The U.S. Supreme Court resolved two important patent law issues that were before it this term. On May 31, 2011, the Court issued its decision in Global-Tech Appliances, Inc. v. SEB S.A., U.S., 10-6, -- U.S. – (2011), which clarifies the state of mind a party must have to be liable for inducing infringement by others. On June 9, 2011, the Court issued its decision in Microsoft Corp. v. i4i Ltd., U.S., No. 10-290, -- U.S. – (2011), which addresses the proper burden of proof for invalidating a patent.
The Court's decision in Global-Tech raises the standard for proving induced infringement. The case involves interpretation of Section 271(b) of the Patent Act, which states: “Whoever actively induces infringement of a patent shall be liable as an infringer.” The issue for the Court was what state of mind a party must possess to “actively induce” infringement by a third party.
The Federal Circuit had ruled that a party is liable for inducing infringement if it was “deliberately indifferent to a known risk that a patent may exist” covering the accused product. The Supreme Court rejected the “deliberate indifference” standard. Instead, the Court held that a plaintiff must show that a defendant either had actual knowledge that the induced acts constitute infringement, or that the defendant engaged in “willful blindness” of the existence of a patent.
“Willful blindness,” the Court held, requires that “(1) the defendant must subjectively believe that there is a high probability that a fact exists and (2) the defendant must take deliberate actions to avoid learning of that fact.” The Court explained how the “willful blindness” test differs from the Federal Circuit's “deliberate indifference” standard, stating that deliberate indifference permitted a finding of knowledge “when there is merely a ‘known risk' that the induced acts are infringing” and that it did not require “active efforts by an inducer to avoid knowing about the infringing nature of the activities.”
As a practical matter, it remains to be seen whether the new “willful blindness” standard will lead to a decrease in the number of parties found liable for induced infringement. Indeed, the Supreme Court found that the defendant in Global-Tech was liable under either standard.
The second case on the Supreme Court's docket, i4i, initially made headlines when the jury awarded the patent owner $290 million in damages. One of Microsoft's defenses was that the patent should be found invalid because i4i was allegedly selling a product covered by the patent more than one year before it filed its application with the USPTO. That prior art was not considered by the USPTO during prosecution.
The Supreme Court granted review on the issue of whether invalidity must be proven by “clear and convincing evidence,” or the lower “preponderance of the evidence” standard. The “clear and convincing” standard has been in place since 1984, when it was established by the Federal Circuit in American Hoist & Derrick Co. v. Sowa & Sons, Inc., 725 F.2d 1350, 1359 (Fed. Cir. 1984). The dispute involved interpretation of Section 282 of the Patent Act, which states: “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 heard oral arguments in the case on April 18, 2011. At the arguments, Microsoft's counsel contended that Section 282 does not specify a level of proof and, as a result, the lower preponderance of the evidence standard should apply by default. i4i, on other hand, argued that Congress had implicitly condoned use of the clear and convincing standard by failing to amend Section 282 during the 27 years since the American Hoist decision.
One issue the Court had to wrestle with is whether the lower burden of proof should apply only in those instances where the USPTO did not consider the prior art at issue. In its 2007 decision in KSR Int'l Co. v. Teleflex, Inc., 550 U.S. 398 (2007), the Supreme Court suggested it might favor such a bifurcated standard of proof. In its i4i decision, however, the Court rejected that approach, finding there is nothing in the text of Section 282 that “suggests Congress meant to … enact a standard of proof that would rise and fall with the facts of each case.”
Ultimately, the Court unanimously affirmed the Federal Circuit's clear and convincing standard. Regarding situations where the USPTO did not consider the prior art at issue, the Court explained that this can be dealt with in jury instructions: “When warranted, the jury may be instructed to consider that it has heard evidence that the PTO had no opportunity to evaluate before granting the patent.”
The i4i decision is viewed by many as a clear victory for patent holders and generally maintains the long-standing state of the law. But, it remains to be seen how future courts will instruct juries about prior art that was not considered by the USPTO in light of this decision.