The U.S. Supreme Court issued its much-anticipated decision in Microsoft Corp. v. i4i Limited Partnership and affirmed, without hesitation, that patent invalidity must be proven by clear and convincing evidence. Still, the Supreme Court’s seemingly straight-forward opinion invited patent chal-lengers to request—and for lower courts to “most often” grant—jury in-structions on the effect of new evidence not previously before the Patent Office. This practice may potentially weaken the presumption of validity for a patent.
i4i sued Microsoft in the Eastern District of Texas in 2007, alleging infringement of U.S. Patent No. 5,787,449. Microsoft alleged that the ‘449 patent was invalid under the “on-sale” bar of § 102(b), which precludes patent protection for any invention on sale for more than a year prior to the filing of a patent application. Microsoft alleged that i4i’s S4 software product, which was not before the Patent Office during the prosecution of the ‘449 patent, embodied the claimed invention and rendered the ‘449 claims invalid.
Relying principally on KSR Co. Int’l v. Teleflex, Inc., 550 U.S. 398 (2007), in which the Supreme Court noted that “the rationale underlying the presumption [of validity]—that the PTO, in its expertise, has approved the claim—seems much diminished” where the references were not considered by the Patent Office, Microsoft argued that it was required only to prove invalidity by a preponderance of the evidence. Microsoft proposed the following hybrid jury instruction:
“Microsoft’s burden of proving invalidity and unenforceability is by clear and convincing evidence. However, Microsoft’s burden of proof with regard to its defense of invalidity based on prior art that the examiner did not review during the prosecution of the patent-in-suit is by preponderance of the evidence.”
The trial court rejected Microsoft’s arguments and proposed instructions, instead giving the following instruction, familiar to anyone trying patent cases:
“Microsoft has the burden of proving invalidity by clear and convincing evidence.”
The jury concluded that Microsoft had not met its burden, awarding $200 million in damages. On appeal, the Federal Circuit affirmed the applicability of the clear and convincing evidence standard, finding no error in the trial court’s instruction.
The Supreme Court granted certiorari and heard argument on April 18, 2011. The unanimous Court determined that use of the clear and convincing evidence standard for invalidity is correct under the patent statute.
The Court reiterated its pre-1952 holding articulated in Radio Corp. of America v. Radio Engineering Laboratories, Inc., 293 U.S. 1, 2 (1934) (“RCA”), that “there is a presumption of validity, a presumption not to be overthrown except by clear and cogent evidence.” The Court noted that when Congress enacted § 282 of the Patent Act of 1952 and declared that a patent is “presumed valid,” it may be presumed that Congress intended to incorporate the heightened standard of proof articulated in RCA. The Court also recognized that the Federal Circuit “has never wavered” in its interpreta-tion of § 282 as requiring an invalidity defense to be proven by clear and convincing evidence. Finally, the Court noted that Congress has often amended § 282 over that last several decades and, despite significant criticism of the heightened invalidity standard of proof, it has not once even considered a proposal to lower the standard.
The Court expressly rejected Microsoft’s argument for a fluctuating standard of proof where evidence before the fact finder was not before the PTO during the examina-tion process, noting that the RCA opinion spoke directly on this issue, applying the heightened standard of proof even where the evidence before the court was “different” than that considered by the PTO. The Court also stated that had Congress intended to drop the heightened standard of proof under these circumstances, it would have done so expressly.
Despite these affirmations of how the patent trial bar has been doing business for decades, the decision may not be as benign as it appears in its holding. The Court recognized that where new evidence supporting invalid-ity was not previously considered by the PTO, “its considered judgment may lose significant force.” Without endorsing any particular formulation, the Court suggested that in these instances a jury may be instructed to consider that it has heard evidence not previously before the PTO when it granted the patent, or to evaluate whether the evidence is “materially new,” and if so, to consider that fact when determining whether the invalidity defense has been proved by clear and convincing evidence. Microsoft, however, failed to request such an instruction from the trial court. This suggestion opens the door for defendants to formulate carefully crafted instructions having the intended effect of suggesting that the presumption of validity might not have the same strength for prior art not before the examiner. It is not difficult to imagine a jury effectively applying a hybrid analysis—much like Microsoft sought at trial—in their deliberations. These types of separate instructions for evidence not considered during prosecu-tion might gain some traction following the Court’s suggestion.
Finally, in a concurring opinion, Justice Breyer reiter-ated that the clear and convincing standard is an evidentiary standard to be applied to questions of fact and not to questions of law. In order to prevent the heightened standard “from roaming outside its fact-related reservation,” Justice Breyer recommended specific interrogatories and special verdicts to make clear which specific factual findings underlie the jury’s conclusions. The i4i verdict form was a general verdict form, as compared to more detailed special verdict forms similar to the template included in the Northern District of California’s Model Patent Jury Instructions (November 2007) (Appendix C.3 – www.cand.uscourts.gov/filelibrary/5/Model-Patent-Jury-Instructions.pdf).
While the Supreme Court did nothing to change the law regarding invalidity or application of the clear and convincing standard of proof, it is likely that defendants will seek separate instructions regarding evidence of prior art not considered during prosecution of patents in suit. At a minimum, in view of the decision, patent litigators should review their preferred jury instructions and verdict forms to better highlight the differing factual underpinnings of the invalidity evidence they present at trial.