Microsoft v. i4i: Shifting Weight of Evidence versus Shifting Burden of Proof

Microsoft Corp. v. i4i Limited Partnership

This case, now pending before the US Supreme Court, questions the standard of proof necessary to invalidate an issued patent based on issues not considered by the USPTO during examination. For Microsoft, lowering the standard appears to be its only chance to escape from a pending judgment of over $100 million in favor of i4i. Microsoft lost at the district court, lost on appeal, lost at the PTO during reexamination, and was summarily denied a second attempt at reexamination. The Supreme Court, however has offered the software giant some light.

The issue is whether the District Court and Federal Circuit erred in holding that Microsoft was required to prove its invalidity defense by clear and convincing evidence “even though the prior art on which the invalidity defense rests was not considered by the Patent and Trademark Office prior to the issuance of the asserted patent.”

It turns out that the parties are not so far apart on the answer. Although i4i argues that the level of proof should remain clear-and-convincing, it also admits that the Federal Circuit has consistently held that the burden can be more easily satisfied with prior art that the PTO never considered.

Throughout its existence, the Federal Circuit has held that the clear-and-convincing standard may be more easily satisfied with references the PTO did not consider. See, e.g., Connell v. Sears, Roebuck & Co., 722 F.2d 1542, 1549 (Fed. Cir. 1983); SSIH Equip. S.A. v. U.S. Int’l Trade Comm’n, 718 F.2d 365, 375 (Fed. Cir. 1983) (five-judge panel); SIBIA Neurosciences, Inc. v. Cadus Pharm. Corp., 225 F.3d 1349, 1355-1356 (Fed. Cir. 2000); Jervis B. Webb Co. v. Southern Sys., Inc., 742 F.2d 1388, 1392 n.4 (Fed. Cir. 1984) (citing cases). . . . As with such other evidence, prior art that the PTO never considered does not change the standard of proof. Instead, the jury can give more or less weight to the evidence because of its particular characteristic.

This argument apparently works for i4i because, although the jury might not have been instructed on the proper appliation of the standard, Microsoft has not preserved that issue for further appeal.

The i4i brief serves as a point-by-point critique of the arguments introduced by Microsoft and others. This technocrat approach is effective, but it also leaves i4i open to the simple cross-doctrinal counter that was so effective in the eBay case. The court will certainly ask – If a preponderance of the evidence is all that is required to invalidate a real property claim, a personal property claim, a registered copyright, a trademark, or a trade secret claim, what is so different about patent law?

Friend-of-the-court briefs in support of i4i’s position are expected this week.

Documents:

54 thoughts on “Microsoft v. i4i: Shifting Weight of Evidence versus Shifting Burden of Proof

  1. 54

    Ya kiinda missin the point there Sunshine.

    Unllike you and your ever Windmill chasin be otch sessions, my observations get picked up inhigh powere law briefs to the Supreme Court.

    I guess it comes down to how ya define “fluffy”, dont it?

    Hmmm – high powered legal arguments = fluff. Sunshine Malcolm scratch-his-bum-and-sniff be otches…

    Yeah, put me down with the high powered folk and call me fluffy.

    Get a clue.

  2. 53

    Nice ta see that fluffy team from Finnegan, Henderson, Farabow, Garret & Dunner, LLP; Wilmer, Cutler Pickering Hale and Dorr LLP; McKool Smith PC; and Sterne, Kessler, Goldstein & Fox PLLC be pickin up my “fluffy” stuff (the chuckle wagon keeps a’rollin on).

    Those folks are getting paid real money to fluff that patent, pingaling.

    In contrast, you’ll fluff any patent that’s put in front of you. For free.

  3. 52

    Anyone seen my main man IANAE? 4 days now and nary even a whimper.

    Must be heavily involved in the i4i brief that lo and behold takes many of me own observations to heart.

    Nice ta see that fluffy team from Finnegan, Henderson, Farabow, Garret & Dunner, LLP; Wilmer, Cutler Pickering Hale and Dorr LLP; McKool Smith PC; and Sterne, Kessler, Goldstein & Fox PLLC be pickin up my “fluffy” stuff (the chuckle wagon keeps a’rollin on).

  4. 51

    If section 282 were removed by Congress and the President tomorrow, then I think that it would be part of the plaintiff’s case to prove validity.

    Sigh. Tony, who would the movant be?

    To stea… um, borrow from another poster’s idea:

    Act III, Scene 1: Patentee: Your Honor, I bring this lawsuit inorder to prove that my patent granted by the USPTo (already valid under law) is valid.

    Huh whattt?

  5. 50

    I’m confused. As far as I see it, section 282 puts the ultimate burden of proof on the defendant to prove invalidity. This case doesn’t affect that — what’s at issue here is the weight of that burden. If section 282 were removed by Congress and the President tomorrow, then I think that it would be part of the plaintiff’s case to prove validity.

  6. 48

    Here is a similar story

    Canadian firm i4i has submitted its brief with the U.S. Supreme Court in a long-running patent-infringement suit with Microsoft. The case, Microsoft vs. i4i Limited Partnership, 10-290, is expected to be heard in April 2011.

    “We continue to be confident that i4i will prevail,” Loudon Owen, chairman of i4i, wrote in a March 14 statement. “Our position from the outset has been clear—this attack on patent holders and the adverse implications from the change proposed by Microsoft are unprecedented and would deal a devastating blow to any U.S. patent holder, large or small.”

  7. 46

    In other news re government-granted monopolies:

    link to news.yahoo.com

    ATLANTA – The price of preventing preterm labor is about to go through the roof.

    A drug for high-risk pregnant women has cost about $10 to $20 per injection. Next week, the price shoots up to $1,500 a dose, meaning the total cost during a pregnancy could be as much as $30,000.

    That’s because the drug, a form of progesterone given as a weekly shot, has been made cheaply for years, mixed in special pharmacies that custom-compound treatments that are not federally approved.

    But recently, KV Pharmaceutical of suburban St.Louis won government approval to exclusively sell the drug, known as Makena (Mah-KEE’-Nah). The March of Dimes and many obstetricians supported that because it means quality will be more consistent and it will be easier to get.

    None of them anticipated the dramatic price hike, though — especially since most of the cost for development and research was shouldered by others in the past.

    Nobody could have predicted!

  8. 45

    Do you think there might be even a remote possibility that investors in startups would look to the patents of the startup for some assurance that their investment will be protected?

    Do you think there might even be a remote possibility that investors in new drug research might look patents for some assurance that their investments in R&D will be protected?

  9. 44

    People who say patents hurt innovation have a Constitution to overcome, not to mention some 220 years of experience that this country has had. During those years, more invention, more prosperity, more wellbeing for mankind has been generated than ever before in human history.

    LOL. And how about the last, say, fifteen years when more patents are issuing than ever before? I know it’s been great for millionaires, but how about for the other 99% of Americans?

  10. 43

    TINLA Now it’s practically impossible to get a patent that will attract investors

    My clients seem to be doing fine.

  11. 41

    Oh, and also, you say that nobody is scared off by the patents, but aren’t the unexperienced in your scenario being frightened off from joining the market?

    They be takin care of this by strippin out the power of the False Marking Statute. Now no one will care about patents a’tall.

  12. 40

    bear some resemblance to reality

    It be really scary to consider just what 6 thinks is “reality.”

    Might make for a good “reality” TV show on MTV, though.

  13. 39

    Excepting of course crack pots. But we don’t need their apps anyway. So they don’t really count.

    Careful there 6 – if PHOSITA keeps on getting stronger (inevitabel with KSR) and Flash O Genius keeps on makin inroads – only the crackpots will have apps that pass – all esle will be merely responding to market conditions that make the inevitable “Obvious”.

    But then again – you are not going to understand a word of this.

  14. 38

    “Patents encourage innovation the most when they hold out false promise of enforceability. That way, newb inventors with dollar signs in their eyes and light bulbs over the heads can get patents and attract investors.

    Meanwhile, the more experienced who know that 75% of patents are invalid can just copy everyone willy nilly in “creative” ways and go to market. Then, when the newbs try to enforce their patents, they find out how worthless they were.

    Did the newbs get cheated? Well, they got investors if they actually tried to go to market. And occasionally one of them gets lucky has claims that survive the validity challenge and still read on the accused product. But no one’s so scared of that that they stay out of the market.

    That’s how patents work to get inventions disclosed, rather than suppressed or maintained as trade secrets, while incentivizing investment and entry to market. We had a system like that not too many years ago, but then along came the Quawlity Poleez with their Festos and their KSRs. Now it’s practically impossible to get a patent that will attract investors, while ensuring that the patents that are issued are much bigger problems for those trying to bring products to market.

    Finally a hypothesis that might bear some resemblance to reality coming from broje’s mouth.

    But I have a question though Broje. In you scenario it is apparently only the “experienced” that then go to market (or presumably, they are the only ones in this tale that have long termish success). Why does one need to be experienced with the patent system to be able to give it a wothwhile go? Shouldn’t we abolish the whole shebang and let everyone have a good shot?

    Oh, and also, you say that nobody is scared off by the patents, but aren’t the unexperienced in your scenario being frightened off from joining the market?

  15. 37

    “6, are you suggesting that there is no relation between risk and investment?”

    Nope, I suggested that your statement was ludicrous. But if you want a more detailed explanation, fine. I am suggesting that whatever tininy relation that there is between risk and investment in the instant situation is so small that it would only affect 1 in infinite applications. And furthermore, since we’ve only had 10 million or so applications, and will likely only have 1000 million, at most, in the course of the lifetime of the United States as a government that the relation is irrelevant.

    Practically speaking, nobody that just invented something who is pondering getting a patent will just say “meh, I can’t have a clear and convincing standard of proof at trial so I won’t bother”. Or, like I said, 1 in infinite people in such circumstances.

    Excepting of course crack pots. But we don’t need their apps anyway. So they don’t really count.

  16. 36

    And yet TINLA – weza got record number O people still tryin to get one of these fancy dancy patent thingees.

    Obviously the anti-patent rhetoric aint hit home just yet.

    “May I have some more, please?”

  17. 35

    Patents encourage innovation the most when they hold out false promise of enforceability. That way, newb inventors with dollar signs in their eyes and light bulbs over the heads can get patents and attract investors.

    Meanwhile, the more experienced who know that 75% of patents are invalid can just copy everyone willy nilly in “creative” ways and go to market. Then, when the newbs try to enforce their patents, they find out how worthless they were.

    Did the newbs get cheated? Well, they got investors if they actually tried to go to market. And occasionally one of them gets lucky has claims that survive the validity challenge and still read on the accused product. But no one’s so scared of that that they stay out of the market.

    That’s how patents work to get inventions disclosed, rather than suppressed or maintained as trade secrets, while incentivizing investment and entry to market. We had a system like that not too many years ago, but then along came the Quawlity Poleez with their Festos and their KSRs. Now it’s practically impossible to get a patent that will attract investors, while ensuring that the patents that are issued are much bigger problems for those trying to bring products to market.

  18. 33

    He doesn’t even say where in the lawl these other heightened reqs come from

    As if the origianl author likewise proeprly cited where he obtained his creds.

    So the question ya asked likewise be asked of the original point.

    Now if ya nullify both positions, where does that leave ya?

    C’mon man, think before you blather.

  19. 32

    Americal Cowboy, when patents claim beyond what they disclose so that the claims literally cover the future inventions of others, patents do inhibit innovation.

    I urge you to read O’Reilly v. Morse and the famous Halliburton v. Walker Supreme Court cases for more.

    See, e.g., link to supreme.justia.com

  20. 29

    Maxie said: “But nothing dampens creativity quite like an intimidating environment in which patents are going to be enforced…. ”

    So, Commander 6, I suppose you are right. My mistake. It is not haveing patents, but enforcing them that is alleged to dampen creativity. Huge difference, n’est-ce pas?

  21. 28

    “During those years, more invention, more prosperity, more wellbeing for mankind has been generated than ever before in human history.”

    And yet:

    “”And homeless near a thousand homes I stood / And near a thousand tables pined and wanted food.” —Wordsworth”

    link to english.ucsb.edu

    “How can anyone say it discouraged innovation?”

    But besides what I was talking about just a second ago, would you mind telling us who in this thread was saying that patents discourage innovation?

  22. 27

    So if MSFT loses because they did not preserve this issue for appeal, is Weil Gotshal going to get hit with a malpractice suit?

  23. 25

    This talk about patents inhibiting innovation strikes me as BULL. The Constitution, of all things, says that the purpose of exclusive rights is to encourage science and the useful arts.

    People who say patents hurt innovation have a Constitution to overcome, not to mention some 220 years of experience that this country has had. During those years, more invention, more prosperity, more wellbeing for mankind has been generated than ever before in human history. The vast majority of those advances took place in the United States under the encouragement of the patent system. How can anyone say it discouraged innovation?

  24. 24

    Moocow is stupd. He doesn’t even say where in the lawl these other heightened reqs come from. Perhaps they come from statutes, perhaps from caselawl, but he doesn’t bother to tell us so why should we care?

  25. 23

    Because everyone knows that making patens weaker is, um, is…

    Well 6, what is making patents weaker better for?

  26. 21

    “The argument here is that C & C strengthens the patent system and thereby strengthens innovation.”

    Ludicrous at best.

  27. 20

    IP, your assumption is this: that before the ’52 act, it was well established that invalidity was an affirmative defense.

    Was it?

    If it was, there is some force to your argument. However, consider that ownership is not presumed. Generally it is not at issue and the records of the PTO give some presumption that the record owner is the owner. But still, the plaintiff has the burden of proof and the issue is put into issue by simple denial of the allegation by the defendant.

  28. 19

    * The typical standard for any affirmative defense or case in chief for any case is “preponderance of the evidence”.
    * If Section 282 did not exist at all, there would be no statutory basis for requiring a standard for invalidating patents other than by a mere preponderance of the evidence. (I say “statutory issue” because in such a case, it remains unclear as to what administrative or Chevron type deference would be given to the PTO’s determinations of patentability even without 282.)
    * Because invalidity is part of the accused infringer/dj plaintiff’s case in chief, the burden of proving invalidity is properly on that party — so 282 does not operate to shift a burden. (And, surely, 282 have the “null hypothesis” effect of simply not requiring the patentee to re-prove the validity of the patent as part of its own case in chief, given the substantive examination process, though this may tie into the Chevron/administrative deference issue I raised earlier)
    * Because the burden doesn’t shift from one party to another, 282 thus operates to raise the bar for proving invalidity from POE to C&C. Sure, Congress could have been much more clear on drafting it. But C&C is not simply Federal Circuit fiat out of thin air — they’re following the requirements of 282.

  29. 17

    Max, I think the problem you identify to “creativity” is caused by overbroad claims: claims like in O’Reilly v. Morse that claim all means for achieving a result using some basic principle, regardless that the means is neither described nor enabled.

    The problem with prior art is entirely different. The claims can be narrow, but the patent might block progress only in a certain direction. But this actually promotes innovation because it requires the competitor to find alternative paths.

  30. 16

    The Supremes (noramally, always?) imposes a C & C standard itself when there is a constitutional right or privilege at issue that has to be defended. Think defamation and public figures.

    The argument here is that C & C strengthens the patent system and thereby strengthens innovation.

    The contrary argument is that the Constitution gave the power to regulate patents to Congress. The call on burden of proof is Congress’s to make.

    So, what did Congress in fact do?

    If an issue of patentability has been considered, is there a heightened level of proof required by statute? If so, what statute? APA?

    This line of argument leads directly to whether Section 282 was intended to impose a general C & C standard regardless of whether the reference was considered. So, this might be the ultimate question on which this case depends.

  31. 15

    Ah but that’s just it, Ned. Which environment is most conducive to creativity? Depends on what sort of creativity, right? In some fields you get more creativity without patents. In others you need patents otherwise there is no breaking of new ground.

    But nothing dampens creativity quite like an intimidating environment in which patents are going to be enforced, even if they are invalid ones.

  32. 14

    I’m not sure that Section 282 has anything to do with the standard of proof.

    Congress could have included the presumption to codify Supreme Court or other case law that the defendant had the burden to clarify some controversy on that issue. Carl Moy argued that there was some controversy on this very issue.

  33. 13

    The answer to your question at the end is 35 USC 282: “A patent shall be presumed valid.” There is no limitation in the statute as to only those sources before the PTO.

    Because the preponderance of the evidence standard advocated by microsoft is the *EXACT* same standard as would be necessary to prove invalidity as part of the case in chief without any presumption, their proposed “standard” would effectively gut 282. What use is a “presumption” that neither shifts a burden nor changes its evidentiary standard?

    A presumption of validity that only requires the opponent to carry the same burden that they would ordinarily have to carry is no presumption at all.

    i4i’s brief is correct that weighting is the proper way to deal with evidence that was not before the PTO and also comports with 282.

  34. 12

    On the public policy issue, the brief does have a lot to say. See section B.2. at page 32. It includes

    “In short, contrary to Microsoft’s claim that patent disputes involve only “private economic interests” (Br. 16), patents implicate a strong—constitutionally-based—public interest in
    promoting innovation to enhance quality of life and
    economic growth. ”

  35. 11

    That’s an interesting point.

    Perhaps another is that Congress specifically specified clear and convincing as the burden of proof when a defendant is trying to establish a defense via their own prior commercial use.

    What is the justification for thinking that Congress intended less of a burden to apply when attempting to assert a defense by evidence of the patentee’s own prior commercial use?

  36. 10

    >>to invalidate an issued patent based on issues not >>considered by the USPTO during examination.

    Just because a patent is not explicitly listed does not mean that it was not considered. Experts develop a group of prior art they consider in examining patents, and disregard thousands of patent after determining they are cumulative to the core group.

    Just more intellectually dishonest nonsense. Let’s hope the SCOTUS flushes it.

  37. 8

    I keep wondering if Justice Jackson’s famous dissent in Jungersen v. Ostby & Barton is going to make an appearance in the i4i briefing. Given the Supreme Court’s general anti-patentee bent, the dissent seems timely again.

    —–
    It would not be difficult to cite many instances of patents that have been granted, improperly I think, and without adequate tests of invention by the Patent Office. But I doubt that the remedy for such Patent Office passion for granting patents is an equally strong passion in this Court for striking them down so that the only patent that is valid is one which this Court has not been able to get its hands on.
    —–
    Jungersen v. Ostby & Barton Co., 335 U.S. 560, 572 (1949) (Jackson, J., dissenting).

    Part of the reason for the Federal Circuit’s creation was to strengthen patent rights, if I recall correctly (I could be wrong about this). One of the things they did was to take the presumption of validity seriously.

    DDC points out what is likely the most effective rejoinder to i4i’s brief, and there are amicus brief that make that point pretty well. Maybe i4i’s amici have the answer.

  38. 7

    “If a preponderance of the evidence is all that is required to invalidate a real property claim, a personal property claim, a registered copyright, a trademark, or a trade secret claim, what is so different about patent law?”

    Mhmmm

  39. 6

    “This argument apparently works for i4i because, although the jury might not have been instructed on the proper appliation of the standard, Microsoft has not preserved that issue for further appeal.”

    God the legal system is hilarious.

  40. 5

    I’m struck by one argument in the briefs: under the Administrative Procedure Act, a USPTO decision is entitled to deference only if the record affirmatively indicates that the decision is the product of “reasoned decisionmaking” (see the briefs by Lemley et al., SAP et al., etc.).

    Suppose the Court were to adopt that line of thinking. That might upend a crucial bit of received wisdom among patent prosecutors.

    I was taught long ago that in submitting an information disclosure statement, a patent attorney should never (i) summarize or, God forbid, characterize a reference, nor (ii) argue for patentability over a reference in advance of a specific rejection. Doing so, goes the folk wisdom, risks premature prosecution history estoppel, and puts the attorney at risk of being accused of having attempted to mislead the examiner.

    But if the Court goes with the “record of reasoned decisionmaking” notion, the better course might be for a patent attorney to make more of an effort to build a record of such decisionmaking — for example:

    (a) briefly summarize,in numbered paragraphs, the relevant portions of each reference, and distinguishing the claims over the reference in the process;

    (b) include a blanket disclaimer that the summaries and arguments of course aren’t intended as a substitute for the examiner’s own careful consideration of each reference; and

    (c) invite the examiner to indicate his or her consideration of particular arguments by simply referring to the numbered paragraphs.

    Lawyers like to eliminate all risks, but that’s not always possible. In many cases, trade-offs are unavoidable. I know in a lot of cases, I’d recommend to the client that it’s better to have a record that shows reasoned decisionmaking, and that the risk of premature prosecution history estoppel is worth taking.

  41. 4

    If prior art was considered by the PTO, then a challenge amounts to collateral review of the agency’s determination. Not so if the art was not considered. Nevertheless, the buden ought to account for defendant’s advantage in knowing the stakes when patent applicants often do not.

  42. 3

    The problem with ths notion, which is seductive given the prblems at the PTO, is that district courts struggle mightily with material prior art as evidenced by inequitable conduct. Is the presumption to vanish if a defendant can come up with any old combination of cumulative or less relevant prior art? Lots of room for mischief here.

    Not to mention that M$ should be the least sympathetic party in these matters “evar.” Don’t these knuckleheads understand that a decently strong patent system is one of the last bulwarks against their whole business being outsourced to Bangalore? Big “tech” (ha ha ha ha ha ha) is being very shortsighted.

  43. 2

    I find it odd how i4i’s brief goes on and on and on about re-examination, when prior use allegations (including the very allegation in this case) are not reviewable by re-examination at all. This collapses i4i’s entire re-exam-is-an-adequate-substitute argument.

  44. 1

    “If a preponderance of the evidence is all that is required to invalidate a real property claim, a personal property claim, a registered copyright, a trademark, or a trade secret claim, what is so different about patent law? ”
    It’s not that simple. Reformation of a deed, trust, or will commonly requires a heightened burden of proof. And most registered trademarks benefit from incontestability status. Actually, there’s nothing particularly different about patent law. When you go look, the law applies heightened proof requirements in all kinds of circumstances where important personal rights are at issue that are affected by the public interest and where there’s a need for finality, just like it does for patent rights.

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