The United States Supreme Court has accepted a new patent case that will determine the level of difficulty for challenging a patent’s validity in court.
On November 29, 2010, the Supreme Court granted a writ of certiorari to hear Microsoft’s appeal in the i4i LP v. Microsoft Corp. case – the largest patent infringement verdict ($200 million) ever to be affirmed on appeal, according to Microsoft’s briefs. Microsoft has asked the Supreme Court to decide whether the appellate court (the Federal Circuit) erred in holding that the same burden of proof is required to invalidate a patent based on a prior art reference regardless of whether the United States Patent and Trademark Office (USPTO) already considered that reference while the patent was being prosecuted.
The appeal involves the interpretation of Section 282 of the Patent Act, which states that “[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.” In 1984, the Federal Circuit interpreted Section 282 to require a heightened evidentiary burden to invalidate a patent in court. Am. Hoist & Derrick Co. v. Sowa & Sons, Inc., 725 F.2d 1350, 1359 (Fed. Cir. 1984). This is known as the “clear and convincing” burden of proof rather than the lower “preponderance of the evidence” burden of proof (i.e., more likely than not), which is the norm in most civil cases.
Microsoft’s petition relies heavily on a statement the Supreme Court made in KSR International Co. v. Teleflex , Inc., 550 U.S. 398, 427 (2007), that the presumption of validity “seems much diminished” when an invalidity defense rests on evidence that the USPTO never considered. In this case, however, the Federal Circuit stated that “the Supreme Court’s decision in KSR ... did not change the burden of proving invalidity by clear and convincing evidence.”
Microsoft also relies on the decisions by the regional circuit courts of appeals, which heard patent appeals before the Federal Circuit was formed in 1982. Each regional circuit held that the clear-and-convincing standard does not apply in situations involving prior art that the USPTO did not consider when it awarded the patent. For example, the Eleventh Circuit held that “when pertinent prior art was not considered by the Patent Office, the burden upon the challenging party is lessened, so that he need only introduce a preponderance of the evidence to invalidate a patent.” Manufacturing Research Corp. v. Graybar Electric Co., 679 F.2d 1355, 1364 (11th Cir. 1982).
In response, i4i contends that the Federal Circuit’s interpretation of Section 282 has been settled law for more than 25 years and, therefore, any change to this interpretation should come from Congress. Moreover, Congress has had the same amount of time to overturn the Federal Circuit, and Congress’s inaction is evidence that it does not disagree with the Federal Circuit. Additionally, Congress has passed legislation to establish an administrative process, called reexamination, that allows a third party to challenge the validity of an issued patent, based on certain types of prior art, absent the presumption of validity that normally occurs in court proceedings. The fact that the Patent Act imposes no presumption of validity in a reexamination proceeding, but establishes a presumption of validity in litigation under Section 282, is further evidence, according to i4i, that Congress intended a higher burden of proof to invalidate a patent in a court proceeding.
Eleven amicus briefs were filed in support of Microsoft, representing a diverse group of interested third parties, such as Google, Toyota, the Electronic Frontier Foundation, trade and industry groups, and legal and economic scholars. The outcome of this case will clearly have a wide impact on technology companies, and could jeopardize the validity of many issued patents when challenged in court. Additionally, the Court’s decision could affect how patent practitioners handle patent prosecution, as a decision in favor of Microsoft may influence them to cite many more references with their patent applications.
This is the third patent case – and the fourth intellectual property case – that the Supreme Court will hear this term.