On November 29, 2010, the U.S. Supreme Court granted Microsoft’s petition for writ of certiorari challenging the Federal Circuit’s requirement that the invalidity defense provided in the Patent Act, 35 U.S.C. § 28, must be proven by clear and convincing evidence. i4i Ltd. P’ship v. Microsoft Corp., 598 F.3d 831 (Fed. Cir. 2010), cert. granted, 79 U.S.L.W. 3128 (U.S. Nov. 29, 2010) (No. 10-290). In light of the substantial $290 million judgment against Microsoft, which was confirmed earlier this year by the Federal Circuit, commentary about the case has focused almost exclusively on the damages holding, but Microsoft’s appeal relates to whether the Federal Circuit “erred in holding that [its] invalidity defense must be proved by clear and convincing evidence.” Petition for Writ of Certiorari, Microsoft Corp. v. i4i Ltd. P’ship, No. 10-290 (U.S. Aug. 27, 2010), 2010 WL 3413088.For a discussion of the background of the case and the Federal Circuit’s decision, see http://www.kilpatrickstockton.com/en/Knowledge_Center/Alerts_and_Podcasts/Legal_Alerts/2010/04/240_Million_Patent_Damages_Award_Affirmed.aspx.
Microsoft’s question challenges more than 25 years of Federal Circuit precedent. Pet. 2; Brief in Opposition at 5, 13-17 (U.S. Oct. 28, 2010). In the early 1980s, the Federal Circuit established the clear and convincing standard for challenges to patent validity based on its interpretation of the statutory presumption of validity for issued patents, at 35 U.S.C. § 282, and has since required such a showing regardless of the factual basis for the invalidity defense. See, e.g., Am. Hoist & Derrick Co. v. Sowa & Sons, Inc., 725 F.2d 1350, 1359 (Fed. Cir. 1984); Uniroyal, Inc. v. Rudkin-Wiley Corp., 837 F.2d 1044, 1050 (Fed. Cir. 1988); Environ Prods., Inc. v. Furon Co., 215 F.3d 1261, 1265 (Fed. Cir. 2000). Microsoft relying, in part, on dicta from KSR International Co. v. Teleflex Inc., 550 U.S. 398 (2007), in which the Supreme Court questioned the basis for the clear and convincing standard asserts that the standard should not always be so high, particularly because “‘the rationale underlying the presumption [of validity] - that the PTO, in its expertise, has approved the claim - seems much diminished’ where an invalidity defense rests on evidence that the PTO never had an opportunity to consider.” Pet. 2 (quoting KSR, 550 U.S. at 426).
Eleven amicus briefs—filed by leading companies including Apple, Cisco, Google, Wal-Mart, and Yahoo!; industry and interest groups, including the financial services industry, wireless technology industry, and the open-source community; a group of law professors; and generic pharmaceutical companies—supported Microsoft’s petition, echoing many of Microsoft’s statutory and legal arguments and adding additional arguments against the clear and convincing evidence standard, particularly when the invalidity defense is based on prior art not seen by the PTO. See Briefs of: Acushnet Co., et al.; Apple Inc.; CTIA – the Wireless Assoc.; Elec. Frontier Found., et al.; Facebook, Inc., et al.; Google, Inc., et al.; Intel Corp.; Sec. Indus. & Fin. Mkt. Ass’n, et al.; Teva Pharm. USA, Inc., et al.; Thirty-Six Professors; and Yahoo!, Inc. as Amici Curiae Supporting Petitioner, No. 10-290 (U.S. Sept. 29, 2010), all available at: http://www.scotusblog.com/case-files/cases/microsoft-v-i4i-limited-partnership.
In opposition, i4i countered that this heightened proof requirement correctly interprets the statute and therefore, this standard should only be changed by Congress. Resp. to Pet., at 17. I4i also argued that a reduced presumption of validity, requiring proof of invalidity by a mere preponderance of evidence, is available through the administrative challenge process (reexamination) before the PTOId., at 19.
Because the invalidity defense is raised routinely in patent litigation, the impact of the Court’s decision in this case has the potential to be far-reaching. In the event that the U.S. Supreme Court rules to reject the clear and convincing evidentiary standard as Microsoft and the amici argue, the greatest impact may be for defendants arguing invalidity in cases brought by non-practicing entities whose business model is primarily the licensing of their patent portfolios because lowered proof requirement could increase the chances that defendants in such cases would succeed on summary judgment.
Due to the importance of this issue, we will monitor the case closely.