Supreme Court Prepares to Chop Down "Clear and Convincing" Standard for Proving Patent Invalidity

In the case of Microsoft Corp. v. i4i Ltd., patentee i4i was awarded a $290M judgment against Microsoft and an order barring the infringing sale of Word in the U.S.  The patent was directed to a method for editing documents using XML, a language that tells a computer how text should appear. I4i's invention claimed a technique that stores the content and the XML codes separately, making it easier for users to work alone with either the content or the codes.

During litigation, Microsoft submitted allegedly invalidating prior art (in the form of a prior public sale by i4i), which was not considered during prosecution at the USPTO.  Microsoft argued that, since the prior art was not considered, the "clear and convincing" standard of proving invalidity was not in play, and that a lower standard of proof should be applied.  The district court rejected this argument, as did the Federal Circuit.

On petition to the Supreme Court, Microsoft presented the following question:

The Patent Act provides that “[a] patent shall be presumed valid” and that “[t]he burden of establishing invalidity of a patent or any claim thereof shall rest on the party asserting such invalidity.” 35 U.S.C. § 282. The Federal Circuit held below that Microsoft was required to prove its defense of invalidity under 35 U.S.C. § 102(b) by “clear and convincing evidence,” even though the prior art on which the invalidity defense rests was not considered by the Patent and Trademark Office prior to the issuance of the asserted patent. The question presented is:

Whether the court of appeals erred in holding that Microsoft’s invalidity defense must be proved by clear and convincing evidence.

Today, the Supreme Court granted certiorari and agreed to hear the case, making it (in the words of Hal Wegner) "the most important Supreme Court patent case of the new century."

NOTE 1:  At least a few Justices have appeared to be sympathetic to Microsoft's argument in the past - as recently as KSR v. Teleflex, the Supreme Court noted (in dicta):

We need not reach the question whether the failure to disclose Asano during the prosecution of Engelgau voids the presumption of validity given to issued patents, for claim 4 is obvious despite the presumption. We nevertheless think it appropriate to note that the rationale underlying the presumption - that the PTO, in its expertise, has approved the claim - seems much diminished here.

 NOTE 2: For reasons unknown, Justice Roberts has recused himself from this case.

 NOTE 3:  I4i Chairman Loudon Owen stated to Bloomberg News that Microsoft’s argument has a “simplistic appeal” that “does not take into consideration at all what the patent office actually does . . . What it’s going to result in is tremendous uncertainty for anyone who owns a patent . . .  It would be a sea change in the operations of the patent office and would be a dramatic body blow to the health of the U.S. patent industry and the value of patents.”

Effect on patent practice: In the meantime, the USPTO applicants will likely inundate the USPTO with prior art submissions.  As the issue before the Supreme Court deals with prior art not considered by the Patent Office, the trick will be to cover as many areas as practicable to minimize the risk of being exposed to the effects of this case.