By Paul F. Morgan
The forthcoming Supreme Court decision in Microsoft v. i4i, case number 10-290, seems likely to eliminate the Federal Circuit's judicially imposed "clear & convincing evidence" requirement for invalidating patents, and thus jury instructions thereon, at least for prior art not of record in the patent application file.
Typical of some of the frightening projections is the January 1, 2011 "Law360" article in which Matthew M. Wolf, a Howrey LLP partner, is quoted as saying that: "it will radically alter the nature of trials in the patent world and will apply to every patent case" and that "if juries are told that the standards are the same for invalidating patents as for infringing patents, there will be a lot more defence verdicts and we are going to see fewer defendants desirous of settlement."
That is, it is argued that this result would flow from patent invalidity challenges having the same "preponderance of the evidence" standard as for proving patent infringement. Technically, that might become the case. But how significant would this change be in reality?
First, more than 97% of patent suits are settled before trial with no judicial validity test. Of the small percentage of patent cases that do go to trial, the vast majority are decided or settled there or on appeal on non-infringement, not on invalidity. Considering the many good reasons why the vast majority of accused or actual defendants are willing to settle rather than risk the very high costs and uncertainties of patent litigation, even against numerous dubious troll suits, how much is this one forthcoming change likely to affect patent litigation and settlements overall?
The test is, would this change really dramatically affect anticipated jury decision-making reality? [Because patent invalidity is rarely decided other than by juries, such as on summary judgment motions, in view of disputed facts. USPTO patent reexamination standards would not be affected at all by this decision, and are usually delayed too long by the USPTO to be helpful anyway.]
Removing this higher evidentiary burden might indeed affect some unknown relatively small number of future post-trial JMOL and Fed. Cir. decisions. But note the relatively small percentage of those based on invalidity as opposed to non-infringement.
So, what is the basis for projecting that the very small percentage of patents now being held invalid by juries would somehow greatly increase due to this one potential change in jury instructions? [Even if one really believes that juries really do pay close attention to, and fully understand, the typical lengthy jury instructions in a patent infringement suit and are willing split hairs over those instructions. See, e.g., the length of the AIPLA model jury instructions.] Has anyone done a mock jury study to see if leaving out the present jury instruction for "clear and convincing evidence" dramatically changes outcomes?
Could contesting patent validity before a jury realistically become equated to contesting infringement, as alleged? Attacking the validity of a patent is attacking something granted by the United States Government, while deciding infringement is just considering one private company's arguments against another. Furthermore, the jury can be shown for emphasis the Government gold seal and blue ribbon on the patent. Even if the statutory presumption of patent validity could technically be overcome by a mere preponderance of evidence for prior art not of record, the patent owner should be entitled to a jury instruction on the statutory presumption of patent validity. [Which could be contrasted to no such instruction for deciding infringement]. For example, as indicated Section 5.1 of the June 23, 2009 "National Patent Jury Instructions" and its "Committee Note," presently courts may optionally combine the two existing defense burdens into a single jury instruction that the accused infringer "bears the burden of proving that it is highly probable that the claims are invalid." [Likewise, some other model patent jury instructions.] However, the express "Committee Note" rationale for that is a presumption that "instructing the jury on the presumption in addition to informing it of the highly probable burden of proof may cause jury confusion as to its role in deciding invalidity. This single instruction therefore omits any reference to the presumption of validity. Some courts, however, follow the more traditional approach, and instruct the jury on the presumption. Both approaches appear consistent with Federal Circuit law." Thus, if the "clear and convincing evidence" burden is removed, this "highly probable" instruction would have to be removed, and this present rationale for not instructing a jury on the statutory presumption of patent validity would seem to disappear?
The other public scare story is that this decision will lead to a flood of additional prior art citations in patent applications. That also lacks factual credibility. The already-existing fear of personal "inequitable conduct" accusations is far more motivating than the mere possibility getting a slightly better jury instruction. Furthermore, few applicants would be willing to pay for a much more costly prior art search to add much more art to an IDS just for that remote reason, and also to risk being accused of not having actually read that art in making assertions in claim prosecution.
Whether as a matter of public policy this anticipated change is good or bad for patent law and technical or economic progress is not the subject here. Even if the extent of the potential impact were factually supported, it may not be very relevant to this Supreme Court decision. As understood, this case is being contested primarily on to whether or not there is a proper legal basis and/or precedent for the Federal Circuit to have imposed this additional, non-statutory, evidentiary burden for patent litigation. It is argued that that is inconsistent with modern Supreme Court evidentiary rules for civil cases in general and inconsistent with the evidentiary rules for pre-Federal-Circuit patent suits in the other federal circuits when they were deciding patent cases. [So it is surprising that this issue has not been this contested before. Presumably due to most defendants waiving it by failing to object to this jury instruction?]
The recent decisions controlling the evidence for and/or reducing patent infringement damages recoveries seem to me far more likely to impact patent licensing and settlement negotiations than Microsoft v. i4i. See Uniloc USA, Inc. v. Microsoft Corp., (Fed. Cir. Jan. 4, 2011), Lucent v. Gateway (Fed. Cir. 2009), the two E.D. TX D.C. decisions in which Judge Randall Rader sat by designation, Cornell v. HP (March 2009) and IP Innovation v. Red Hat and Novell (March 2010), and Judge Ward's reduction of a jury award of $52 million in LaserDynamics v. Asus Computer International down to only $6.2 million.