Microsoft v. i4i – Supreme Court Unanimously Holds that Invalidity of a Patent Must be Shown by Clear and Convincing Evidence

• First major patent decision by the Supreme Court in past 5 years in which jurisprudence of the Court of Appeals for the Federal Circuit affirmed
  
• If the governing statute on the burden of proving invalidity is to be changed in the way Microsoft argued, that change will need to come from Congress

The Microsoft v. i4i decision comes as no big surprise.  The Court unanimously held that invalidity of a patent must be shown by clear and convincing evidence.  There is some language dicta in the decision that defendants will undoubtedly use to try to decrease the showing with respect to prior art not considered by the PTO.  But at the end of the day the clear and convincing standard for invalidating a patent was upheld.

In Microsoft v. i4i, a decision rendered by the Supreme Court on June 9, 2011, the Supreme Court unanimously affirmed (with Chief Justice Roberts taking no part) the decision of the Court of Appeals for the Federal Circuit in holding that invalidity of a patent must be shown by clear and convincing evidence.

This action involved prior art S4 software that was never presented to the PTO examiner because the software’s source code had been destroyed years before the commencement of the litigation and hence the factual dispute turned largely on trial testimony by S4’s two inventors. Microsoft objected to i4i’s proposed jury instruction that it was required to prove its invalidity defense by clear and convincing evidence and requested an instruction that would require the clear and convincing burden to apply only with respect to prior art examined by the PTO.  In all other cases, the burden of proof would be by a preponderance of the evidence.  The district court rejected Microsoft’s hybrid standard of proof and instructed the jury to use the clear and convincing standard.  The jury found Microsoft to willfully infringe the i4i patent and that Microsoft had not proven invalidity by clear and convincing evidence.  The federal circuit affirmed.

The Supreme Court upheld the federal circuit decision applying a strict statutory construction to 35 U.S.C. 282, which provides that “[a] patent shall be presumed valid” and “[t]he burden of establishing invalidity . . . rest[s] on the party asserting such invalidity”.  As the Court made clear there was a statute pretty much on point.  It didn’t use the word “clear and convincing” in the statute on proving a patent to be invalid but it did use the words that a patent is “presumed valid”.   Under statutory construction, what does “presumed valid” mean if not a heightened standard to invalidate a patent.  As the Court explained “basic principles of statutory construction require us to assume that Congress meant to incorporate “the cluster of ideas” attached to the common law term it adopted. Beck, 529 U. S., at 501 (internal quotation marks omitted). And RCA leaves no doubt that attached to the common-law presumption of patent validity was an expression as to its “force,” 293 U. S., at 7—that is, the standard of proof required to overcome it. Slip. Op. pp. 9-10.  In this regard, the Court observed that a fixture of the common law has been that “. . .  a defendant raising an invalidity defense bore “a heavy burden of persuasion,” requiring proof of the defense by clear and convincing evidence.” Slip Op. p. 8.

Had the Supreme Court ruled the other way and “cut the baby in half” to allow prior art not considered by the PTO to be used to invalidate a patent under a lower “by a preponderance of the evidence” standard, the Court would have effectively eviscerated the clear and convincing standard.  A two standard approach to proving patent invalidity would have effectively opened the door to a host of difficult issues such as which of the two standards would apply to a piece of prior art that was not considered by the PTO but arguably cumulative?  For that matter, who would decide what is “cumulative” for purposes of deciding which standard to apply?  In addition, a contrary holding could even be viewed as the Court not giving credit to the PTO as an administrative body since the courts would effectively have free reign to second guess PTO examiners.

And so the big news in Microsoft v. i4i is that there is no big news.  But if there is any news in the i4i decision, it is that Microsoft v. i4i is the first major patent decision decided by the Supreme Court in the past 5 years in which the Supreme Court affirmed the jurisprudence of the Court of Appeals for the Federal Circuit.  In Bilski v. Kappos, 561 US __ (2010), for example, the Court affirmed but on different reasoning.  In each of eBay Inc. v. MercExchange LL7, 547 U.S. 388 (2006) (vacating Federal Circuit judgment); KSR v. Teleflex, 550 U.S. 398 (2007) (reversing Federal Circuit); MedImmune v. Genentech, 549 U.S. 118 (2007) (reversing Federal Circuit); Microsoft v. AT&T, 550 U.S. 437 (2007) reversing Federal Circuit); Quanta Computer v. LG Electronics (2008) (reversing Federal Circuit), the federal circuit was reversed.  Which raises the question why the Court even granted certiorari in the Microsoft v. i4i case at all?  Maybe some of it has to do with the good lawyering done on the part of Microsoft that presented facially convincing arguments that fell apart after the Court did its own analysis.  But rather than dismissing the certiorari as improvidently granted as was done in Lab Corp.v. Am. Holdings (LabCorp) v. Metabolite Labs, Inc., 126 S. Ct. 2921 (2006), perhaps the Court saw Microsoft v. i4i as an opportunity to make clear that this is not an activist court and will not be legislating from the bench.  As the Court explained, “Congress specified the applicable standard of proof in 1952 when it codified the common-law presumption of patent validity. Since then, it has allowed the Federal Circuit’s correct interpretation of §282 to stand. Any recalibration of the standard of proof remains in its hands.” Slip Op. at 20.  Hence, the real news in the i4i decision may be that if the governing statute on the burden of proving invalidity is to be changed in the way Microsoft argued, that change would need to come from Congress.  That, and that Microsoft must now pay i4i $290 Million.

The Juhasz Burge PC Firm can help you to better understand the effect of Microsoft v. i4i on your patents. For more information regarding Microsoft v. i4i, please contact The Juhasz Burge PC Firm.

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