Client Alert

On June 9, 2011, the Supreme Court of the United States, on appeal from the United States Court of Appeals for the Federal Circuit, issued its decision in Microsoft Corp. v. i4i Limited Partnership, No. 10-290. In an 8-0 decision (Chief Justice Roberts took no part), the Court held that the defense of patent invalidity must be proven by clear and convincing evidence under § 282 of the Patent Act. The Court held that § 282 codified the common-law presumption of patent validity, which implicitly included the clear and convincing standard of proof required to invalidate a patent.

Background
Respondent i4i Limited Partnership filed suit against Petitioner Microsoft Corporation for infringement of its patent directed to an improved method for editing computer documents. Microsoft counterclaimed, seeking a declaration that i4i's patent was invalid under § 102(b) due to a prior sale of a software program known as S4. The parties agreed that the S4 program was sold more than one year before i4i's patent application was filed and was never submitted to the Patent and Trademark Office (PTO) during examination of i4i's patent application. However, they disagreed as to whether S4 included the patented invention.

Section 282 of the Patent Act provides "[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." Microsoft sought jury instructions stating that the burden of proving invalidity based on references never presented to the PTO may be proven merely by a preponderance of the evidence. The District Court rejected the proposed instruction and informed the jury that invalidity must be proven by clear and convincing evidence. The jury found that Microsoft failed to prove i4i’s patent was invalid and that Microsoft willfully infringed the patent. The Federal Circuit affirmed the decision.

Microsoft was supported in its appeal to the Supreme Court by other large software companies who are frequently sued for patent infringement by small software companies and non-practicing entities. A plethora of patent holders, both large and small, supported i4i and sought to maintain the existing clear and convincing evidence burden of proof to invalidate a patent.

The Supreme Court Decision
The Supreme Court affirmed the decisions of the lower courts and held that the clear and convincing standard of proof is implicitly included in § 282's presumption of validity. Prior to the creation of § 282, the Court found there was a common-law understanding that patents "presumed valid" can only be held invalid by clear and convincing evidence. Citing the general rule that the common-law meaning is assumed when Congress uses a common-law term, the Court found that Congress codified the clear and convincing standard of proof in § 282 when it stated that patents are "presumed valid." To further support its conclusion, the Court noted that for nearly 30 years, the Federal Circuit has applied the clear and convincing standard of proof under § 282 and that Congress has not disturbed this standard despite ongoing criticism and numerous other amendments to the section.

Additionally, the Court noted that there were no qualifications on utilizing the clear and convincing heightened standard of proof in prior cases and courts had not applied a "fluctuating standard of proof," even when presented with evidence not before the PTO. However, the Court reiterated the principle that "new evidence supporting an invalidity defense may 'carry more weight' in an infringement action than evidence previously considered by the PTO." The Court suggested that jury instructions addressing the effect of new evidence should be given in appropriate circumstances.

In a concurring opinion, three justices emphasized that the clear and convincing evidentiary standard of proof only applies to questions of fact and not to questions of law. Disputes regarding how the law applies to the facts are not held to the strict clear and convincing standard. The concurring justices suggest that courts use jury instructions, interrogatories and special verdicts to ensure that the clear and convincing standard of proof is applied properly.

Impact of the Decision
The Supreme Court's unanimous decision in Microsoft Corp. v. i4i Limited Partnership affirmed the existing principle that clear and convincing evidence is required to invalidate an issued patent, even when issued without review of the best prior art. Those who obtained patents without PTO review of the best prior art, such as some business method and software patentees, will continue to receive the benefit of the clear and convincing standard to overcome the presumption of validity. However, both the majority and concurring opinions mention that courts should consider additional jury instructions regarding new evidence or clarifying the applicable standard of proof. The decision may lead to an increased emphasis on jury instruction and jury practice, but will do little to reduce the volume of software and business method patent filings or patent litigation in these fields.

If you have any questions or wish to discuss how this decision may impact your company, please contact your attorney at Brinks Hofer Gilson & Lione.

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