The Supreme Court of the United States unanimously upheld a $290 million verdict against Microsoft in favor of the Canadian software company, i4i Limited Partnership. The Supreme Court rejected Microsoft’s arguments on appeal that a defendant in a patent infringement action need only persuade a jury of an invalidity defense by ‘a preponderance of the evidence’ rather than by ‘clear and convincing evidence,’ even when the defense relies on evidence that was never considered by the Patent and Trademark Office ("PTO") during the examination of the patent application. Microsoft Corp. v. i4i L.P., No. 10-290 (U.S. June 9, 2011).
The highly anticipated decision arises from i4i’s 2007 patent infringement action against Microsoft for willfully infringing the i4i patent, which claims an improved method of editing computer documents, through Microsoft’s manufacture and sale of certain Microsoft Word products. At the District Court, Microsoft relied on i4i’s sale of a software program known as "S4" that occurred more than one year prior to the filing of the i4i patent application to assert that the on-sale bar of 35 U.S.C. §102(b) rendered i4i’s patent invalid and unenforceable. Before trial, Microsoft objected to i4i’s proposed jury instruction that Microsoft was required to prove the invalidity of the i4i patent by ‘clear and convincing evidence,’ because sale of the S4 software was not presented to the PTO during the examination of the patent application. Instead, Microsoft advocated that its burden of proving invalidity and unenforceability based on prior art that was not reviewed during the prosecution of the patent should be by a ‘preponderance of the evidence.’ The District Court rejected Microsoft’s argument and at trial the jury found that Microsoft failed to prove its invalidity case and that Microsoft had willfully infringed the i4i patent. On appeal, the Federal Circuit affirmed the District Court’s ruling regarding the disputed jury instruction.
Noting the that patents are presumed valid under 35 U.S.C. § 282, the Supreme Court unanimously rejected Microsoft’s appeal, holding that §282 requires an invalidity defense to be proved by clear and convincing evidence. Relying on prior rulings requiring "clear and cogent evidence" to overturn an issued patent, the Court held that the Patent Act sought to codify the common law standard, though it did not reiterate the standard expressly.
The Supreme Court also rejected Microsoft's argument that the presumption of patent validity is weakened for challenges involving prior art that was not considered by the PTO during prosecution. However, the Court agreed that new evidence of invalidity may carry more weight than evidence previously considered and rejected by the PTO, noting, "if the PTO did not have all material facts before it, its considered judgment may lose significant force" and that "the challenger's burden to persuade the jury of its invalidity defense by clear and convincing evidence may be easier to sustain" under these circumstances. The Supreme Court further noted that Microsoft failed to request an instruction along these lines from the District Court, providing a helpful suggestion to future litigants in Microsoft’s position.