Clearly and Convincingly: The Supreme Court weighs in on Microsoft v. i4i
The United States Supreme Court (the “Court”) has noted that from their inception, patent laws have “embodied a careful balance between the need to promote innovation and the recognition that imitation and refinement through imitation are both necessary to invention itself and the very lifeblood of a competitive economy.”[1]
On June 9, 2011, the Court addressed the necessary tension between patentees and their potentially infringing competitors when, in Microsoft v. i4i Limited Partnership, it upheld the long-standing precedent requiring a defendant to prove a patent invalid by “clear and convincing” evidence.[2] At issue was the proper evidentiary standard for prior art that had not been examined in the United States Patent & Trademark Office (the “PTO”) during prosecution. Microsoft had asked the Court to lower the burden of proof for an invalidity defense to a preponderance of the evidence standard in all cases or, alternatively, adopt a dual standard based on whether or not the prior art had been before the PTO.
A BRIEF HISTORY OF INFRINGEMENT JURISPRUDENCE
Section 271 of the Patent Act gives a patentee the right to bring an action for direct infringement against anyone who makes, uses, offers to sell or sells any patented invention within the United States.[3] In addition to claiming that there is no infringement, a defendant often challenges the validity of the patent. The challenger, however, bears a substantial burden since the statute itself specifies that the patent is presumed valid and several decisions of the U.S. Court of Appeals for the Federal Circuit (the “Federal Circuit”) have held that clear and convincing evidence is required to overcome this presumption of validity.[4]
The current evidentiary standard in patent infringement cases has its roots in nineteenth century Supreme Court jurisprudence, when, in Coffin v. Ogden, the Court held that the burden of proof to make an invalidity defense rests upon an accused infringer and that “every reasonable doubt should be resolved against him.”[5] The Court revisited the issue in 1934, in Radio Corp. of America v. Radio Engineering Laboratories, Inc., in which Justice Cardozo stated:
there is a presumption of [patent] validity, a presumption not to be overthrown except by clear and cogent evidence[6]
Three years later, in Smith v. Hall, the Court held that documentary evidence of defendant’s prior use, including a book, his own unsuccessful patent application and a journal article, supported the “heavy burden of persuasion which rests upon one who seeks to negative novelty in a patent by showing prior use.”[7] The presumption of validity was codified in 1952, in § 282 of the Patent Act, which 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.”[8]
In the thirty years that followed, the regional courts of appeals developed a variable standard of interpretation of §282 when dealing with prior art that was not before the PTO.[9] The Federal Circuit, created in 1982 in part due to Congress’ concern that the lack of uniform treatment of patents among the federal circuits had undermined patent law’s goal of encouraging innovation and growth, adopted its interpretation of §282 in 1983 when, in Connell v. Sears, Roebuck & Co., it held that “the introduction of art or other evidence not considered by the PTO does not change the burden and does not change the requirement that that evidence establish presumption-defeating facts clearly and convincingly.”[10] Two years later, in American Hoist & Derrick Co. v. Sowa & Sons, Inc., Federal Circuit Judge Rich stated that while the language in §282 that he co-authored always imposes a clear and convincing burden, a challenger can more easily carry that burden when the PTO has not considered the evidence:
What the production of new prior art or other invalidating evidence not before the PTO does is to eliminate, or at least reduce, the element of deference due the PTO, thereby partially, if not wholly, discharging the attacker’s burden, but neither shifting nor lightening it or changing the standard of proof. . . . [T]he evidence may, therefore, carry more weight and go further toward sustaining the attacker’s unchanging burden.[11]
Since then, the Federal Circuit has consistently required clear and convincing evidence of invalidity in all cases. The Supreme Court addressed the issue in 2007, when, in KSR International v Teleflex Inc., it noted that in a case where the prior art in question had not been before the PTO during prosecution, “the rationale underlying the presumption—that the PTO, in its expertise, has approved the claims—seems much diminished here.”[12]
MICROSOFT V. I4I
The current controversy arose on March 8, 2007, when Infrastructures for Information Inc. (“i4i”) filed suit in the Eastern District of Texas[13], claiming the manufacture and sale of certain Microsoft Word products infringed U.S. Patent No. 5,787,449, entitled “Method and System for Manipulating the Architecture and the Content of a Document Separately from Each Other” (the “’449 patent”).[14] The ‘449 patent claims an improved method for editing documents containing markup languages by creating a “metacode map,” a data structure that stores the metacodes and their locations separately from the content within a document.[15]
At trial, Microsoft argued that the ‘449 patent was invalid based on several pieces of prior art. As relevant here, Microsoft argued that i4i’s invention was anticipated under 35 U.S.C. § 102(b) by the sale of a software program, SEMI-S 4 (“S4”), by i4i before the critical date.[16] The parties agreed that S4 was sold in the United States before the critical date, but disputed whether S4 practiced the “metacode map” limitation of the ‘449 patent.[17] The S4 source code was destroyed years before the litigation began, so the dispute turned largely on the credibility of S4’s two inventors.[18]
Microsoft cited the KSR dicta and proposed an instruction to the jury that “Microsoft’s burden of proof with regard to the prior art that the examiner did not review during the prosecution is by preponderance of the evidence.” i4i objected to Microsoft’s proposed instruction and the district court agreed and instructed the jury that Microsoft had the burden of proving invalidity by clear and convincing evidence.[19] A jury found that Word infringed all asserted claims of the ‘449 patent and that the patent was not invalid. On appeal, the Federal Circuit held that the jury instructions were correct “in light of this court’s precedent, which requires the challenger to prove invalidity by clear and convincing evidence.”[20] The court explained that its decisions made it clear that the Supreme Court’s decision in KSR did not change the burden of proving invalidity by clear and convincing evidence.
On November 29, 2010, the Supreme Court granted a writ of certiorari.[21] Twenty amicus briefs were filed on behalf on Microsoft, twenty-four amicus briefs were filed in support of i4i’s position of maintaining the status quo and fives briefs were filed in support of neither party.
ARGUMENTS FOR AND AGAINST THE CLEAR AND
CONVINCING STANDARD
In its brief, i4i asserted that when Congress codified the presumption of validity in 1952, the Court had established that proof of invalidity required clear and convincing evidence, including with allegations of prior use.[22] i4i and supporting amici argued that the Federal Circuit has consistently applied the clear and convincing standard for over twenty-five years, and despite modifying other Federal Circuit rulings, Congress has left the clear and convincing standard unchanged. They further argued that the KSR dicta is consistent with Federal Circuit precedent holding that a challenger’s burden is more easily carried with evidence of prior art not considered by the PTO.
Amici representing university patent owners and venture capitalists, whose financing is crucial to supporting technological innovation, argued that a change in the burden of proof would frustrate one of the main university goals—transferring research and technology to the public— and weaken patents beyond the risk tolerance of venture capital investors.[23]
Several amici supporting Microsoft argued that because the preponderance of the evidence standard results in a roughly equal allocation of the risk of error between litigants, this standard is applicable in civil actions between private litigants unless “particularly important individual interests or rights are at stake.”[24] However one amicus countered that as per the Court’s jurisprudence in Addington v. Texas, the heightened standard of proof is warranted whenever the magnitude of the countervailing interests of the litigants are highly asymmetric, as is the case in patent invalidity proceedings, where patentee faces a far greater risk from an erroneous judgment against him.[25]
Supporters of the current approach argued that adopting a dual standard would increase the complexity of patent litigation as parties dispute exactly which prior art was “considered” by the PTO, and force categorization of the prior art as considered/not considered before the jury evaluates validity.[26] i4i further argued that continued deference to the PTO is valid since it rests not on any individual decision, but on the presumption of administrative correctness, which in turns rests on Congress’s delegation of authority to the PTO to determine questions of patent vailidty. A preponderance standard in litigation would therefore force juries to give no weight to the expert agency’s decision that a patent met the statutory criteria.[27]
Several critics of the administrative deference to the PTO argued that patent law’s presumption of validity is flawed: the recent surge of patent applications has overwhelmed the resources of the PTO’s examiners[28] and it is estimated that a patent examiner is able to spend, on average, just 18 hours on each application, with those hours often spread over a three- to five-year period.[29] Critics also argued that the clear and convincing standard exacerbates the problem of abusive patent suits brought by non-practicing entities (“NPEs”), who buy questionable patents and assert them in litigation.[30]
i4i and its amici countered that problems with NPEs and PTO examination procedures should be addressed directly: the problem is not the evidentiary standard and efforts should be focused on creating better prior art databases, or providing the PTO with better resources for examinations.[31]
ARGUMENTS BEFORE THE SUPREME COURT
On April 18, 2011, in oral arguments before the Supreme Court, Microsoft counsel’s comment that the current clear and convincing standard “made no sense” drew a reply from Justice Ginsburg, who said that it would be difficult to say the standard makes no sense when it was supported by Justice Cardozo and §282’s co-author, Judge Rich.[32] Justices Breyer, Ginsberg and Sotomayor asked if the issues raised by the instant case could be addressed with careful jury instructions and i4i’s counsel responded that ”the Federal Circuit has said that over and over and over again.”[33]
On June 9, 2011, the Court, in a unanimous 8-0 decision[34], held that Section 282 requires an invalidity defense to be proved by clear and convincing evidence. The Court noted that while § 282 includes no express articulation of the standard of proof, in 1952 when Congress stated that a patent is “presumed valid,” it traced nearly a century of case law imposing a heightened burden of proof, as articulated in Radio Corp.[35]
The Court noted that in the past it had applied the heightened proof rule without any mention of whether the relevant prior art evidence had been before the PTO examiner and in cases where the evidence included documentary proof, and not just oral testimony.[36] It rejected Microsoft’s argument that the longstanding Federal Circuit’s interpretation rendered § 282’s additional statement that “[t]he burden of establishing invalidity . . . shall rest on the party asserting” superfluous, because neither of Microsoft’s alternative explanations of § 282 avoids excess language.[37] While recognizing that it might be unusual to treat a presumption as alone establishing the governing standard of proof, the Court stated
Whatever the significance of a presumption in the abstract, 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. And [Radio Corp.] leaves no doubt that attached to the common-law presumption of patent validity was an expression as to its “force,”—that is, the standard of proof required to overcome it.[38]
Moreover, the Court agreed with Judge Rich’s opinion in American Hoist, and noted that if the PTO did not have all material facts before it, its judgment may lose significant force, and a jury may be instructed to consider this when determining whether an invalidity defense has been proved by clear and convincing evidence.[39]
Finally, the Court noted that during the nearly 30 years that the Federal Circuit has interpreted § 282, Congress had amended § 282 and other patent laws, but apparently has never considered any proposal to lower the standard of proof.[40] Thus, the Court stated, any recalibration of the standard of proof remains in Congress’ hands.
[1] Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 146 (1989).
[2] Microsoft Corp. v. i4i Ltd. P’ship, 131 S.Ct. 2238, 2240 (2011).
[3] 35 U.S.C. §271(a) (2010). §271 also prohibits the importation of a patented invention into the United States.
[4] 35 U.S.C. §282 (2002). See N. Am. Vaccine v. Am. Cyanamid Co., 7 F.3d 1571, 1579 (Fed. Cir. 1993).
[5] 85 U.S. 120, 124 (1873). Twenty years later, in Washburn & Moen Mfg. Co. v. Beat ‘em all Barbed Wire Co., the Court, in a case involving uncorroborated oral testimony made years earlier, held that proof “shall be clear, satisfactory and beyond a reasonable doubt.” 143 U.S. 275, 284, 289 (1892).
[6] Radio Corp. of Am. v. Radio Eng’g Laboratories, Inc., 293 U.S. 1, 2 (U.S. 1934).
[7] 301 U.S. 216, 220-23, 227 (1937).
[8] 35 U.S.C. § 282.
[9] In cases involving invalidity claims based on prior art that was not before the PTO, four circuit courts held that the presumption of validity was eroded and that the preponderance of evidence standard applied. The other nine regional circuits held that when the prior art had not been considered by the PTO, the presumption of validity was weakened. See Petition for a Writ of Certiorari at 15-17, Microsoft Corp. v. i4i Ltd. P’ship, 131 S.Ct. 647 (2010) (No. 10-290), 2010 WL 3413088.
[10] 722 F.2d 1542, 1549 (Fed. Cir. 1983).
[11] 725 F.2d 1350, 1360 (Fed. Cir. 1984).
[12] 550 U.S. 398, 426 (2007).
[13] i4i Ltd. P’ship v. Microsoft Corp., 670 F.Supp.2d 568 (E.D. Tex. 2009).
[14] U.S. Patent No. 5,787,449 (filed Jun. 2, 1994) (issued Jul. 28 1998).
[15] See id. Separate storage of a document’s structure and content was an improvement over prior technology because it has allowed users to work solely on a document’s content or its structure. See ‘449 Patent at col.7 ll.6-27.
[16] In order to prove anticipation by the on-sale bar, a defendant must show by clear and convincing evidence that the following occurred before the critical date: (1) the invention was the subject of a commercial sale or offer for sale, by showing proof of reduction to practice before the critical date; or by proof that prior to the critical date the inventor had prepared drawings or other descriptions of the invention that were sufficiently specific to enable a person skilled in the art to practice the invention and (2) the invention was “ready for patenting” at the time of the offer or sale. See Pfaff v. Wells Elecs., Inc., 525 U.S. 55, 67-68 (1998).
[17] See i4i Ltd. P’ship v. Microsoft Corp., 670 F.Supp.2d 568, 585 (E.D. Tex. 2009).
[18] The inventors claimed that the S4 code was on a Macintosh platform, which was no longer of interest to them and so the code was destroyed in the normal course of business. See Brief in Opposition to a Writ of Certiorari at 4, Microsoft Corp. v. i4i Ltd. P’ship, 131 S.Ct. 647 (2010) (No. 10-290), 2010 WL 4314336
[19] See i4i Ltd. P’ship, 670 F.Supp.2d at 589.
[20] See i4i Ltd. P’ship v. Microsoft Corp., 598 F.3d 831, 848 (Fed. Cir. 2010), hearing en banc denied 589 F.3d 1246 (Fed. Cir. 2010) (citing Zenith Elecs. Corp. v. PDI Commc’n Sys., Inc., 522 F.3d 1348, 1363-64 (Fed. Cir. 2008)).
[21] 131 S.Ct. 647 (2010).
[22] See Reply for Respondents at 12, Microsoft Corp. v. I4i Ltd. P’ship, 131 S.Ct. 647 (2011) (No. 10-290). See also N. Star Steel Co. v. Thomas, 515 U.S. 29, 34 (1995) (it is appropriate to presume that Congress was thoroughly familiar with the Court’s precedents and that it expects its enactments to be interpreted in conformity with them).
[23] The biotechnology industry is the most capital focused industry in the world, in which research and development expenditures average $30 billion annually in research and development, virtually all of which comes from private sources. This is more than twice the annual investment of the pharmaceutical industry, which itself is several times more intensive than any other industry. See Brief of Amici Curiae Biotechnology Indus. Org., Ass’n of Univ. Tech. Managers, and Croplife Int’l in Support of Respondents at 24-25, Microsoft Corp. v. I4i Ltd. P’ship, 131 S.Ct. 647 (2011) (No. 10-290), 2011 WL 1042217. See also See Brief of Amici Curiae Venture Capital Firms Aberdare Ventures, Affinity Capital, Alta Partners, Arch Ventures, Asset Mgmt. Co., Atlas Ventures, Canaan Partners, Delphi Ventures, HLM Venture Partners, Kearny Venture Partners, Latterell Venture Partners, New Enterprise Assoc., Prospect Venture Partners, Thomas, Mcnerney & Partners, U.S. Venture Partners, Venrock, Venture Investors, LLC, Versant Ventures, and The Vertical Grp., in Support of Respondents at 5, Microsoft Corp. v. I4i Ltd. P’ship, 131 S.Ct. 647 (2011) (No. 10-290). The U.S. Department of Commerce has noted that “[v]enture-backed startups disproportionately generate the new technological improvements upon which growth depends.” U.S. Dep’t of Commerce, Patent Reform: Unleashing Innovation, Promoting Economic Growth & Producing High-Paying Jobs 3 (2010).
[24] See Brief of Bus. Software Alliance as Amicus Curiae in Support of Petitioner at 25, Microsoft Corp. v. i4i Ltd. P’ship, 131 S.Ct. 647 (2011) (No. 10-290), 2011 WL 343079. These amici note that while patent rights are valuable economic rights, they are different from fundamental interests, such as civil commitment and loss of parental rights, that warrant a clear and convincing standard of proof in which the governing statute does not expressly call for one.
[25] See Brief of Amicus Curiae Dr. Ron D. Katznelson in Support of Affirmance at 5, Microsoft Corp. v. i4i Ltd. P’ship, 131 S.Ct. 647 (2011) (No. 10-290). Whereas an alleged infringer faces damages incurred by his own infringing activity, the patentee faces a far greater risk under an erroneous judgment against him, since he would lose the right to recover from all infringing parties. Amicus argues that since the patentee has already disclosed his invention for the benefit of the public, he would be unlikely to recoup the investments made in the development of the invention. See id. at 4. See also Addington v. Texas, 441 U.S. 418 (1979).
[26] See Brief for Amicus Curiae Bar Ass’n of the District of Columbia Patent, Trademark & Copyright Section in Support of Neither Party at 5, Microsoft Corp. v. I4i Ltd. P’ship, 131 S.Ct. 647 (2011) (No. 10-290), 2011 WL 343073. Under a dual or lower standard, critics worry that an examiner would be forced to list every single reference in the classes and subclasses she searched, since any reference she did not list could be an “unconsidered” invalidating reference in litigation.
[27] See Reply for Respondents, supra note 22, at 56.
[28] In 2006, the PTO received almost twice as many patent applications (485,500) as it did just ten years earlier (278,268), and three times as many as 20 years earlier (163,306). See USPTO Performance and Accountability Report 113 tbl. 2 (2009). See also Doug Lichtman & Mark A. Lemley, Rethinking Patent Law’s Presumption of Validity, 60 Stan. L. Rev. 45, 46, 54 (2007).
[29] See Mark A. Lemley & Carl Shapiro, Probabilistic Patents, 19 J. Econ. Persp. 75, 79 (2005); Brief Amici Curiae of 36 Law, Bus., and Econ. Professors in Support of Certiorari at 3, Microsoft Corp. v. i4i Ltd. P’ship, 131 S.Ct. 647 (2010) (No. 10-290).
[30] Patent Trolls: Fact or Fiction?, Hearing Before the Subcomm. on Courts, the Internet, & Intellectual Property of the House Comm. on the Judiciary, 109th Cong. 2-3 (2006) (statement of Rep. Berman).
[31] See Reply for Respondents, supra note 22, at 37-38
[32] See Gene Quinn, Microsoft i4i Oral Arguments Complete at Supreme Court, IP Watchdog (Apr. 18, 2011 4:15 pm) http://ipwatchdog.com/2011/04/18/microsoft-i4i-oral-arguments-complete-at-supreme-court/id=16525/.
[33] See id.
[34] Microsoft Corp. v. i4i Ltd. P’ship, 131 S.Ct. 2238 (2011). Chief Justice Roberts recuses himself from any Microsoft cases before the Court.
[35] See id. at 2240. The Court noted that it must presume that Congress intended to incorporate the heightened standard of proof unless the statute otherwise dictated. See id. at 2246.
[36] See id. at 2246, 2250 (citing Smith v. Hall, 301 U.S. 216, 227, 233 (1937)).
[37] See id. at 2240.
[38] See id. at 2246-47.
[39] See id. at 2251. The Court noted that although Microsoft argued that S4 was never considered by the PTO, it failed to request an instruction along these lines from the District Court, and the Court would therefore refuse to consider it. See id.
[40] See id. at 2252.
—————————————————————————————————————————————–
Ron Vogel is a third year student at Fordham University School of Law. He is a graduate of the Cooper Union for the Advancement of Science and Art and IPLJ staff member. See his other post here.
