For almost thirty years, the Federal Circuit Court of Appeals has required that alleged patent infringers prove patent invalidity by a heightened evidentiary standard, namely by clear and convincing evidence. When the U.S. Supreme Court agreed to hear Microsoft's appeal in Microsoft Corp. v. i4i Limited Partnership, patent holders became concerned that the Court would accept Microsoft's invitation to reduce the evidentiary standard required from clear and convincing evidence down to simply preponderance of the evidence.1 Yesterday, the Court issued its opinion in Microsoft Corp. v. i4i Limited Partnership, No. 10-290, 2011 WL 2224428 (Jun. 9, 2011). All eight voting members of the Court – Justice Roberts recused himself – rejected Microsoft's argument and agreed that the Federal Circuit's clear and convincing standard was compelled by the adoption of 35 U.S.C. § 282.

The Underlying Lawsuit.

In the underlying lawsuit, i4i sued Microsoft for patent infringement. Microsoft asserted the defense that the patent-in-suit was invalid. Specifically, Microsoft alleged that the patent-in-suit was invalid by the on-sale bar of § 102(b) of the Patent Act. At trial, the issue of whether the on-sale bar was applicable turned on the testimony of the two inventors of the patent-in-suit as to whether software they had previously sold contained certain features of the patent-in-suit. If it did, the patent was invalid; if not, the patent remained valid. Because the original source code for the software had been destroyed years earlier, the only evidence of whether the prior software incorporated the features was the oral testimony of the inventors. In submitting this disputed factual issue to the jury, i4i requested an instruction that Microsoft had to prove its defense of patent invalidity by clear and convincing evidence. Microsoft objected and asked the district court to give the jury an instruction that patent invalidity is determined by a preponderance of the evidence. The district court rejected Microsoft's instruction and gave the jury i4i's clear and convincing instruction. The jury found against Microsoft on the question of invalidity, and Microsoft appealed.

Microsoft's Appeal.

On appeal, Microsoft argued that the applicable evidentiary standard should be simply preponderance of the evidence, rather than the Federal Circuit's clear and convincing standard. In the alternative, Microsoft argued that the lower evidentiary standard should be applied where the allegedly invalidating prior art was not before the PTO during prosecution of the patent because, by definition, the deference to an administrative agency built into the clear and convincing standard should not apply when the agency never actually considered the prior art.

The Court's Opinion.

The Court rejected both of Microsoft's contentions. According to the Court, the clear and convincing evidentiary standard was mandated by the adoption of 35 U.S. C. § 282, which states that "[a] patent shall be presumed valid" and "[t]he burden of establishing invalidity of a patent or any claim thereof shall rest on the party asserting such invalidity." The Court found that the Federal Circuit's clear and convincing evidence standard properly accounted for the statutory presumption of validity set forth in § 282. In fact, according to the Court, since 1984 in the American Hoist decision,2 the Federal Circuit has properly held that "[Section] 282 creates a presumption that a patent is valid and imposes the burden of proving invalidity on the attacker. That burden is constant and never changes and is to convince the court of invalidity by clear evidence."3 As to Microsoft's alternative argument that the lower standard should apply to prior art that was not before the PTO during patent prosecution, the Court rejected the contention as inconsistent with § 282, as well as the Court's pre-1952 precedents.4

Simply put, if the PTO did not have all the material facts before it, its considered judgment may lose significant force . . . [a]nd, concomitantly, the challenger's burden to persuade the jury of its invalidity defense by clear and convincing evidence may be easier to sustain.5

More importantly, the Court suggested that an alleged infringer could obtain a jury instruction on the issue. According to the Court, "[w]hen warranted, the jury may be instructed to consider that it has heard evidence that the PTO had no opportunity to evaluate before granting the patent."6 In sum, patent holders' fears that the Court would continue to weaken patent rights went unrealized with this latest opinion. While patent invalidity defenses must still be proved by clear and convincing evidence, alleged infringers will be able to instruct juries about prior art that the PTO did not review during prosecution.

Footnotes

1 In the last five years, the Court has reduced the strength of granted patents by lowering the burden necessary to demonstrate patent invalidity based upon obviousness, KSR Int'l Co. v. Teleflex Inc., 550 U.S. 398 (2007), and increasing the burden of obtaining a preliminary injunction against alleged infringers. eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006).

2 American Hoist & Derrick Co. v. Sowa & Sons, Inc., 725 F.2d 1350 (Fed. Cir. 1984).

3 725 F.2d at 1350.

4 The Patent Act, including 35 U.S.C. § 282, was adopted in 1952.

5 2011 WL 2224428 at *11.

6 Id.

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