On June 9, the Supreme Court reaffirmed that the facts underlying an assertion of patent invalidity must be proved by “clear and convincing” evidence.
On June 22, 1994, Infrastructures for Information, Inc. (“i4i”) applied for a patent on a method of manipulating XML documents. In particular, i4i’s method stored the “metacode,” i.e., XML Tags and other markup features, separately from the body of a document. This allowed users to focus on the document’s content or structure. Patent No. 5,787,449 (the ‘449 patent) issued on July 28, 1998.
In 2003, Microsoft Corp. released a version of Word capable of editing XML documents, and i4i sued for infringement of the ‘449 patent. Microsoft counterclaimed for invalidity of the ‘449 patent, asserting that the invention was embodied in a product, SEMI S4, that i4i sold in the US more than one year prior to filing its patent application. If true, the ‘449 patent would be invalid due to the “on sale bar” of 35 U.S.C. § 102(b). i4i admitted selling SEMI S4 in the US prior to the bar date, but claimed that the product did not incorporate the invention protected by the ‘449 patent. SEMI S4 was a custom, one-time effort, and both i4i and its customer had discarded all SEMI S4 source code long before the litigation began. Accordingly, the primary evidence in the invalidity part of the trial was testimony of the i4i inventors, who were also the authors of the SEMI S4 product.
The normal evidentiary standard for proof of patent invalidity is “clear and convincing evidence.” Microsoft requested – and was denied – a jury instruction to the effect that, at least with respect to alleged prior art that was not before the Patent Office during the patent’s prosecution, invalidity may be proved by a lower “preponderance of the evidence” standard. A jury found the ‘449 patent valid and infringed, and awarded i4i $200 million and a permanent injunction, and enhanced damages by an additional $40 million for willful infringement (with interest, the damages at stake before the Supreme Court were approximately $290 million). Microsoft appealed the denial of the jury instruction, and the Court of Appeals for the Federal Circuit affirmed.
Writing for a unanimous Supreme Court (Justice Roberts recusing himself due to his Microsoft stock holdings), Justice Sotomayor affirmed that the proper standard is “clear and convincing evidence.” The statute, 35 U.S.C. § 282 states simply, “A patent shall be presumed valid” and “[t]he burden of establishing in-validity of a patent or any claim thereof shall rest on the party asserting such invalidity.” The statute does not specify an evidentiary standard. However, the Court held that when Congress adopted the Patent Act in 1952, by using the common-law phrase “presumed valid,” it intended the phrase to have its common-law meaning at the time. That was established in the 1934 Supreme Court case Radio Corp. of America v. Radio Engineering Laboratories, Inc., 293 U. S. 1 (1934). In that case, Justice Cardozo stated that a patent carries “a presumption of validity, a presumption not to be overthrown except by clear and cogent evidence.” Since neither Congress nor the Federal Circuit (or its predecessor courts) have wavered significantly from that evidentiary standard in nearly 70 years, it remains in force for proving patent invalidity.
Microsoft argued that the lower standard of “preponderance of the evidence” should apply where the evidence offered was not before the Patent Office during prosecution of the patent whose validity is challenged. For that, it cited the Supreme Court’s decision in KSR v. Teleflex Inc. , 550 U.S. 398 (2007), in which the Court stated that under those circumstances, “the rationale underlying the presumption [of validity] – that the PTO, in its expertise, has approved the claim – seems much diminished.” However, the Court declined to adopt “the kind of fluctuating standard of proof that Microsoft envisions,” whereby the applicable “standard of proof . . . would rise and fall with the facts of each case.” Rather, the Court simply recognized that new evidence, which was not before the Patent Office, would “carry more weight and go further toward sustaining the attacker’s unchanging burden.” (citing American Hoist & Derrick Co. v. Sowa & Sons, Inc., 725 F. 2d 1350, 1359 (Fed. Cir. 1984)). The Court noted that juries may be instructed to consider that the weight they should give evidence may vary based on whether or not it has the imprimatur of Patent Office examination, but the standard of proof remains the same.
Finally, the Court reviewed the policy arguments presented by both sides as to the wisdom of a “clear and convincing” standard, and concluded that “[a]ny re-calibration of the standard of proof remains in [Congress’s] hands.”
The decision is generally good news for patent holders. It reaffirms that an issued patent enjoys a presumption of validity, and that presumption can only be successfully attacked by “clear and convincing” evidence that the patent fails to meet the standards of patentability.