Microsoft Corp. v. i4i Limited Partnership, — U.S. —- (June 9, 2011) (SOTOMAYOR, Scalia, Kennedy, Ginsburg, Breyer, Alito, & Kagan; BREYER, Scalia & Alito, concurring; THOMAS, concurring judgment) Microsofti4i.ussc
MAJOR ISSUES: invalidity defenses; clear and convincing evidence standard of proof; Section 282 as codification of common-law heightened proof standard; jury instruction when accused infringer relies on new evidence not considered by PTO during examination
COMMENTS: The Court, in a well-crafted opinion by Justice Sotomayor, confirms the Federal Circuit’s position, consistently maintained for almost 30 years, that one challenging the validity of a patent claim bears a proof burden of clear and convincing evidence and not the general civil burden of a preponderance of the evidence. This heightened standard is not lowered even when the challenger relies on “new” evidence, that is, evidence that was not presented to or considered by the PTO during examination of the claim. However, the Court, like the Federal Circuit, cautioned that a challenger may more easily carry the heightened burden by relying on new evidence. And the Court directed that a cautionary instruction to a jury on new evidence will be proper.
Cross References: For a discussion of the proof burden, as applied to obviousness invalidity defenses, see Chisum on Patents § 5.06. See also Chisum on Patents § 19.02. For cases on the presumption of validity, see Chisum Patent Law Digest § 1562, § 5663.
For a summary of the Court’s decision, see below.
1. CLARIFYING TERMINOLOGY: BURDEN OF PERSUASION, NOT PRODUCTION OF EVIDENCE. In a helpful footnote, the Court clarified terminology. It noted that the term “burden of proof” encompasses two separate burdens: (1) a burden of persuasion, which specifies “which party loses if the evidence is balanced”, and (2) a burden of production, which specifies “which party must come forward with evidence at various stages of litigation.” At issue here is the burden of persuasion or “standard of proof,” which refers “to the degree of certainty by which the factfinder must be persuaded of a factual conclusion to find in favor of the party bearing the burden of persuasion.” The parties dispute whether the standard for an invalidity defense should be “preponderance of the evidence” or a heightened standard of “clear and convincing evidence.” The accused infringer, Microsoft, argues that burden should be a preponderance either generally or, alternatively, when a validity defense relies on evidence not considered by the Patent and Trademark Office (PTO). The Court rejected both arguments, holding that he standard of proof on invalidity is clear and convincing evidence. However, when an accused infringer does rely on new evidence to support an invalidity defense, a court should, on request, give a cautionary instruction to a jury.
2. CODIFYING COMMON LAW PRESUMPTION AND HEIGHTENED PROOF STANDARD. Prior to the 1952 Act, the courts, as a matter of common law, applied a heightened standard of proof for invalidity defenses.
The leading decision was Radio Corp. of America v. Radio Engineering Laboratories, Inc., 293 U.S. 1 (1934). RCA stated that “an infringer who assails the validity of a patent fair upon its face bears a heavy burden of persuasion, and fails unless his evidence has more than a dubious preponderance.”
In enacting Section 282, which, for the first time, stated a presumption of validity but which did not explicitly define the standard of proof, Congress used the common-law phrase “presumed validity” and must be assumed to have intended that it embody the common-law heightened proof standard.
Early after its formation, in an opinion by Judge Giles Rich, “a principal drafter of the 1952 Act,” American Hoist & Derrick Co. v. Sowa & Sons, Inc., 725 F.2d 1350 (Fed. Cir. 1984), and consistently thereafter, the Federal Circuit interpreted Section 282 as codifying an existing presumption of validity and as imposing a constant burden of proving invalidity by clearer and convincing evidence. Meanwhile, Congress “often amended § 282” but never “even considered a proposal to lower the standard of proof.”
Under the common and proper understanding of a presumption, the presumption does not, alone, establish a standard of proof. See J. Thayer, Preliminary Treatise on Evidence at the Common Law 336-337 (1898); Fed. Rules of Evidence Rule 301. However, courts have often used “presumption” “when another term might be more accurate,” and Congress cannot be faulted for similarly using the phrase “presumed valid” in an imprecise way.
The accused infringer Microsoft argues that pre-1952 cases applied the heightened standard to only two categories of cases: those involving oral testimony of prior invention and those involving invention priority issues previously litigated by the parties in the PTO. To the contrary, the pre-1952 cases identified no such limitations. See Smith v. Hall, 301 U.S. 216, 233 (1937); Coffin v. Ogden, 85 U.S. 120, 124 (1874).
The accused infringer argues that construing the phrase “presumed valid” in Section 282 as imposing a heightened burden renders the subsequent phrase, “[t]he burden of establishing invalidity of a patent … shall rest on the party asserting such invalidity,” superfluous. That is true, but the accused infringer’s own suggested interpretation suffers from superfluity. Sometimes, “Congress enacts provisions that are superfluous.”
The Court noted: “For those of us for whom it is relevant,” Section 282’s legislative history supports the conclusion that “Congress meant to codify the judge-made presumption of validity” and not to establish a new presumption.
3. EVIDENCE NOT CONSIDERED BY PTO DURING EXAMINATION. The accused infringer argues, in the alternative, that a preponderance standard should apply “where the evidence before the factfinder was not before the PTO during the examination process.”
In KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398(2007), the Court stated that, as to evidence on validity not considered by the PTO: “the rationale underlying the presumption–that the PTO, in its expertise, has approved the claim–seems much diminished.” The statement “is true enough, although other rationales may animate the presumption in such circumstances,” such as the reliance interest of a patent owner, who has disclosed an invention in order to obtain a patent. See The Barbed Wire Patent, 143 U.S. 275, 292 (1892).
Regardless of the rationale, Congress codified “the common-law presumption of patent validity and, implicitly, the heightened standard of proof attached to it.” The pre-1952 cases on the common-law presumption endorsed no “fluctuating standard of proof.”
A fluctuating standard would involve “impracticalities” and “collateral litigation,” such as the difficulty in determining “whether a PTO examiner considered a particular references.” The PTO only requires examiners to cite the “best” reference, not all the references considered.
Pre-1952 Court of Appeals decisions did refer to a “weakened” or “dissipated” presumption when the Patent Office had not considered evidence, but did not suggest that a preponderance standard should apply. Rather, the cases reflect a “common sense principle” that the Federal Circuit has recognized: “new evidence supporting an invalidity defense may `carry more weight’ in an infringement action than evidence previously considered by the PTO, American Hoist, 725 F.2d at 1360.”
4. JURY INSTRUCTION. The Court noted: “a jury instruction on the effect of new evidence can, and when requested, most often should be given.”
If the parties dispute “whether the evidence presented to the jury differs from that evaluated by the PTO, the jury may be instructed to consider that question.”
Thus, “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.”
5. THIS CASE: COMPUTER DOCUMENT EDITING METHOD. A patent concerned an improved computer document editing method, which required, inter alia, separate storage of document content and its “metacodes.” U.S. Pat. No. 5,787,449. USPatNo5787449
The patent’s owner, i4i, sued an accused infringer, Microsoft, alleging that Microsoft’s “Word” software product infringed the patent’s claims.
The accused infringer alleged that the asserted claims were invalid because of an “on sale” bar.
The inventors named in the patent had sold a software product (“S4”) more than a year before applying for the patent. The S4 product had not been disclosed to or considered by the PTO during examination of the patent. The source code for S4 had been destroyed. At trial to a jury, the inventors testified that the S4 software did not embody the claimed invention because it did not provide the separate metacode storage.
The accused infringer requested an instruction to the jury that its burden of proof on “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 refused to give that instruction, instead instructing the jury that the accused infringer’s burden of proving invalidity was by clear and convincing evidence. The jury rendered verdicts that Microsoft willfully infringed and that the patent’s asserted claims were not invalid. The Federal Circuit affirmed. i4i Limited Partnership v. Microsoft Corp., 598 F.3d 831 (Fed. Cir. 2010), aff’d, — S. Ct. —- (2011). In turn, the Supreme Court affirmed. The accused infringer argued in its reply brief that a cautionary instruction to the jury to consider that the S4 software had never been considered by the PTO should have been given. However, the accused infringer never requested such an instruction. Therefore, the argument “comes far too late, and we therefore refuse to consider it.”
6. LAW AND FACT. Justice Breyer, joined by Justices Scalia and Alito, wrote a concurring opinion to emphasize that the heightened proof standard only applied to “questions of fact and not to questions of law.”
Focusing primarily on jury trials in which invalidity for obviousness is at issue, Justice Breyer advocated use of techniques such as interrogatories and special verdicts to “isolate the facts (determined with help of the `clear and convincing’ standard),” and “thereby assure the proper interpretation or application of the correct legal standard (without use of the `clear and convincing’ standard).” Justice Breyer concluded: “By preventing the `clear and convincing’ standard from roaming outside its fact-related reservation, courts can increase the likelihood that discoveries or inventions will not receive legal protection where none is due.”
For cases on jury trials on obviousness, see Chisum Patent Law Digest § 1565. See also Chisum on Patents § 5.04.
7. Justice Thomas also wrote a concurring opinion, which argued that Section 282 did not codify the common-law rule. It is silent on the standard of proof. Nevertheless, the majority result is correct because the heightened standard set forth in RCA (1934) remains the law.