Supreme Court Hears Oral Argument in Microsoft v. i4i
April 18, 2011. The Supreme Court heard oral argument in Microsoft v. i4i, a patent case involving the standard of proof that must be met by a party seeking to a judgment of invalidity.
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 U.S. Court of Appeals (FedCir) reissued its opinion [51 pages in PDF] on March 10, 2010, affirming the judgment of the District Court.
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.
Microsoft stated in a release that "The case revolves around the standard of proof that must be met by those who seek to challenge the validity of a patent in court. The law states that patents, which are generally issued by the Patent Office solely on the basis of supporting information submitted by the patent applicant, are to be presumed valid. Since the 1980s, however, the Federal Circuit Court of Appeals, which oversees patent appeals, has required a challenge to a patent's validity be proved by a heightened standard of ``clear and convincing evidence,´´ as opposed to the lower ``preponderance of evidence´´ standard routinely applied in civil lawsuits."
The relevant statute does not specify the standard. 35 U.S.C. § 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.)
Justice Stephen Breyer stated that "I'll assume that the language is open enough in the history so that we could make what would be a change, I think it would be a change. The reasons as I get from the brief for doing that are because there are two types of errors: It's a bad thing not to give protection to an invention that deserves it; and it is just as bad a thing to give protection to an invention that doesn't deserve it." See, transcript.
He asked, if there is the second type of error, instead of changing the standard, why not "go back to the Patent Office and ask for reconsideration".
Thomas Hungar (Gibson Dunn), Microsoft's counsel, responded that under current law, "re-exam is limited in scope. It can only consider certain types of prior art evidence and issues. It couldn't, for example -- it was not available for the issue that we're talking about here, the on-sale bar."
Justice Ginsburg stated that since the Federal Circuit has had "a monopoly on appeal in patent cases since 1984", and "has consistently taken this position, one would have expected that there would have been bills proposed to change it". So, she asked, "Were there any?" Hungar responded, "No".
Seth Waxman (Wilmer Hale), i4i's counsel, argued that the Congress has "actively acquiesced" in the clear and convincing evidence standard, which prompted Justice Antonin Scalia to joke about the meaning of "active acquiescence" and "passive activity".
Waxman responded, "So Congress has been very, very active in this field, and what I mean by active acquiescence is it has been very active in this field, it is well aware of the clear and convincing evidence standard, and it has done nothing whatsoever to change it, even make any effort to consider making such a sweeping change in long-standing doctrine."
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 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.
It wrote that "When the defendant in a patent infringement action asserts that the relevant patent is invalid, he must present clear and convincing evidence of invalidity in order to establish that defense. ... That heightened standard applies even if the defendant relies on evidence of invalidity that was not before the PTO. ... Evidence that was not before the examiner, however, may be given greater weight, making the defendant’s burden easier to satisfy. ... That approach -- which the Federal Circuit has long followed -- is consistent with congressional intent and with this Court’s precedents, and it best serves the administrative-deference and reliance interests implicated by challenges to a patent."
The OSG elaborated that "The clear-and-convincing-evidence standard best accommodates the interests implicated by validity challenges. A contention that a patent is invalid is in essence a collateral attack on the PTO’s prior administrative action, and it therefore implicates principles of deference to agency authority and expertise. Invalidity challenges also implicate the inventor’s reliance interests in a patent, which confers valuable property rights in return for the inventor’s public disclosure of his invention. Requiring that invalidity be demonstrated by clear and convincing evidence serves both of these interests by ensuring that the jury has a high degree of confidence before it overturns the PTO’s grant of a patent. Even when evidence suggesting invalidity was not before the PTO, and the administrative-expertise rationale therefore does not apply, the heightened burden of proof furthers the patent holder’s reliance interests, and it is consistent with congressional intent and with this Court’s precedents."
The Pharmaceutical Research and Manufacturers of America (also known as PhRMA) also filed an amicus curiae brief in support of i4i and the clear and convincing evidence standard.
In contrast, a group of 37 law, economics and business professors filed an amicus curiae brief in which they argued that the clear and convincing standard is "a mistake". They wrote that "Deference to previous decisions is appropriate when those previous decisions have a high likelihood of being accurate. But the initial process of patent review today is, unavoidably, often an inaccurate signal, one that doesn’t take account of all relevant information. Deference doesn’t make sense in that circumstance."
Similarly, the Computer and Communications Industry Association (CCIA) wrote in its amicus curiae brief that "Bestowing this enhanced presumption of validity upon granted patents is fundamentally at odds with the Patent Act. Many factors already favor the patent applicant: the statute’s presumption of entitlement, the examiner’s limited and undocumented expertise, the limited scope of the examination process, the mismatch between the examiner and the applicant, and the examiner’s incentives to grant the application. In light of these factors, the Federal Circuit’s extraordinary deference to a highly constrained agency process is without basis."
The CCIA added that "By making questionable patents hard to invalidate, the clear-and-convincing standard creates an artificial incentive to apply for patents. It induces more applications and more patents, especially weak, marginal, and invalid patents. This unmerited legal leverage dilutes and undermines the value of genuine inventions. It distorts market competition, discourages the challenging of invalid patents, and promotes opportunism."
See also, amicus curiae brief of Google, Verizon, Comcast, Dell, HP, the Consumer Electronics Association (CEA), and other companies and groups, which urges the Supreme Court to adopt the preponderance of the evidence standard.
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