On April 18, 2011, the U.S. Supreme Court heard oral arguments in Microsoft Corp. v. i4i Limited Partnership. Microsoft wants the Court to reconsider the "clear and convincing evidence" standard usually required to invalidate a patent, and hold that only "a preponderance of the evidence" is required when the prior art at issue was not considered by the USPTO. The Justices asked similar questions on both sides of the issue, and did not seem to telegraph their views. With Justice Roberts' recusal, a 4-4 split decision could leave the Federal Circuit's decision in tact without a decisive proclamation from the Supreme Court.
My previous article about this case provides more detail on the underlying dispute. Briefly, Microsoft had challenged the validity of the patent at issue under the on-sale bar provisions of 35 USC § 102(b). The question presented to the jury was:
Did Microsoft prove by clear and convincing evidence that any of the listed claims of the '449 patent are invalid?
The jury answered "NO" for each asserted claim. Microsoft moved for judgment as a matter of law (JMOL) on that issue, but the district court denied the motion. The Federal Circuit also quickly disposed of Microsoft's argument:
We conclude that the jury instructions were correct in light of this court’s precedent, which requires the challenger to prove invalidity by clear and convincing evidence.
The Petition for Certiorari
Microsoft’s petition for certiorari presented the question:
"Whether the court of appeals erred in holding that Microsoft’s invalidity defense must be proved by clear and convincing evidence."
One of Microsoft's arguments is that
The clear and convincing standard is based on a rationale—"that a government agency such as the Patent Office was presumed to do its job"—that does not take into account the realities of patent prosecution (e.g., the time pressures of examination, the imbalance of information) and simply does not apply when the prior art at issue was not considered by the examiner.
The Supreme Court Oral Arguments: Microsoft
For Microsoft, former Deputy Solicitor General Thomas G. Hungar argued:
"It makes no sense to have a heightened standard of proof when the relevant prior art evidence was never even considered by PTO."
Justices Scalia, Ginsburg and Kagan spent some time grilling Hungar on the significance and scope of Justice Cardozo's opinion in Radio Corporation of America v. Radio Engineering Labs., Inc., 293 U.S. 1 (1934) ("RCA"), which is oft-cited for setting forth the "clear and convincing" standard.
Switching gears, Justice Ginsburg pointed out the Federal Circuit's consistency on the appropriate burden of proof, and noted Congress' failure to even propose a legislative change.
Justice Sotomayor noted the practice of some litigants to offer a dual jury instruction:
"They give a clear and convincing standard, and they add a separate instruction that tells the jury, in applying that standard, you should consider the fact that the PTO did not see this evidence."
Hungar stuck to his main position, responding, "that construction would not solve the fundamental problem, which is that when the Patent Office didn't even consider the evidence, it makes absolutely no sense, as the KSR court indicated, to have this heightened deference."
Justice Breyer took a more philosophical approach:
[T]here are two types of errors. It's a bad thing not to give protection to an invention that deserves it; and it is just as bad a thing to give protection to an invention that doesn't deserve it. Both can seriously harm the economy. . . . So I'm turning you to and say: Well, what should we do about it?
Justice Breyer asked whether reexamination was a sufficient safeguard against the second type of errors. Hangar was able to quickly respond "No" since the on-sale bar at issue in this case could not have been resolved in a reexamination proceeding.
Justices Ginsburg, Kennedy and Alito then turned the conversation to the context of the 1952 Patent Act, the shifting of burdens of presumption and persuasion, and the meaning of each clause of the statute at issue (35 USC § 282):
A patent shall be presumed valid. . . . The burden of establishing invalidity of a patent or any claim thereof shall rest on the party asserting such invalidity.
The Supreme Court Oral Arguments: i4i
Arguing for i4i, former Solicitor General Seth P. Waxman opened with three main points:
The long-settled, clear and convincing evidence standard is correct, one, as a matter of statutory interpretation, two, as a matter of stare decisis in a field in which stability is particularly important, and, three, as a matter of first principles.
On the first point, Waxman emphasized that while Congress has been active in different aspects of patent reform, and "is well aware of the clear and convincing evidence standard," it "has done nothing whatsoever to change it, even make any effort to consider making such a sweeping change in long-standing doctrine."
Justice Alito grilled Waxman on the statutory language, and Justice Ginsburg raised the issue of dual jury instructions. Waxman had no problem with instructing a jury that
[T]he defendant bears the burden of proving invalidity by clear and convincing evidence, and in deciding whether the defendant has met that burden, you may find it more easily met with evidence that you conclude the Patent Office did not consider in evaluating patentability.
Justice Ginsburg turned Microsoft's arguments on Waxman:
If the whole reason for this extra deference, for this clear and convincing standard, is a Patent Office is expert and so we defer . . . to their judgment, but if they haven't judged anything, what is the justification for continuing to have the clear and convincing standard?
Waxman outlined three independent justifications:
- [A]n infringer's validity challenge is a collateral attack on a government decision that has already been made.
- [T]he harm from an erroneous determination is hugely asymmetrical. A single holding of invalidity by a single lay jury vitiates for all time the patent and all of the reliance interest by the inventor and the investors and the licensees who have relied upon that ex ante.
- [T]his is a grant of a property right that under the Constitution is specifically designed to induce reliance in exchange for the inventor's honoring her half of the patent bargain . . . that is, public disclosure of her intellectual property for the public benefit, and the commitment of capital by investors and licensees that's necessary to bring into fruition for the public benefit.
The Supreme Court Oral Arguments: The United States
Presenting the position of the United States, Deputy Solicitor General Malcolm R. Stuart urged that the RCA case was intended to provide a broad statement of law and should continue to be interpreted and applied broadly, and that Congress intended to codify those principles in the 1952 Patent Act. When questioned on the specific phrasing of the statute, Stuart responded that it was a "belts and suspender" approach.
Stuart outlined three justifications for the "clear and convincing" standard:
- The grant of a patent has historically been understood to reflect a quid pro quo between the applicant and the government, and the applicant's part of the bargain was disclose that which might otherwise be maintained as a trade secret, and the government's part of the bargain was give a period of exclusivity.
- The second is related to the patentee's reliance interests . . . . Congress could reasonably determine that there are enough uncertainties along the way to getting a patent, to having it overturned on various other grounds [so] that in an invalidity suit . . . the patentee should have reasonable confidence that it won't be overturned unless the evidence is clear.
- [T]he third thing I would say is even when a defendant in an infringement suit comes forward with prior art that was not itself considered by the PTO, there's always the possibility that that prior art will be substantively equivalent to prior art that the PTO did consider; and so in cases like this . . . the defendant would be asking the jury to make a determination that the PTO had never made, but in substance, what the defendant would be asking the jury to do is conclude that what the PTO thought was a patentable advance really was not so.