 282 and declared that a patent is ‘presumed valid,’ the presumption of patent validity had long been a fixture of the common law. According to its settled meaning, a defendant raising an invalidity defense bore ‘a heavy burden of persuasion,’ requiring proof of the defense by clear and convincing evidence. That is, the presumption encompassed not only an allocation of the burden of proof but also an imposition of a heightened standard of proof. Under the general rule that a common-law term comes with its common-law meaning, we cannot conclude that Congress intended to ‘drop’ the heightened standard proof from the presumption simply because § 282 fails to reiterate it expressly. (Slip op. at 8-9.)
The Court also rejected Microsoft’s argument that the pre-1952 case law requiring a heightened standard of proof was limited to cases involving oral testimony of prior invention or invalidity challenges where that issue was previously litigated between the parties in PTO proceedings. The Court stated that none of these limitations on the heightened standard of proof could be found in RCA or any of the Court’s other pre-1952 cases.
Evidence Not Previously Considered by the PTO Also Required to Meet Clear and Convincing Standard, But May Carry More Weight
The Court further held that the pre-1952 common law, codified in the Patent Act, did not support Microsoft’s alternative argument that the preponderance standard applies if the evidence was not before the USPTO during patent prosecution. The Court stated that “[o]ur pre-1952 cases never adopted or endorsed the kind of fluctuating standard of proof that Microsoft envisions. And they do not indicate, even in dicta, that anything less than a clear-and-convincing standard would ever apply to an invalidity defense raised in an infringement action.” (Slip op. at 15.) Moreover, “[n]othing in § 282’s text suggests that Congress meant to depart from that understanding to enact a standard of proof that would rise and fall with the facts of each case. Indeed, had Congress intended to drop the heightened standard of proof where the evidence before the jury varied from that before the PTO – and thus to take the unusual and impractical step of enacting a variable standard of proof that must itself be adjudicated in each case – we assume it would have said so expressly.” (Slip op. at 15-16.)
While the Court recognized that many pre-1952 circuit court cases opined the presumption of validity was “weakened” or “dissipated” where the evidence was not considered by the PTO, the Court did not view these circuit court cases to mean that a preponderance standard applied in even in this limited circumstance. Rather, the Court explained that these circuit court cases held that new evidence not previously before the PTO may “carry more weight” in an invalidity defense than evidence already considered by the PTO. Thus, new evidence not considered by the PTO may ease the challenger’s burden to persuade the jury of invalidity by clear and convincing evidence. The Court advised:
[W]e note that a jury instruction on the effect of new evidence can, and when requested, most often should be given. When warranted, the jury may be instructed to consider that it has heard evidence that the PTO had no opportunity to evaluate before granting the patent. When it is disputed whether the evidence presented to the jury differs from that evaluated by the PTO, the jury may be instructed to consider that question. In either case, the jury may be instructed to evaluate whether the evidence before it is materially new, and if so, to consider that fact when determining whether an invalidity defense has been proved by clear and convincing evidence. (Slip op. at 18.)
The Court concluded its opinion by listing the many policy arguments propounded by the parties and the amici as to the wisdom of the clear and convincing evidence standard. In the end, the Court did not address these policy positions on the merits, noting that Congress has chosen to adopt the common-law presumption of patent validity in the 1952 Patent Act and, therefore, it was up to Congress to consider any “recalibration of the standard of proof.”