Microsoft Takes a Licking as SC Reinforces ‘Presumption of Validity’

In Microsoft v. i4i, The U.S. Supreme Court recently affirmed that the presumption of validity is high for an issued patent and that invalidating it requires an extremely strong case.

In particular, the court affirmed that proving invalidity and unenforceability requires “clear and convincing evidence.” In delivering this judgment, the U.S. Supreme Court decision upheld the District and Federal Circuit Court decisions, while demonstrating a strong reluctance to lower the standard of “clear and convincing evidence,” despite the differences regarding the state of the prior art known by the USPTO during prosecution and at trial.

The Microsoft Arguments

Microsoft did its best to argue that the high standard of “clear and convincing evidence” was too strong for two reasons: Microsoft argued first, that section 282 of the U.S. Patent Act did not explicitly read in the common law standard of “clear and convincing evidence”; and second, that the preponderance standard must at least apply where evidence before the fact finder was not before the USPTO during patent prosecution.

In dismissing the first argument, the court reasoned that the Pre-Act cases never indicated a fluctuating standard of proof as suggested by Microsoft. In particular, these cases in fact reinforced the heightened standard. In the pre-Act case RCA 293 U.S. 1, Cardozo J. stated that the presumption of validity is not to be overthrown except by clear and cogent evidence.

When section 282 was enacted, the presumption of validity and heavy burden was a longstanding fixture in the common law. The U.S. Supreme Court felt that one cannot assume that Congress intended to drop the heightened standard of proof merely because section 282 fails to expressly reiterate it.

Similarly, it must be presumed that Congress intended to incorporate this because the statute failed to state to the contrary. In its judgment, the court felt that it was unnecessary to codify the presumption of validity echoed by the common law in Radio Corp. of America v. Radio Engineering Laboratories Inc. 293 U.S. 1 (1934), because it had neither been overruled by the court nor overwritten by Congress. The Court thus dismissed this portion of the Microsoft argument.

In dismissing Microsoft’s second argument, the U.S. Supreme Court considered the patent prosecution process. Microsoft argued that the presumption of validity should not be considered at such a high standard because the USPTO did not have all the evidence now before the court. As such, Microsoft felt that the high standard of proof serves to insulate bad patents from an invalidity challenge.

In countering the Microsoft arguments, i4i stated that the heightened standard is a fixture of the patent bargain between inventors and the public. I4i also stated that the heightened standard limits the ability for a jury of laypersons to overturn the judgment of an expert agency.

However, in reviewing these arguments, the Supreme Court felt that these discrepancies went to the weight of evidence and not the presumption of validity. The Court felt that although the presumption of validity was weakened when evidence presented in an infringement action was not available to the USPTO during prosecution (Jacuzzi Brothers, H. Schindler, Gillette Safety Razor, and Butler), the standard of this presumption cannot be so low as to be that of preponderance.

The court understood these cases as stating that new evidence supporting an invalidity defense may carry more weight in an infringement action compared to evidence previously considered by the USPTO (as stated in American Hoist). However, defending an infringement action by claiming patent invalidity must still be based on “clear and convincing” evidence.

Effects on US Companies

The U.S. Supreme Court sent a clear message to potential infringers attempting to claim patent invalidity in this case. This holding is in line with longstanding principles of patent policy that seek to promote innovation and technological development in society.

In return for public disclosure of an invention, the inventor receives a temporary monopoly over its exploitation. In requiring such a high burden to invalidate a patent, the U.S. Supreme Court reinforces the policies behind the patent bargain.

Although the Court applied this underlying policy at only two points of the patent process (examination and litigation), one must consider what really motivates an inventor to file a patent.

What many fail to realize is that the patent bargain is quite risky for inventors. Inventors invest a significant portion of their time and money into obtaining a patent, with few patents resulting in payouts.

Should infringement occur, it is the obligation of the Patentee to take another financial risk and bring an infringement action. When an inventor is rewarded with a patent and has to chase down infringers, there should be a heavy burden to invalidate it — not only to act as a deterrent, but also to reward a Patentee for taking a risk.