On June 9, 2011, the United States Supreme Court decided Microsoft Corp. v. i4i Limited Partnership and unanimously affirmed the Federal Circuit’s longstanding requirement that parties to litigation challenging patent validity must prove the patent invalid by “clear and convincing” evidence.
Respondents (collectively, “i4i”) sued petitioner Microsoft Corp. (“Microsoft”) for willful infringement of their patent on an improved method for editing computer documents. Microsoft counterclaimed and argued, as one of its defenses, that i4i’s patent was invalid under 35 U.S.C. § 102(b)’s on-sale bar, which precludes protection for any invention placed on sale in this country more than one year prior to the patent application filing date. i4i sold a software program allegedly embodying the claimed invention more than one year before applying for its patent. The United States Patent and Trademark Office (“PTO”) did not consider the issue when allowing i4i’s patent. The dispute over what i4i sold before the filing date primarily turned on the named inventors’ testimony because the software’s source code had been destroyed prior to litigation.
Because the PTO did not consider whether the on-sale bar applied, Microsoft asked the district court to instruct the jury that Microsoft needed to prove its invalidity defense only by a preponderance of evidence rather than by “clear and convincing” evidence. The district court disagreed and instructed the jury that “clear and convincing” evidence was required. The jury found in favor of i4i and awarded i4i $240 million — a verdict that the district court upheld. Microsoft appealed. The Federal Circuit affirmed, relying on its settled interpretation of 35 U.S.C. § 282 and reiterated that a challenger must always prove invalidity by clear and convincing evidence. Microsoft appealed to the Supreme Court, which granted certiorari. Microsoft challenged the application of the “clear and convincing” standard in cases where the PTO did not consider evidence of invalidity and argued that a preponderance standard should apply for invalidity defenses in all cases.
Patent Invalidity Requires Clear and Convincing Evidence
Justice Sotomayor delivered the opinion for seven of the justices as Chief Justice Roberts recused himself. Justice Breyer joined the majority but also wrote a concurring opinion joined by Justices Scalia and Alito. Justice Thomas concurred only in judgment.
Despite Microsoft’s attempts to lessen the burden of proof as it relates to newly presented prior art, the Court remained focused on the language of the governing statute, §282, which reads in relevant part: “A patent shall be presumed valid.” The Court acknowledged that “no express articulation of the standard of proof” was included in the statute; however, it did point out that Congress had made a choice by use of the phrase “presumed valid,” a term with a “settled common-law meaning.” Moreover, based on its decision in Radio Corp. of America v. Radio Engineering Laboratories, Inc., 293 U.S. 1, the Court concluded that “presumed valid” has a settled meaning — requiring proof by clear and convincing evidence to negate the presumption.
Although unwilling to relax the clear and convincing standard, the Court did agree that “new evidence” of invalidity likely “carries more weight” than evidence that had been previously considered and rejected by the PTO. Specifically, the Court noted that “if the PTO did not have all material facts before it, its considered judgment may lose significant force,” and “concomitantly, the challenger’s burden to persuade the jury of its invalidity defense by clear and convincing evidence may be easier to sustain.” (emphasis added). Consequently, “a jury instruction on the effect of new evidence can, and when requested, most often should be given.” The Court provided guidance to lower courts on this issue.
Because Microsoft had not requested such an instruction from the district court, the Court held that its argument that such an instruction was warranted was too late. Finally, the Court explained that any decision to shift the standard of proof rests with Congress, not the courts.
Implications of the Decision
Though a disappointment for the defense bar, which had hoped for a shift that would benefit parties challenging the validity of patents, the Court provides clarity to this issue and ought to provide relief to patentees, who are now assured that the “clear and convincing” evidence standard will continue to apply in all litigation cases, regardless of whether the PTO has considered the evidence and arguments raised at trial. However, the Court’s assertion that juries should be instructed that challengers can more easily meet their burden of proving invalidity when relying on evidence not considered by the PTO, provides some solace to those accused of infringement. The practical implications of such jury instructions remain to be seen.