Court of Appeals for the Federal Circuit, Decision of 29 November 2010
The U.S. Supreme Court granted Microsoft's petition for certiorari in the patent infringement case i4i L.P v. Microsoft Corp., the outcome of which case could potentially affect the strength and value of all issued U.S. patents. Affirming the trial court decision, the Court of Appeals for the Federal Circuit (CAFC) upheld the established standard of proof for invalidity challenges and denied a rehearing en banc.
At trial, Microsoft sought a jury instruction that the burden of proof for invalidity based on prior art that the Patent and Trademark Office (PTO) examiner had not reviewed, was "by a preponderance of the evidence." The court denied Microsoft's request and instructed that the required standard of proof was "by clear and convincing evidence." Following the Texas jury's verdict in favor of i4i that awarded $200 million in damages, the trial judge awarded an additional $40 million for willful infringement and entered a permanent injunction against Microsoft.
In its petition for writ of certiorari to the Supreme Court, Microsoft framed the question presented as "whether the court of appeals erred in holding that Microsoft's invalidity defense must be proved by clear and convincing evidence," when the invalidity argument is based upon evidence that was not specifically considered by the PTO. Microsoft urged the Supreme Court to grant the petition for certiorari for three major reasons:
1. The CAFC's decision disregards the Supreme Court's decision in KSR Int'l Co. v. Teleflex Inc. and conflicts with decisions in all twelve regional circuits.
In its decision in KSR in 2007 the Supreme Court had noted that the rationale for the presumption of patent validity "seems much diminished" when an invalidity defense rests on evidence that the PTO never considered. But, in KSR, the court did not directly address the required standard of proof. Microsoft contends that the heightened standard of proof, required by the CAFC since 1982, conflicts with pre-1982 decisions in all twelve regional courts of appeal. According to Microsoft, each of the regional courts of appeal had rejected the heightened standard of proof for invalidity based on prior art that was not before the PTO.
2. The selection of an appropriate standard of proof for invalidity is essential to avoid distorting the patent system. Microsoft contends that invalid patents stifle, rather than promote, the progress of useful arts and that the PTO is overburdened with the inevitable result that it makes an increasingly large number of mistakes. Thus, because too many dubious patents are granted, accused infringers must prove invalidity by clear and convincing evidence, the standard hinders rather than promotes, progress.
3. The standard of proof issue is clearly presented and is ripe for review in this case.
Microsoft urges that the issue will not benefit from further percolation in the circuits because the regional courts of appeal do not hear patent cases since the establishment of the CAFC.
i4i, opposing the petition for certiorari, asserts that a "weakened" presumption of validity based upon prior art that was not considered by the PTO is already a part of the CAFC's jurisprudence and points out that Congress has had 26 years to reject the heightened standard imposed by the CAFC, but has not done so.
Eleven amicus briefs were filed by parties (some by multiple parties) supporting Microsoft's petition for certiorari, including a number by leading computer and software companies. The number of amicus briefs filed is just one indication of the interest generated by this case. Companies both large and small that assert patents, or defend against them, will watch with great interest to see if the Supreme Court makes it easier to invalidate a U.S. patent.