The importance of patents in a knowledge economy is evident from the recent flurry of court decisions addressing patent related issues.  Today, the Supreme Court of the United States issued its second patent opinion this week.  The opinion maintains the existing presumption of patent validity, making patents easier to enforce and, consequently, more valuable.

Patent litigation is expensive, especially for a losing defendant.  Microsoft Corporation was the losing defendant in a patent infringement suit brought by i4i Ltd. Partnership over U.S. Patent No. 5,787,499 (the i4i patent).  The i4i patent claims a method for processing and storing documents separate from the meta data about the documents using markup languages like XML.

Microsoft Word has included XML editing capability since 2003.  In 2007, i4i filed suit for infringement.  After a seven day trial, the jury awarded $200 million in damages to i4i.  The court awarded an additional $40 million in damages for willful infringement.  Microsoft was unsuccessful on its appeal to the Federal Circuit, which affirmed the District Court judgment.  Microsoft appealed to the U.S. Supreme Court specifically challenging the presumption of patent validity.

The Patent Act adopted by Congress in 1952 provides “[a] patent shall be presumed valid” and “[t]he burden of establishing invalidity of a patent or any claim thereof shall rest on the party asserting such invalidity.”  35 U.S.C. § 282.  Under this presumption, invalidity must be proven by “clear and convincing” evidence. Clear and convincing evidence is a higher standard than the usual “preponderance of the evidence” standard for proving a fact in civil litigation.1  Therefore, it is harder for a defendant to prove invalidity under the clear and convincing standard.

Patents are presumed valid, in part, because there is a rigorous examination process before a patent is issued to an inventor.  Microsoft made two arguments against the presumption of validity.  First, Microsoft argued the statutory language did not require use of the clear and convincing evidence standard.  The Supreme Court did not agree.

“[B]y the time Congress enacted §282 and declared that a patent is “presumed valid,” the presumption of patent validity had long been a fixture of the common law.  According 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.”

The court noted the Federal Circuit “never wavered in this interpretation,” which reflected a “universal understanding”.  The Supreme Court concluded that over a century of case law gave the statutory language “presumed valid” a well-understood meaning that not only allocated the burden of proof but established the standard to be met.

Second, Microsoft argued that, even if the clear and convincing standard applies generally, it should not apply in this case.  Microsoft argued the i4i patent was invalid based on evidence that a commercial product has been sold by i4i using the claimed invention more than one year before the i4i patent application was filed.  This evidence was not considered by the patent examiner before the patent was issued.  Microsoft argued that the lower preponderance of the evidence standard should apply to “prior art” that had not been considered by the examiner.  But the Supreme Court could find no distinction in the statute between evidence that was considered by the patent examiner and evidence that was not.  While the Supreme Court indicated a jury may be instructed whether the evidence was considered by the Patent Office, the jury must still find invalidity by clear and convincing evidence.  The Supreme Court noted that, by adopting the established clear and convincing evidence standard, Congress had made a legislative assessment of the competing policies.  Despite many amendments to the Patent statutes over the years, Congress had never considered any amendment to change the standard of proof.  It is not the role of the Supreme Court to evaluate the merits of the standard Congress adopted.

Seven judges joined in the opinion by Justice Sotomayor.  Justice Thomas concurred in the judgment and Justice Roberts took no part in the decision.

The decision upholding uniform application of the clear and convincing standard to any claim of patent invalidity maintains established expectations regarding the strength of an issued patent and supports the economic value of patents.  This decision comes on the heels of the Supreme Court’s decision on Monday to uphold the commercial assignment of patent rights by a Stanford University research despite claims the assignment was invalid under the Bayh-Dole Act applicable to government funded research.  In both cases this week, the Supreme Court upheld commercial expectations and rights of the inventor to exploit (by license or enforcement) commercially valuable patents.  In both cases long established practices and expectations weighed heavily in the Court’s analysis.  The first sentence of the Court’s opinion on Monday reads:  “Since 1790, the patent law has operated on the premise that rights in an invention belong to the inventor.”  The court held the Bayh-Dole Act did not displace “that norm”.  Stanford v. Roche Molecular Systems, Inc., 563 U.S. _____ (2011).  Similarly, in its opinion today the Supreme Court heavily weighs the “universal understanding”of the presumption of validity.