Summary

On June 9, 2011, the U.S. Supreme Court issued its decision in Microsoft v. i4i,1 rejecting Microsoft’s position that a granted U.S. patent can be invalidated based on a mere preponderance of evidence. The Federal Circuit has long held that the “presumption of validity” language in 35 U.S.C. § 282 requires proof by “clear and convincing evidence” that a patent claim is invalid. Relying on statutory interpretation and common law precedent, the Supreme Court unanimously affirmed.

Background of the Case

U.S. Patent No. 5,787,449, owned by a small Canadian company, i4i, relates to markup languages used in word processing programs. i4i alleged that Microsoft’s popular Word software infringed the ‘449 patent and filed suit in 2007 in the Eastern District of Texas. In 2009, a jury awarded i4i $290 million in damages. During trial, Microsoft claimed that the patent was invalid under the on-sale bar provision of 35 U.S.C. § 102(b) based on i4i’s sale of a software program called S4. The parties agreed that the S4 software was sold more than one year before the patent’s filing date, but disagreed on whether the S4 software met the limitations of the asserted claims. Two of S4’s programmers, who were also the named inventors of the ’449 patent, testified that the software did not practice the patented invention. Because the S4 source code had been destroyed years before the case commenced, the only evidence on which Microsoft could rely regarding S4’s operation was the testimony of a former i4i employee and Microsoft’s expert. The jury verdict form included the question: “Did Microsoft prove by clear and convincing evidence that any of the listed claims of the ’449 patent are invalid?” The jury answered “No.”

In its appeal to the Federal Circuit, Microsoft challenged the validity, infringement and damage rulings of the trial court. Microsoft argued that because the S4 software was not considered by the USPTO during the prosecution of the ’449 patent, the jury should only apply a preponderance-of-the-evidence standard in determining the validity of the claims based on Microsoft’s on-sale-bar defense. The Federal Circuit, relying on long-standing precedent, affirmed the jury instruction and rejected Microsoft’s argument.

The Supreme Court’s Opinion

The Supreme Court granted Microsoft’s request for certiorari on the following question: “Whether the court of appeals erred in holding that Microsoft’s invalidity defense must be proved by clear and convincing evidence.”

Microsoft argued that the preponderance-of-the-evidence standard should be used in all invalidity challenges. As a fallback, Microsoft argued that such a standard should be used at least for invalidity evidence not previously considered by the USPTO. Microsoft argued that the “presumption of invalidity” language in § 282 was merely for allocating the burden of proof (i.e., burden of production and burden of persuasion) between a patentee and an accused infringer, but not for establishing the standard of proof. Thus, Microsoft argued that the Federal Circuit erred by reading a clear-and-convincing evidentiary standard into the statute.

Justice Sotomayor issued the opinion of the full Court, with Justice Roberts recusing himself from this case. The Court first acknowledged that the “presumption of validity” language of 35 U.S.C. § 282 “explicitly specifies the burden of proof,” but does not “articulat[e] the standard of proof.” The Court, however, held that under its precedents, if the “presumption of validity” language had a settled common-law meaning when Congress adopted the term in 1952 to enact § 282, then that common-law meaning “accurately expresse[d] the legislative purpose.”

The Court turned to Radio Corp. of America v. Radio Engineering Laboratories, Inc., 293 U.S. 1 (1934) (“RCA”) as precedent, and found that a unanimous RCA court had held “there is a presumption of validity, a presumption not to be overthrown except by clear and cogent evidence.” Thus, the Court reasoned that by 1952, the presumption of patent validity “had long been a fixture of the common law,” and a defendant raising an invalidity defense at that time bore “a heavy burden of persuasion” and needed “clear and convincing evidence.” The Court held that based on the case law it must assume Congress meant to incorporate into the statute “the cluster of ideas” (i.e., the clear-and-convincing-evidence standard) that attached to the adopted “presumption of validity” common-law term. Thus, the Court ruled that Congress had incorporated the clearand- convincing-evidence standard into § 282.

Although the Court held that the clear-and-convincing evidentiary standard must be used in all invalidity challenges, it also discussed the case where an asserted patent enjoys the presumption of validity even over prior art evidence that was never considered by the USPTO.2 The Court echoed the Federal Circuit’s comments that a district court can address this situation by giving a jury instruction that the undisclosed art should have more weight, rather than lowering the standard of proof for such newly discovered evidence. The Court stated that Microsoft did not request such a jury instruction at trial and it was too late for Microsoft to raise that issue on appeal.

The Court also acknowledged the various policy arguments advanced by the parties and amici as to the wisdom of the clear-and-convincing-evidence standard. In the end, the Court determined that it was bound by the statute and common law, and thus could not base its decision on those policy arguments. In particular, the Court noted that during the nearly 30 years in which the Federal Circuit deployed this evidentiary standard, Congress had multiple chances to amend § 282 but never touched the standard, despite ongoing criticisms of it.

Concurring Opinions

Justice Breyer’s Concurring Opinion Perhaps the most interesting part of the Court’s decision is Justice Breyer’s short but potentially significant concurring opinion.3 The concurrence, while joining the Court’s opinion in full, emphasizes that although the clear-and-convincing-evidence standard is correct, the standard only applies to questions of fact, not questions of law. While seemingly stating the obvious, this distinction is significant because in patent law, the boundary between a question of law and a question of fact is often blurred. Many issues, patent invalidity included, are “questions of law with underlying factual inquiries.”

Justice Breyer suggested that courts could separate “factual and legal aspects of an invalidity claim by, for example, using instructions based on case-specific circumstances that help the jury make the distinction or by using interrogatories and special verdicts to make clear which specific factual findings underlie the jury’s conclusions.” He explained that in this way, “courts can increase the likelihood that discoveries or inventions will not receive legal protection where none is due.” [Emphasis added.]

By these remarks, Justice Breyer is suggesting a practical solution for addressing the criticisms to the application of the clear-and-convincing-evidence standard. Three Justices joined Justice Breyer’s concurring opinion, and Justice Roberts might well join if given the chance.4 How district courts will receive Justice Breyer’s opinion, and whether the Court will take another case to consider Justice Breyer’s approach, are potential developments to watch for.