TLJ News from June 6-10, 2011


Supreme Court Affirms in Microsoft v. i4i

6/9. The Supreme Court issued its opinion [27 pages in PDF] in Microsoft v. i4i, holding that in patent cases 35 U.S.C. § 282 requires that the standard of proof for an invalidity defense is clear and convincing evidence.

The Supreme Court affirmed the judgment of the U.S. Court of Appeals (FedCir) which reissued its opinion [51 pages in PDF] on March 10, 2010, affirming the judgment of the District Court.

Microsoft and amicus curiae parties in support argued for a lower preponderance of the evidence standard. See, amicus curiae brief of Google, Verizon, Comcast, Dell, HP, the Consumer Electronics Association (CEA), and other companies and groups, and amicus curiae brief of the Computer and Communications Industry Association (CCIA).

i4i and supporting amici argued for affirming the Court of Appeals. The Department of Justice's (DOJ) Office of the Solicitor General (OSG) argued in its amicus curiae brief that the judgment of the Court of Appeals should be affirmed.

i4i Limited Partnership is a software consulting company. It filed a complaint in the U.S. District Court (EDTex) against Microsoft alleging that Microsoft's Word infringed its U.S. Patent No. 5,787,449. Microsoft unsuccessfully raised the defense of invalidity. It argued that the invention disclosed by the patent was already on public sale by i4i in a software product more than a year before the patent application was even filed. The District Court entered judgment of infringement, and awarded i4i damages of $200 Million.

The statute does not specify the standard. Section 282 provides in part that "A patent shall be presumed valid. Each claim of a patent (whether in independent, dependent, or multiple dependent form) shall be presumed valid independently of the validity of other claims; dependent or multiple dependent claims shall be presumed valid even though dependent upon an invalid claim.... The burden of establishing invalidity of a patent or any claim thereof shall rest on the party asserting such invalidity". (Parentheses in original.)

The Supreme Court granted certiorari on November 29, 2011. See, story titled "Supreme Court Grants Cert in Microsoft v. i4i" in TLJ Daily E-Mail Alert No. 2,166, December 2, 2010.

The Supreme Court heard oral argument on April 18, 2011. See, story titled "Supreme Court Hears Oral Argument in Microsoft v. i4i" in TLJ Daily E-Mail Alert No. 2,222, April 18, 2011.

Justice Sotomayor wrote the opinion of the Court. She wrote that "by its express terms, §282 establishes a presumption of patent validity, and it provides that a challenger must over-come that presumption to prevail on an invalidity defense. But, while the statute explicitly specifies the burden of proof, it includes no express articulation of the standard of proof."

She continued that "by 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" and "the presumption encompassed not only an allocation of the burden of proof but also an imposition of a heightened standard of proof". Moreover, the "basic principles of statutory construction require us to assume that Congress meant to incorporate ``the cluster of ideas´´ attached to the common-law term it adopted".

She also wrote that "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. In this respect, although we have no occasion to endorse any particular formulation, we note that 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. In either case, the 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."

Also, while the parties and amici argued the policy merits of their positions, Sotomayor concluded that "We find ourselves in no position to judge the comparative force of these policy arguments." She added that changing the standard of proof lies in the hands of the Congress.

Neither S 23 [LOC | WW], the "America Invents Act", passed by the Senate on March 8, 2011, nor HR 1249 [LOC | WW], also titled the "America Invents Act", approved by the House Judiciary Committee (HJC) on April 14, 2011, address this standard. However, both bills address inter partes re-examination procedure, and create a new post grant review procedure at the U.S. Patent and Trademark Office (USPTO). The House may consider HR 1249 next week.

Justice Stephen Breyer wrote a concurring opinion joined by Justices Antonin Scalia and Sam Alito. Breyer wrote that "the evidentiary standard of proof applies to questions of fact and not to questions of law. ... Many claims of invalidity rest, however, not upon factual disputes, but upon how the law applies to facts as given. ... Where the ultimate question of patent validity turns on the correct answer to legal questions -- what these subsidiary legal standards mean or how they apply to the facts as given -- today's strict standard of proof has no application."

He added that "Courts can help to keep the application of today's ``clear and convincing´´ standard within its proper legal bounds by separating factual and legal aspects of an invalidity claim, say, by using instructions based on case-specific circumstances that help the jury make the distinction or by using interrogatories and special verdicts to make clear which specific factual findings underlie the jury's conclusions."

Justice Clarence Thomas wrote a separate concurring opinion.

Ed Black, head of the CCIA, stated in a release that "We are facing a firehose of low-quality patents that makes it impossible to know who owns what. It's getting worse. Any successful product, like smartphones, has become a target for patent attacks, whether by losers in the market or opportunists."

Black added that "it appears that we are in a race with China to see who can grant the most patents. That's easy if you don't have to worry about quality. The winners are patent attorneys, who must be dancing in the streets today. The losers are innovators who find the value of good patents diluted -- and a blizzard of low-quality patents blocking even routine attempts to innovate."

This case is Microsoft Corporation v. i4i Limited Partnership, et al., Supreme Court of the U.S., Sup. Ct. No. 10-290, a petition for writ of certiorari to the U.S. Court of Appeals for the Federal Circuit, App. Ct. No. 2009-1504. Judge Sharon Prost wrote the opinion of the Court of Appeals, in which Judges Schall and Moore joined. The Court of Appeals heard an appeal from the U.S. District Court for the Eastern District of Texas, D.C. No. 07-CV-113, Judge Leonard Davis presiding. See also, Supreme Court docket.

People and Appointments

Michael Leiter6/9. Michael Leiter (at right), Director of the National Counterterrorism Center (NCTC), announced that he will resign, effective July 8, 2011. See, White House news office release, and Rep. Mike Rogers' (R-MI) release.

6/9. President Obama withdrew the nomination of Peter Diamond to be a member of the Board of Governors of the Federal Reserve System. See, Congressional Record, June 9, 2011, at Page S3708, and White House news office release.

Senate Commerce Committee Approves Communications Bill

6/8. The Senate Commerce Committee (SCC) held an executive business meeting at which it amended and approved S 911 [LOC | WW], the "Public Safety Spectrum and Wireless Innovation Act".

The bill as amended authorizes the Federal Communications Commission (FCC) to conduct incentive auctions. It also gives 10 megahertz of spectrum known as the D block to a quasi government entity for the purpose of deploying a nationwide interoperable wireless broadband network for public safety.

Sen. John Rockefeller (D-WV) and Sen. Kay Hutchison (R-TX), the Chairman and ranking Republican on the SCC, made opening statements. The SCC then approved 17 amendments in one voice vote. The SCC then approved by a roll call vote of 21-4 a substitute amendment, as amended by those 17 other amendments. Sen. Olympia Snowe (R-ME), Sen. Jim Demint (R-SC), Sen. John Thune (R-SD), and Sen. Pat Toomey (R-PA) voted no. Some Senators then made statements.

The SCC has not yet released the bill as amended, or even copies of the amendments approved on June 8.

Sen. Claire McCaskill (D-MO) discussed, but did not offer, an amendment regarding low power TV. Sen. Rockefeller stated that he would have opposed the amendment, and thanked Sen. McCaskill for not offering it. He also pledged to work with her on the subject.

Sen. Maria Cantwell (D-WA) briefly mentioned her amendment regarding white space spectrum and incentive auctions.

Sen. Demint discussed the D block. He said that this bill is a spending bill, and that "it directly increases the deficit" by more than 17 Billion dollars. He complained that the D block would be "given away for free", and operated by a "quasi government entity", that will be "bureaucratic", "centralized", and "politicized". He said the Committee should consider the USPS and Amtrak as examples of the type of non-innovative entity that the bill would create.

Sen. Roy Blunt (R-MO) offered and withdrew an amendment that would have directed the FCC to re-auction the D block to the commercial sector.

Sen. Toomey thanked Sen. Rockefeller for supporting two amendments, including one regarding political activity of the D block entity.

He also offered and withdrew an amendment regarding eligible auction participants. Sen. Hutchison spoke in favor of this amendment. Sen. Toomey also offered and withdrew an amendment regarding requiring auction proceeds to first repay loans.

He also offered an amendment regarding the bill's billion dollar telecommunications research grant program. He said that the private sector is already conducting research on a huge scale, and that a government grant program is therefore not necessary. Sen. Rockefeller opposed the amendment. Sen. Warner argued that there is not enough research and development in the public safety market. Sen. Hutchison also spoke in opposition. The SCC rejected the amendment by roll call vote of 9-16.

Sen. Amy Klobuchar (D-MN) discussed and advocated the "next generation 911 systems" provisions of the bill.

Sen. Mark Warner (D-VA) discussed public safety spectrum. Sen. Frank Lautenberg (D-NJ) reminisced about the events of September 11, 2001. Sen. Barbara Boxer (D-CA) addressed public safety communications in broad terms.

Michael Powell, head of the National Cable and Telecommunications Association (NCTA) stated in a release that this bill "encourages greater spectrum efficiency, meets the broadband needs of public safety personnel, and preserves Commission flexibility with respect to auction design. We especially appreciate the committee's effort to craft a fair framework for reclaiming broadcast spectrum through incentive auctions that will cover costs incurred by cable operators due to channel sharing or repacking and will not expand or extend current carriage obligations."

Gordon Smith, head of the National Association of Broadcasters (NAB), stated in a release that the "NAB appreciates the hard work of Chairman Rockefeller and ranking member Hutchison in shepherding through today's legislation. As the process moves forward, NAB will work with policymakers to help ensure that broadcasters are able to deliver on the promise of free and local digital television made to tens of millions of viewers."

Steve Largent, head of the CTIA, stated in a release that "We greatly appreciate the focus the bill places on authorizing incentive auctions and making additional spectrum available for commercial wireless providers. Making additional spectrum available is critical to ensuring that the wireless industry can continue to meet the exploding demand for wireless broadband services and remain a catalyst for economic growth."

People and Appointments

6/8. The National Association of Broadcasters' (NAB) Joint Board of Directors held meetings in Washington DC on June 7 and 8, 2011, at which it, among others things, elected officers. Gordon Smith was elected P/CEO. See, NAB release.

More News

6/8. President Obama signed into law HR 754, the "Intelligence Authorization Act for Fiscal Year 2011". See, White House news office release.

Kaplan Replaces Milkman as FCC WTB Chief

6/7. Federal Communications Commission (FCC) Chairman Julius Genachowski named Rick Kaplan to be Chief of the Wireless Telecommunications Bureau (WTB), effective June 20, 2011.

Kaplan is currently Genachowski's Chief Counsel and Senior Legal Advisor. He will replace Ruth Milkman, who will remain at the FCC with the job title Special Counsel to the Chairman for Innovation in Government. Milkman began her current stint at the FCC in August of 2009.

The FCC stated in a release that Milkman will "lead a team to develop proposals for procedural, regulatory and statutory changes to further innovation".

Rep. Walden Addresses Intercarrier Compensation and Universal Service

6/7. Rep. Greg Walden (R-OR), Chairman of the House Commerce Committee's (HCC) Subcommittee on Communications and Technology gave a speech in which he addressed intercarrier compensation and universal service.

He said that "The intercarrier compensation regime is broken" and "is not long for this Earth".

"Absent serious reform, this system of implicit subsidies will collapse under its own weight, thus potentially bringing down rural telecommunications networks with it and hindering high-speed broadband deployment in rural America. This cannot be allowed to happen."

Regarding universal service, he said that "the mounting costs of the high-cost fund, along with declines in the USF funding base, have led to ever-increasing customer surcharges as high as 15% of the interstate portion of a customer’s phone bill.  In a word, the Universal Service Fund has become unsustainable. Reform is no longer an aspiration; it is a necessity."

He said that the HCC and the Federal Communications Commission (FCC) are working to "implement several principles", including capping the universal service high cost fund and each sub-fund, using market based technology neutral mechanisms, such as competitive bidding, migrating the USF to broadband, subsidizing those unserved areas that are uneconomic for the private sector to serve, access charge replacement, and overhauling the contribution methodology.

He also said the the SCT will hold another hearing that will examine the proposed merger of AT&T and T-Mobile USA. He said that "It is far too soon to judge the merits of this merger."

He also said that "America’s economic growth and vitality is dependent on competitive and innovative free markets. I am thus interested in learning whether the merger promotes competition for consumers and encourages innovation in the technology manufacturing sector. If not, it may lead the industry further into the watering hole of government regulation."

He added that "I am concerned about the 'public interest' conditions the FCC might place on the merger if approved.  Conditions placed on any merger should be limited to those conditions necessary to address risks to consumers that arise as a direct result of the merger.  Mergers should not be used to impose conditions that are better suited for generic proceedings where all industry and consumer groups have an equal opportunity to weigh in."

Judicial Appointments

6/7. President Obama nominated Jesse Furman to be a Judge of the U.S. District Court (SDNY). See, White House news office release and release. He is an Assistant U.S. Attorney in the Southern District of New York. Before that, he worked for the law firm of Wiggin & Dana. He also clerked for former Judge Michael Mukasey (USDC/SDNY), Jose Cabranes (USCA/2ndCir), and former Justice David Souter (SCUS).

6/7. President Obama nominated Margo Kitsy Brodie to be a Judge of the U.S. District Court (EDNY). See, White House news office release and release. She has been a federal prosecutor since 1999. Before that, she worked for the law firm of Carter Ledyard & Millburn.

6/7. President Obama nominated Susie Morgan to be a Judge of the U.S. District Court (EDLa). See, White House news office release and release.

6/7. President Obama nominated Mary Elizabeth Phillips to be a Judge of the U.S. District Court (WDMo). See, White House news office release and release.

FCC Hires New Chief Economist

6/6. Federal Communications Commission (FCC) announced changes to its small line up of economists. FCC Chairman Julius Genachowski named Marius Schwartz Chief Economist in the FCC's Office of Strategic Planning & Policy Analysis (OSPPA).

Schwartz is a professor in the economics department at Georgetown University. He briefly worked in the Department of Justice's (DOJ) Antitrust Division, including as acting Deputy Assistant Attorney General for Economics, at the time of the Microsoft litigation.

He will replace Jonathan Baker. The FCC also announced in a release that Baker and Gregory Rosston will have the job titles "Senior Economists for Transactions", and will work on the FCC's AT&T T-Mobile USA antitrust merger review. Also, Baker will return to his position at the American University law school.

Senate Confirms Verrilli to Be Solicitor General

6/6. The Senate confirmed Donald Verrilli to be the Solicitor General at the Department of Justice (DOJ) by a vote of 72-16. See, Roll Call No. 85. All of the no votes were cast by Republicans.

Until recently, Verrilli was a partner in the law firm of Jenner & Block. He has represented major copyright based businesses in recent high profile cases. For example, his clients have included movie companies in MGM v. Grokster, Viacom and others in Viacom v. YouTube, and Perfect 10 in Perfect 10 v. Visa.

However, opposition to his nomination was based upon concerns that he has been too close to President Obama (as Deputy Counsel) to act independently, and that he is too soft on terrorism.

Sen. Charles Grassley (R-IA), the ranking Republican on the Senate Judiciary Committee (SJC) voted for confirmation, but expressed concerns. He stated that "My concern with this nomination is whether or not the nominee will demonstrate appropriate independence in the office. His testimony at his hearing raised doubts about his ability and commitment to uphold that principle. Mr. Verrilli seemed to buy into the notion that he was still the President’s lawyer. He gave lip service to the two traditional exceptions to the Solicitor General defending a statute -- first, if the statute violates separation of powers by infringing on the President’s constitutional authority; and second, if there is no reasonable argument that can be advanced in defense of the statute. Mr. Verrilli then appeared to create a third exception -- one that is not supported by practice or tradition. He stated he would defend a statute’s constitutionality “unless instructed by my superior not to do so."

The Senate debate is in the Congressional Record, June 7, 2011, at Pages S3485-3488.

People and Appointments

6/6. Robert Naylor was named Chief Information Officer (CIO) at the Federal Communications Commission (FCC). See, FCC release. He was previously CIO at the Small Business Administration (SBA).

More News

6/6. The Copyright Office (CO) published a notice in the Federal Register that announces, describes, recites, and sets the effective date (June 6, 2011) for, its new regulations regarding notices of termination of certain grants of transfers and licenses of copyright under 17 U.S.C. § 203. See, Federal Register Vol. 76, No. 108, Monday, June 6, 2011, at Pages 32316-32321.

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