In a unanimous decision issued June 9, 2011, the Supreme Court rejected Microsoft’s arguments that a granted U.S. patent can be invalidated based on a mere preponderance of evidence, rather than clear and convincing evidence, as long has been required. The Federal Circuit had interpreted 35 USC § 282 as embodying a clear and convincing standard, and the Supreme Court agreed.
As I wrote previously, the facts of the patent infringement litigation between i4i and Microsoft have very little to do with the issue raised at the Supreme Court. Still, I will review them for context.
The patent at issue, U.S. 5,787,449, relates to markup languages used in word processing programs. i4i asserted the patent against certain versions of Microsoft Word, and a jury awarded i4i a record $200 million in damages, which the district increased by $40 million in view of the jury finding of willfulness
The On-Sale Bar Challenge
Microsoft had challenged the validity of the patent under the on-sale bar provisions of 35 USC § 102, based on i4i's sale of a software program called SEMI-S4 (S4) more than one year before the patent's filing date. That S4 was sold before the critical date was not disputed, but the parties disagreed as to whether S4 met the limitations of the patent claims. 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 Appeal
In its appeal to the Federal Circuit, Microsoft challenged the jury verdict (and the denial of JMOL) on several grounds, including the standard of proof for the on-sale bar issue. As framed by the Federal Circuit:
According to Microsoft, the burden of proof should have been less for prior art that was not before the PTO. . . .
The court quickly disposed of this 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.
Oral Arguments At The Supreme Court
The parties’ arguments were well presented in the oral arguments at the Supreme Court.
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.
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.
Presenting the position of the United States, Deputy Solicitor General Malcolm R. Stuart urged retention of the clear and convincing evidence standard based on the 1935 Supreme Court case in Radio Corp. of America v. Radio Engineering Laboratories, Inc. ("RCA").
The Supreme Court Decision
Justice Sotomayor issued the opinion of the Court, which was joined by Justices Scalia, Kennedy, Ginsberg, Breyer, Alito and Kagan. Justice Breyer also filed a separate concurring opinion joined by Justices Scalia and Alito. Justice Thomas concurred in the judgment. Chief Justice Roberts did not participate.
The Court considered and rejected both Microsoft’s aggressive argument that
a defendant in an infringement action need only persuade the jury of an invalidity defense by a preponderance of the evidence
and its fall-back argument that
a preponderance standard must apply at least when an invalidity defense rests on evidence that was never considered by the PTO in the examination process.
The Court considered the language of the statute (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.
and noted that "while the statute explicitly specifies the burden of proof, it includes no express articulation of the standard of proof."
The Court considered the common law meaning of "presumed valid" at the time the statute was enacted (1952), and cited this passage of its 1934 RCA decision as "authoritative" on the issue:
"[T]here is a presumption of validity, a presumption not to be overthrown except by clear and cogent evidence."
The Court reasoned that "by the time Congress enacted § 282, . . . the presumption of patent validity had long been a fixture of the common law," and "[a]ccording to its settled meaning, a defendant raising an invalidity defense bore 'a heavy burden of persuasion,' requiring proof of the defense by clear and convincing evidence."
"Squint as we may, we fail to see the qualifications that Microsoft purports to identify in our cases."
The Court invoked "the general rule that a common-law term comes with its common-law meaning," and found no reason to conclude that Congress intended to "drop" the heightened standard "simply because §282 fails to reiterate it expressly."
Turning to Microsoft’s fall-back position, the Court noted:
Our pre-1952 cases never adopted or endorsed the kind of fluctuating standard of proof that Microsoft envisions. And they do not indicate, even in dicta, that anything less than a clear-and-convincing standard would ever apply to an invalidity defense raised in an infringement action.
The Court acknowledged appellate court decisions "observ[ing] that the presumption of validity is 'weakened' or 'dissipated'" when "the evidence . . . was never considered by the PTO," but qualified those as supporting the principle that "new evidence supporting an invalidity defense may 'carry more weight' . . . than evidence previously considered," rather than setting forth a different standard of proof.
Simply put, if the PTO did not have all material facts before it, its considered judgment may lose significant force. . . . And, concomitantly, the challenger’s burden to persuade the jury of its invalidity defense by clear and convincing evidence may be easier to sustain.
The Supreme Court Offers Guidance On Jury Instructions
While careful not to "endorse" specific jury instructions, the Court discussed possible jury instructions on new evidence.
- [A] jury instruction on the effect of new evidence can, and when requested, most often should be given.
- 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.
- When it is disputed whether the evidence presented to the jury differs from that evaluated by the PTO, the jury may be instructed to consider that question.
- [T]he jury may be instructed to evaluate whether the evidence before it is materially new, and if so, to consider that fact when determining whether an invalidity defense has been proved by clear and convincing evidence.
The Supreme Court Stays Away From The Policy Arguments
The Court acknowledged conflicting policy arguments raised by the parties and amici, but declined to wade into the political fray:
We find ourselves in no position to judge the comparative force of these policy arguments.
The Court noted that Congress has done nothing to amend the statute to change the standard of proof, in spite of consistent Federal Circuit decisions applying the clear and convincing evidence standard and other revisions to § 282.
Congress specified the applicable standard of proof in 1952 when it codified the common-law presumption of patent validity. Since then, it has allowed the Federal Circuit’s correct interpretation of §282 to stand. Any recalibration of the standard of proof remains in its hands.
Justice Breyer’s Concurrence
Justice Breyer "join[ed] the Court’s opinion in full," but wrote separately to emphasize that "the evidentiary standard of proof applies to question of fact and not to questions of law." Thus, the "strict standard of proof" upheld here "has no application" to such legal issues as
- Do the given facts show that the product was previously “in public use”?
- Do they show that the invention was “novel” and that it was “nonobvious”?
- Do they show that the patent applicant described his claims properly?
Justice Breyer urged courts to do their part "to keep the 'clear and convincing' standard within its proper legal bounds by separating factual and legal aspects of an invalidity claim," in order to "increase the likelihood that discoveries or inventions will not receive legal protection where none is due."
Justice Thomas’ Concurrence
Justice Thomas wrote a separate opinion concurring in the judgment based on common law rather than the statute. Justice Thomas is "not persuaded that Congress codified a standard of proof" in § 282, but agrees that the clear and convincing evidence standard derives from the common law, which "has never been overruled by this Court or modified by Congress."
A Win For Patent Holders
Many patent holders may be breathing a sigh of relief now that the Supreme Court has put Microsoft’s "fluctuating standard of proof" arguments to rest. While most legal scholars believed that the clear and convincing standard was firmly-grounded in the pre-1952 common law and Federal Circuit jurisprudence surrounding § 282, there were concerns that at least some Justices might have agreed with the logic underlying Microsoft’s position. At least in this case, the rule of law carried the day. With nothing in the currently pending patent reform bills that would change this standard, patent holders (and their investors) can continue to rely on the presumed validity of their patents.
Another case that could have a blanket impact on the strength of granted patents is Therasense. If this case ends up before the Supreme Court, and the Court affirms, the tightened inequitable conduct standard could make it harder to render a patent unenforceable.