Microsoft Corp. v. i4i Limited Partnership, No. 10-290 (U.S. Sup. Ct. June 9, 2011). [link]
Thursday's U.S. Supreme Court opinion in the Microsoft case did not make any significant changes to patent law or patent litigation as some observers had predicted. The Supreme Court affirmed the long standing rule that the invalidity defense to a patent infringement action must be proven by "clear and convincing evidence," even if relying on new evidence that had not been presented to the Patent and Trademark Office during the prosecution of the patent in question. But the opinion contained some language that indicates it might be easier to challenge the invalidity of patents in the future.
Section 282 of the federal Patent Act provides that "[a] patent shall be presumed valid" and that "[t]he burden of establishing invalidity of a patent or any claim thereof shall rest on the party asserting such invalidity." In its 1984 decision in American Hoist & Derrick Co. v. Sowa & Sons, Inc., 725 F.2d 1350 (Fed. Cir. 1984), the Federal Circuit interpreted Section 282 to require that the burden of proving invalidity is "to convince the court of invalidity by clear evidence." Since 1984, the Federal Circuit has been consistent in this interpretation.
In 2007, i4i sued Microsoft for willful patent infringement, claiming Microsoft's manufacture and sale of certain Microsoft Word products infringed i4i's patent. Microsoft asserted a counterclaim and sought a declaration that i4i's patent was invalid and unenforceable, alleging that i4i had sold software incorporating the patented inventions in the U.S. more than a year prior to filing its patent application. It was undisputed that the disputed evidence concerning the sale of the software has not been presented to the Patent and Trademark Office examiner during the prosecution of the patent application. At trial, Microsoft objected to the proposed jury instruction that the invalidity defense must be proved by 'clear and convincing evidence,' with respect to the prior art that was not examined by the PTO examiner. Microsoft proposed the following alternative jury instruction:
"Microsoft's burden of proving invalidity and unenforceability is by clear and convincing evidence. However, Microsoft's burden of proof with regard to its defense of invalidity based on prior art that the examiner did not review during the prosecution of the patent-in-suit is by preponderance of the evidence."
The District Court rejected Microsoft's proposed jury instruction. At trial, the jury found that Microsoft had willfully infringed i4i's patent, and that Microsoft failed to prove invalidity. The Court of Appeals for the Federal Circuit affirmed the ruling in 2010, relying on its longstanding interpretation of Section 282 in the American Hoist decision.
Supreme Court Decision
The Supreme Court affirmed the lower court decisions in an 8-0 ruling. (Chief Justice Roberts did not participate in the ruling, reportedly because he owns Microsoft stock).
Writing for the majority, Justice Sotomayor reviewed the history of Section 282 of the Patent Act. She found that in adopting Section 282 in 1952, Congress had codified the common-law presumption that patents are valid, and, implicitly, the heightened 'clear and convincing' standard of proof that attached to this presumption. She also found that Congress had had many opportunities to amend Section 282 and other patent laws since 1984, but apparently has never considered any proposal to lower the standard of proof for invalidity. As a result, any change to the standard of proof must be made by Congress.
Under an agreement between the parties, Microsoft must now pay i4i $300 million within 15 days.
Change for the Future?
One interesting part of Justice Sotomayor's decision addressed Microsoft's contention that the 'preponderance of the evidence' standard should apply where the evidence being presented in the trial was not presented to the PTO during the examination process. Her opinion found that there was no evidence that Congress intended to deviate from the 'clear and convincing evidence' standard in these circumstances. However, the Court's opinion noted 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 has 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."
As a result, the 'clear and convincing evidence' standard for proving the invalidity of a patent remains in place. But the Court's decision also clearly instructs lower courts to permit juries to consider new evidence, and the effect of new evidence when making their 'clear and convincing' determination. We will need to wait for a number of patent infringement cases to move their way through the lower courts to see whether or not this new evidence has any actual affect on the juries. In theory, however, it would appear that by endorsing the consideration of new evidence by juries, the Court's decision may make it easier to prove the invalidity of patents in the future.