Source: https://www.foley.com/supreme-court-unanimously-reaffirms-clear-and-convincing-evidence-standard-for-patent-invalidity-06-09-2011/
Timestamp: 2019-04-25 13:51:22+00:00

Document:
In its decision in Microsoft Corp. v. i4i Limited Partnership, No. 10-290 (June 9, 2011), the U.S. Supreme Court unanimously affirmed the Federal Circuit’s long-established precedent that in all patent infringement cases, an accused infringer must prove patent invalidity by clear and convincing evidence (http://tinyurl.com/44ga9b8). The Court rejected Microsoft’s argument that the heightened burden was particularly inappropriate in cases where validity is challenged based on prior art not considered by the USPTO. In so doing, the Court interpreted the statutory presumption of patent validity codified in 1952 as 35 U.S.C. § 282 in view of its common-law precedent, most significantly Justice Cardozo’s 1935 decision in Radio Corp. of America v. Radio Engineering Laboratories, Inc., 293 U.S. 1 (RCA).
The Court’s decision is viewed by many as a clear victory for patent holders and maintains the status quo, as juries will continue to be instructed on the heightened evidentiary burden faced by accused infringers. Beyond this, while the Court declined to dictate the specifics of jury instructions in cases where the accused infringer asserts that the art relied on was not considered by the USPTO, it provided some guidance. However, this leaves considerable discretion to the lower courts to craft appropriate jury instructions to account for such situations.
Microsoft’s challenge to the evidentiary burden associated with the defense of patent invalidity arose from a jury verdict for infringement against Microsoft in 2009 that was affirmed by the Federal Circuit.
i4i sued Microsoft in 2007 for infringement of U.S. Patent No. 5,787,449 in the Eastern District of Texas. The patent relates to markup languages technology, and i4i alleged that Microsoft Word's XML editor infringed the patent. Microsoft argued at trial that the patent was invalid under 35 U.S.C. § 102(b) due to on-sale bar because the invention was embodied in software sold in the United States by i4i more than a year before the application for the patent was filed. Microsoft argued that because the USPTO had not considered the prior sale of software, Microsoft's burden of proving invalidity should be only a preponderance of the evidence. Microsoft's proposed jury instruction was rejected based on the settled law requiring that invalidity be established by clear and convincing evidence. The jury found for i4i, awarding $200 million in damages, and the district court subsequently entered a judgment of $290 million, including enhanced damages, interest, and post-verdict damages. Additionally, the district court entered an injunction against the sale of certain versions of Word. See i4i Ltd. P'ship v. Microsoft Corp., 670 F. Supp. 2d 568 (E.D. Tex. 2009). Microsoft appealed.
A three-judge panel of the Federal Circuit affirmed. 598 F.3d 831 (Fed. Cir. 2010) (superseding prior opinion at 589 F.3d 1246 (Fed. Cir. 2009)). See Foley's Legal News Alert: Intellectual Property from December 23, 2009 (http://bit.ly/ft0Q7p). The appellate court found no fault with the jury instruction requiring that invalidity be proven by clear and convincing evidence. Microsoft's petition for certiorari was granted on November 29, 2010.
Justice Sotomayor issued the opinion of the Court, which was joined by six of the seven other justices who presided over the case: 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 rejected Microsoft’s principal argument that in all cases invalidity needs to be proven only by a preponderance of the evidence. The Court similarly rejected Microsoft’s alternate argument that the preponderance standard should apply at least when an invalidity defense is based on prior art that was not considered by the USPTO in the examination process.
[T]here is a presumption of validity, a presumption not to be overthrown except by clear and cogent evidence.
[O]ne otherwise an infringer who assails the validity of a patent fair upon its face bears a heavy burden of persuasion, and fails unless his evidence has more than a dubious preponderance.
The Court thus concluded that by the time Congress acted in 1952, the presumption of validity “encompassed not only an allocation of the burden of proof but also an imposition of a heightened standard of proof.” The Court followed the “general rule that a common-law term comes with its common-law meaning.” As a result, the Court held that absent indication in the statute otherwise, it was obligated to presume that Congress intended to incorporate the heightened standard of proof when it enacted § 282.
[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.
Finally, the Court declined to address the policy arguments raised by the parties and amici, but did note that Congress has done nothing to amend the statute to address the burden of proof, despite the Federal Circuit decisions applying the clear and convincing evidence standard since 1984, and other revisions to § 282.
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?
The decision should be welcome to most patentees and is reflective of the Supreme Court’s recent pro-patentee approach that started with its Bilski decision last year, wherein the Court declined to adopt a stringent standard for patent-eligible subject matter. What remains to be seen is how the decision may play out in certain types of patent litigation involving non-competitive entities, whether the impact will vary among industries, whether the ruling impacts the timing or strategic considerations in filing summary judgment motions, and how patent juries will be instructed.

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