Microsoft Corp. v. i4i Limited Partnership (Supreme Court 2011)
The patent act indicates that issued patents are “presumed valid.” 35 U.S.C. § 282. In this case, Microsoft challenged the strength of that presumption — arguing that a low “preponderance” standard for proving invalidity should be sufficient rather than the higher “clear and convincing” standard required by the Court of Appeals for the Federal Circuit. In straightforward language, the Supreme Court writes: “We consider whether §282 requires an invalidity defense to be proved by clear and convincing evidence. We hold that it does.” Microsoft will now likely be forced to pay the $250+ million judgment for infringing i4i’s patents.
With unanimous agreement, the Supreme Court has rejected Microsoft’s argument and affirmed the Federal Circuit’s strong presumption of proof. Justice Sotomayor delivered the opinion for seven of the justices. Justice Breyer joined the majority but also wrote a concurring opinion that was signed by Justices Scalia and Alito; Justice Thomas concurred, but based upon his own unique historical reasoning. Chief Justice Roberts recused himself. With the absence of Justice Stevens, the court appears to now be tilted to the right on core patent issues. (I.e., toward patents as property rights and away from a more policy-based regulatory paradigm).
The court’s opinion rests largely on its 1934 RCA opinion that required “clear and cogent evidence” to overturn an issued patent and a conclusion that the 1952 patent act intended to codify the common law holding of RCA.
[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. That is, the presumption encompassed not only an allocation of the burden of proof but also an imposition of a heightened standard of proof. Under the general rule that a common-law term comes with its common-law meaning, we cannot conclude that Congress intended to “drop” the heightened standard proof from the presumption simply because §282 fails to reiterate it expressly.
The Supreme Court similarly rejected Microsoft’s alternative proposal that the presumption of validity be weakened for validity challenges that were not considered by the USPTO during prosecution of the application. However, the Court did agree with Judge Rich’s American Hoist opinion that “new evidence” of invalidity likely carries more weight than evidence that had been previously considered and rejected by the Patent Office. In what may become the most litigated aspect of the decision, the Supreme Court writes:
Simply put, 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. Although Microsoft emphasized in its argument to the jury that S4 was never considered by the PTO, it failed to request an instruction along these lines from the District Court. Now, in its reply brief in this Court, Microsoft insists that an instruction of this kind was warranted. That argument, however, comes far too late, and we therefore refuse to consider it.
In its opinion, the court acknowledged policy arguments both for and against a strong presumption of validity (Citing Lemley & Lichtman), but in the end decided that it was bound to follow Congress and the common law precedent.
In his concurring addendum, Justice Breyer attempted to cabin-in the decision by indicating that the clear and convincing evidence standard of proof “applies to questions of fact and not to questions of law.” He suggested that jury instructions should include detailed interrogatories that separate-out factual determinations made by a jury from the legal conclusions. That distinction is extremely important in the patent landscape because the ultimate question of obviousness is a legal conclusion based upon a set of facts generated by following the process set out in Graham v. John Deere. If Justice Breyer’s prescription is followed, it creates a major loophole in the strong presumption because the most difficult and debatable aspect of the obviousness analysis is the leap from the factual underpinnings to the ultimate conclusion. As an aside, Justice Breyer suggests in his opinion that “novelty” is a question of law while the Federal Circuit has long held that to be a factual conclusion.
Justice Thomas agreed that the standard for proving invalidity should be did not agree with the majority that the standard was “codified” in the Patent Act of 1952 but rather that the common law clear and convincing evidence standard was left unchanged by the Act.