Thursday, June 09, 2011

SCOTUS Speaks: Patents May Only be Invalidated Under "Clear and Convincing" Standard

This morning the Supreme Court released it's opinion in Microsoft v. i4i, and provided "clean sweep" support (10-0) that patents may only be invalidated under "clear and convincing" evidence.

Held: Section 282 requires an invalidity defense to be proved by clear and convincing evidence.

The Court rejected the "preponderance of the evidence" standard, noting that, while §282 provides no express articulation of the standard of proof, common-law terms in the statute are assumed to have a common law meaning.
Here, by stating that a patent is“presumed valid,” §282, Congress used a term with a settled common-law meaning.  Radio Corp. of America v. Radio Engineering Laboratories, Inc., 293 U. S. 1 (RCA), is authoritative. There, tracing nearly a century of case law, the Court stated, inter alia, that “there is a presumption of [patent] validity [that is] not to be overthrown except by clear and cogent evidence,” id., at 2. Microsoft’s contention that the Court’s pre-Act precedents applied a clear-and-convincing standard only in two limited circumstances is unavailing, given the absence of those qualifications from the Court’s cases. Also unpersuasive is Microsoft’s argument that the Federal Circuit’s interpretation must fail because it renders superfluous §282’s additional statement that “[t]he burden of establishing invalidity . . . shall rest on the party asserting” it. The canon against superfluity assists only where a competing interpretation gives effect “ ‘to every clause and word of a statute.’ ” Duncan v. Walker, 533 U. S. 167, 174. Here, no interpretation of §282 avoids excess language because, under either of Microsoft’s alternative theories - that the presumption only allocates the burden of production or that it shifts both the burdens of production and persuasion - the presumption itself would be unnecessary in light of §282’s additional statement as to the challenger’s burden.
The Court also rejected the argument that a preponderance standard must at least apply where the evidence before the fact finder was not before the PTO during the examination process.
It is true enough that, in these circumstances, “the rationale underlying the presumption—that the PTO, in its expertise, has approved the claim - seems much diminished,” KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398, 426, though other rationales may still animate the presumption. But the question remains whether Congress has specified the applicable standard of proof. As established here today, Congress did just that by codifying the common-law presumption of patent validity and, implicitly, the heightened standard of proof attached to it. The Court’s pre-Act cases never adopted or endorsed Microsoft’s fluctuating standard of proof. And they do not indicate, even in dicta, that anything less than a clear-and-convincing standard would ever apply to an invalidity defense. In fact, the Court indicated to the contrary.
However, while not endorsing any particular methodology, the Court did note that unconsidered evidence may be given more weight during trial via jury instructions:
Simply put, if the PTO did not have all material facts before it, its considered judgment may lose significant force.  And, concomitantly, the challenger’s burden to persuade the jury of its invalidity defense by clear and convincing evidence may be easier to sustain. In this respect, although we have no occasion to endorse any particular formulation, we note that a jury instruction on the effect of new evidence can, and when requested, most often should be given. When warranted, the jury may be instructed to consider that it has heard evidence that the PTO had no opportunity to evaluate before granting the patent. When it is disputed whether the evidence presented to the jury differs from that evaluated by the PTO, the jury may be instructed to consider that question. In either case, 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. Although Microsoft emphasized in its argument to the jury that S4 was never considered by the PTO, it failed to request an instruction along these lines from the District Court. Now, in its reply brief in this Court, Microsoft insists that an instruction of this kind was warranted.  That argument, however, comes far too late, and we there-fore refuse to consider it.

Read/download the opinion here (link)

Tuesday, May 31, 2011

SCOTUS: Inducement to Infringe Requires "Actual Knowledge" of Patent; "Deliberate Indifference" Not Enough

Global-Tech Appliances, inc. v. SEB S.A., No. 10-6, May 31, 2011

Global Tech, an Hong-Kong appliance maker, sold a deep-fryer to 3rd parties that was an alleged copy of one patented by SEB.  SEB subsequently sued Global Tech for actively inducing purchasers of the fryers to sell or offer to sell them in violation of SEB’s patent rights. The jury found for SEB on the induced infringement theory, and the District Court entered judgment for SEB.  On appeal, the Fed. Cir. affirmed, ruling that inducement to infringe may be established without actual knowledge of the patent through a showing of a "deliberate indifference" to a risk that the patent does in fact exist.

On appeal to the Supreme Court, the question presented was "whether the legal standard for the state of mind element of a claim for actively inducing infringement under 35 U.S.C. § 271(b) is 'deliberate indifference of a known risk' that an infringement may occur, as the Court of Appeals for the Federal Circuit held, or 'purposeful, culpable expression and conduct' to encourage an infringement."

The Court answered that induced infringement under 271(b) requires knowledge of the patent that is infringed, and "deliberate indifference" (or recklessness) to the existence of the patent is insufficient to confer liability.  However, defendants cannot escape liability if they engage in "willful blindness" towards the patent.

Turning to the decision in Aro Mfg. Co. v. Convertible Top Replacement Co., 377 U. S. 476 (1964) ("Aro II"), the Court stated
Aro II concerned §271(c), which states in relevant part: 
"Whoever offers to sell or sells . . . a component of a patented [invention] . . . , constituting a material part of the invention, knowing the same to be especially made or especially adapted for use in an infringement of such patent, and not a staple article or commodity of commerce suitable for substantial noninfringing use, shall be liable as a contributory infringer." (Emphasis added.)
 [T]he "holding in Aro II has become a fixture in the law of contributory infringement under[section] 271(c)," . . . so much so that SEB has not asked us to overrule it, [].  Nor has Congress seen fit to alter §271(c)’s intent requirement in the nearly half a century since Aro II was decided. In light of the "‘special force’" of the doctrine of stare decisis with regard to questions of statutory interpretation, [] we proceed on the premise that §271(c) requires knowledge of the existence of the patent that is infringed.

Based on this premise, it follows that the same knowledge is needed for induced infringement under §271(b). As noted, the two provisions have a common origin in the pre 1952 understanding of contributory infringement, and the language of the two provisions creates the same difficult interpretive choice. It would thus be strange to hold that knowledge of the relevant patent is needed under §271(c) but not under §271(b). 

Accordingly, we now hold that induced infringement under §271(b) requires knowledge that the induced acts constitute patent infringement.
To establish knowledge, the Court stated that "deliberate indifference" to the existence of the patent will not be enough for liability.  In the absence of direct evidence, "willful blindness" must be shown:

[W]e agree that deliberate indifference to a known risk that a patent exists is not the appropriate standard under §271(b). We nevertheless affirm the judgment of the Court of Appeals because the evidence in this case was plainly sufficient to support a finding of Pentalpha’s knowledge under the doctrine of willful blindness. 

Given the long history of willful blindness and its wide acceptance in the Federal Judiciary, we can see no reason why the doctrine should not apply in civil lawsuits for induced patent infringement under 35 U. S. C. §271(b). 

While the Courts of Appeals articulate the doctrine of willful blindness in slightly different ways, all appear to agree on two basic requirements: (1) the defendant must subjectively believe that there is a high probability that a fact exists and (2) the defendant must take deliberate actions to avoid learning of that fact.  We think these requirements give willful blindness an appropriately limited scope that surpasses recklessness and negligence. Under this formulation, a willfully blind defendant is one who takes deliberate actions to avoid confirming a high probability of wrongdoing and who can almost be said to have actually known the critical facts. See G. Williams, Criminal Law §57, p. 159 (2d ed. 1961) ("A court can properly find wilful blindness only where it can almost be said that the defendant actually knew"). By contrast, a reckless defendant is one who merely knows of a substantial and unjustified risk of such wrongdoing, see ALI, Model Penal Code §2.02(2)(c) (1985), and a negligent defendant is one who should have known of a similar risk but, in fact, did not, see §2.02(2)(d).

Read/download the opinion here (link)

Wednesday, May 25, 2011

Prosecutors Rejoice! Federal Circuit "Tightens the Standards" En Banc for Inequitable Conduct

Therasense, Inc. v. Becton, Dickinson and Company, No. 2008-1511 (May 25, 2011)

Therasense (now Abbott) obtained a patent from the USPTO after a 13-year prosecution history, where the application was repeatedly rejected over a prior Abbott patent.  At one point, Abbott submitted new claims in the application along with a declaration arguing distinctions between the new claims and the features disclosed the prior patent.  The tactic worked, and the application was allowed.

Several years earlier, Abbott was prosecuting the prior patent in the EPO and submitted briefs arguing the meaning of features, where the arguments were inconsistent with the declaration submitted in the later US patent.  The EPO briefs were not disclosed to the USPTO.  When this fact was brought up in litigation, Abbott's patent was declared unenforceable for inequitable conduct.  The Federal Circuit affirmed.

On en banc review, the Federal Circuit admitted that the "sliding scale" between intent and materiality "conflated and diluted" the doctrine of inequitable conduct.

Left unfettered, the inequitable conduct doctrine has plagued not only the courts but also the entire patent system. Because allegations of inequitable conduct are routinely brought on “the slenderest grounds,” . . .  patent prosecutors constantly confront the specter of inequitable conduct charges. With inequitable conduct casting the shadow of a hangman’s noose, it is unsurprising that patent prosecutors regularly bury PTO examiners with a deluge of prior art references, most of which have marginal value.

[W]hile honesty at the PTO is essential, low standards for intent and materiality have inadvertently led to many unintended consequences, among them, increased adjudication cost and complexity, reduced likelihood of settlement, burdened courts, strained PTO resources, increased PTO backlog, and impaired patent quality. This court now tightens the standards for finding both intent and materiality in order to redirect a doctrine that has been overused to the detriment of the public.

With that, the court immediately dove into the "tightened" standard.

To prevail on a claim of inequitable conduct, the accused infringer must prove that the patentee acted with the specific intent to deceive the PTO. . . . A finding that the misrepresentation or omission amounts to gross negligence or negligence under a “should have known” standard does not satisfy this intent requirement. . . . “In a case involving nondisclosure of information, clear and convincing evidence must show that the applicant made a deliberate decision to withhold a known material reference.” . . .  In other words, the accused infringer must prove by clear and convincing evidence that the applicant knew of the reference, knew that it was material, and made a deliberate decision to withhold it.

Death of the "sliding scale":
A district court should not use a “sliding scale,” where a weak showing of intent may be found sufficient based on a strong showing of materiality, and vice versa. Moreover, a district court may not infer intent solely from materiality. Instead, a court must weigh the evidence of intent to deceive independent of its analysis of materiality. Proving that the applicant knew of a reference, should have known of its materiality, and decided not to submit it to the PTO does not prove specific intent to deceive. See Star, 537 F.3d at 1366 (“the fact that information.

Inferring intent:
Because direct evidence of deceptive intent is rare, a district court may infer intent from indirect and circumstantial evidence. . . . However, to meet the clear and convincing evidence standard, the specific intent to deceive must be “the single most reasonable inference able to be drawn from the evidence.” . . . Indeed, the evidence “must be sufficient to require a finding of deceitful intent in the light of all the circumstances.” . . . Hence, when there are multiple reasonable inferences that may be drawn, intent to deceive cannot be found.

[B]ecause the party alleging inequitable conduct bears the burden of proof, the “patentee need not offer any good faith explanation unless the accused infringer first . . . prove[s] a threshold level of intent to deceive by clear and convincing evidence.” . . . The absence of a good faith explanation for withholding a material reference does not, by itself, prove intent to deceive.

This court holds that, as a general matter, the materiality required to establish inequitable conduct is but-for materiality. When an applicant fails to disclose prior art to the PTO, that prior art is but-for material if the PTO would not have allowed a claim had it been aware of the undisclosed prior art. Hence, in assessing the materiality of a withheld reference, the court must determine whether the PTO would have allowed the claim if it had been aware of the undisclosed reference. In making this patentability determination, the court should apply the preponderance of the evidence standard and give claims their broadest reasonable construction.

Rejection of PTO Rule 56 in the courts:
This court does not adopt the definition of materiality in PTO Rule 56. As an initial matter, this court is not bound by the definition of materiality in PTO rules.  . . . While this court respects the PTO’s knowledge in its area of expertise, the routine invocation of inequitable conduct in patent litigation has had adverse ramifications beyond its effect on the PTO.
The first prong of Rule 56 is overly broad because information is considered material even if the information would be rendered irrelevant in light of subsequent argument or explanation by the patentee. Under this standard, inequitable conduct could be found based on an applicant’s failure to disclose information that a patent examiner would readily agree was not relevant to the prosecution after considering the patentee’s argument. Likewise, the second prong of Rule 56 broadly encompasses anything that could be considered marginally relevant to patentability. If an applicant were to assert that his invention would have been non-obvious, for example, anything bearing any relation to obviousness could be found material under the second prong of Rule 56. Because Rule 56 sets such a low bar for materiality, adopting this standard would inevitably result in patent prosecutors continuing the existing practice of disclosing too much prior art of marginal relevance and patent litigators continuing to charge inequitable conduct in nearly every case as a litigation strategy.

Conduct should not give "unfair benefit" to patentee:

Because inequitable conduct renders an entire patent (or even a patent family) unenforceable, as a general rule, this doctrine should only be applied in instances where the patentee’s misconduct resulted in the unfair benefit of receiving an unwarranted claim. . . . After all, the patentee obtains no advantage from misconduct if the patent would have issued anyway. . . . Moreover, enforcement of an otherwise valid patent does not injure the public merely because of misconduct, lurking somewhere in patent prosecution, that was immaterial to the patent’s issuance.

The "egregious misconduct" exception:

Although but-for materiality generally must be proved to satisfy the materiality prong of inequitable conduct, this court recognizes an exception in cases of affirmative egregious misconduct [e.g., where patentee “deliberately planned and carefully executed scheme[s]” to defraud the PTO and the courts.] . . . Because neither mere nondisclosure of prior art references to the PTO nor failure to mention prior art references in an affidavit constitutes affirmative egregious misconduct, claims of inequitable conduct that are based on such omissions require proof of but-for materiality.

Read/download the opinion here (link)

Majority opinion: Rader, Newman, Lourie, Linn, Moore and Reyna
Dissenting: Bryson, Gajarsa, Dyk and Prost
Concurring in part, dissenting in part: O'Malley

[T]he court has consistently held that the PTO’s Rule 56 sets the proper baseline for determining materiality, although there has been some variation in our decisions with regard to which version of the PTO’s rule applies in particular cases.

The appropriate cure for departures from the principles of inequitable conduct that were put in place at the time of Kingsdown would be to reaffirm those principles, as summarized above. The majority, however, has taken a far more radical approach. With respect to the issue of materiality, the majority has adopted a test that has no support in this court’s cases and is inconsistent with a long line of precedents dating back to the early years of this court. The effect of the majority’s new test, moreover, does not merely reform the doctrine of inequitable conduct, but comes close to abolishing it altogether.

Tuesday, April 19, 2011

How Much Does the "Clear and Convincing" Standard Matter? Study Suggests "Not Much"

In the case of Microsoft v. i4i, some of Microsoft’s amici contended that the clear and convincing evidentiary standard has a “compelling effect on jurors” and that it is “tremendously difficult to persuade a jury to go against the decision of the Patent Office.”

Etan S. Chatlynne, Stephen Kenny and Lucas Watkins decided to test this assertion by looking at validity challenges from two data sets: cases from 1966-1982 (the "Graham v. Deere-to-CAFC" period) and cases from 2008-2010 (the "KSR" period).  More importantly, before 1982, rebutting a patent’s presumption of validity generally required clear and convincing evidence.  However, the standard would shift to a preponderance of the evidence if a validity challenger introduced “unconsidered evidence” (i.e. prior art not before the PTO during examination).  Since 1982, rebutting a patent’s presumption of validity has required clear and convincing evidence in all instances.

The authors analyzed the validity challenges from the first data set (1966-1982) to determine whether: 1) the court instructed the jury to apply one of the evidentiary standards; 2) the court discussed unconsidered evidence that a jury could have considered in evaluating invalidity; and 3) the jury determined that the validity challenger satisfied its evidentiary burden for at least one claim.  Unconsidered evidence raised the inference that the jury applied a clear and convincing evidentiary standard, while a finding that there was unconsidered evidence raised the inference that the jury applied a preponderance of the evidence standard.

For the second data set (2008-2010), the authors analyzed the challenges to determine whether: 1) the challenger introduced unconsidered evidence; and 2) the jury determined that the validity challenger satisfied its evidentiary burden for at least one claim. For this data set, evidence was deemed unconsidered if it was: 1) discussed in the Federal Circuit opinion, the district court opinion, or a party’s brief; and 2) not listed on the front of the asserted patent.

What did they find?

Challengers that introduced unconsidered evidence:

  • 1966-1982 - 32% of patents challenged on unconsidered evidence were invalidated on a "preponderance of the evidence" (8 out of 25 times).
  • 2008-2010 - 34% of patents challenged on unconsidered evidence were invalidated on a "clear and convincing" standard (13 out of 38 times)

Challengers that did not introduce unconsidered evidence:
  • 1966-1982 - 13% of patents challenged were invalidated under "clear and convincing" standard (6 out of 45 times). 
  • 2008-2010 - 0% of patents challenged were invalidated under "clear and convincing" standard (0 out of 5 times)
Note the authors:
[I]rrespective of the evidentiary standard, such challengers [using unconsidered evidence] in both periods established the factual bases of invalidity approximately one third of the time.  This indicates that the clear and convincing evidentiary standard may not be as significant a driver in invalidity outcomes as some have suggested.

The study concludes
The comparison herein of data from periods separated by more than twenty-five years surely implicates additional factors such as changes in applicable practice, procedure, search technology and much of the surrounding body of legal rules, including the change made by the Supreme Court to the legal standard for obviousness in KSR.  These factors could impact this investigation in ways the authors could neither determine nor account for.

Nevertheless, subject to the validity of the assumptions employed, this investigation suggests that a challenger’s likelihood of establishing the factual bases of invalidity are driven more by the likely greater impact of unconsidered evidence than by a shift to a preponderance of the evidence standard. Whether this means that the clear and convincing evidentiary standard has a “compelling effect on jurors” and that it is “tremendously difficult to persuade a jury to go against the decision of the Patent Office,” the authors cannot say. The data, however, suggest that a shift to a preponderance of the evidence standard will not significantly affect a validity challenger’s ability to establish the factual bases of invalidity to a jury.

Read/download a copy of the study here (link)

Monday, April 18, 2011

SCOTUS Hears Oral Arguments on "Clear and Convincing Standard" for Patent Validity

Today the Supreme Court heard oral arguments in the case of Microsoft v. i4i, where Microsoft argued that attempts to invalidate patents using prior art not considered by the USPTO should be judged by a "preponderance of the evidence" instead of the more demanding "clear and convincing" standard.

The SCOTUS bench consisted of only 8 Justices, as Chief Justice Roberts recused himself from the case; Justice Scalia sat in on his behalf.

First up was Thomas Hungar, who argued on behalf of Microsoft.  After stating (four sentences in) that "it was error to require clear and convincing proof of invalidity in this case," Justices Ginsberg, Scalia and Kagan began peppering Hungar with questions regarding the 1934 SCOTUS case of Radio Corp. of America v. Radio Engineering Laboratories (link), where Justice Cardozo stated

"Even for the purpose of a controversy with strangers, there is a presumption of validity, a presumption not to be overthrown except by clear and cogent evidence."
"[The] presumption of validity [is supported by] the familiar principle, repeatedly applied in our decisions, that the concurrent findings of the courts below will be accepted by this court 'unless clear error is shown.'"


"[I]t is said that 'the presumption of the validity of the patent is such that the defense of invention by another must be established by the clearest proof - perhaps beyond reasonable doubt." 

"This court held the view when these patents were last before it that the evidence was insufficient to overcome the presumption of their validity in any clear or certain way. If our estimate of probative values had been different, the invention must have gone to Armstrong, no matter though other courts or administrative officers had been persuaded to the contrary. The evidence that was insufficient at that time to evoke a clear conviction that the patents were invalid is the same in all essentials as the evidence before us now."

JUSTICE GINSBURG: It would be hard to argue, Mr. Hungar, that it makes no sense, but it made sense to Cardozo and Judge Rich.

JUSTICE SCALIA: So, you're contradicting Cardozo?

JUSTICE KAGAN: But Justice Cardozo certainly didn't limit his holding in the way you suggest. The language of that opinion is extremely broad. And if you read that opinion, no one would gather from that opinion the kinds of limits that you're suggesting on it.

Hungar countered that the holding in RCA was addressing the issue of priority in a prior invention and that "the RCA case didn't address the question that was discussed in KSR . . . that the preponderance standard should govern across the board."
HUNGAR: To the extent that -- that Justice Cardozo was discussing a heightened standard in the limited context of priority inventions, we think that that's not consistent with section 282, which, of course, came later . . . every single one of the cases that [Cardozo] cites there, without exception . . . is a priority of invention case, The Barbed Wire Patent case being the leading example which had explained this rationale for a heightened concern in that specific context. But you don't have cases applying -- Supreme Court cases applying the heightened standard in other contexts. And, indeed, you have many cases decided after RCA that don't mention any heightened standard in viewing invalidity questions.

Hungar then turned to section 282 of the 1952 Patent Act and argued that there was no congressional intent to codify the RCA holding, and "when you don't have a clear rule to be codified, the default rules of statutory construction apply . . . [which is] the preponderance standard."

To which Justice Ginsburg replied
JUSTICE GINSBURG: [I]t is true that the Federal Circuit has been consistent now since almost the beginning, since that court came on the scene, and it does have a monopoly on appeal in patent cases since 1984. Because the -- the Federal Circuit has consistently taken this position [on the clear and convincing standard], one would have expected that there would have been bills proposed to change it. Were there any?

Justice Sotomayor added that jury instructions could possibly address Microsoft's concerns:
JUSTICE SOTOMAYOR: [H]aving read some of those cases that you've cited that you claim weakened or eliminated the burden of proof standard, most of them didn't quite eliminate it. Virtually all of them added an instruction to the jury of some sort that said that the application of the standard should take into account the fact that the PTO did not consider evidence -- did not consider the prior art relied upon in the invalidity challenge.

You didn't ask for such an instruction in this case; is that correct? And if you didn't, why isn't that adequate to convey the point that you're trying to convey, that a jury should, in fact, consider that the PTO never got to see that prior art? . . . [O]ther judges . . . give a clear and convincing standard, and they add a separate instruction that tells the jury, in applying that standard, you should consider the fact that the PTO did not see this evidence.

Justice Breyer seemed to agree with Sotomayor and further added that, if you like the preponderance of the evidence standard, then the USPTO is the place to be.
JUSTICE BREYER:  I know your proposal. But we have also seen in these briefs the following proposal:  One, somebody who thinks there is [an] error, go back to the Patent Office and ask for reconsideration. That's pretty good. We get the experts to look at it again.

And then that's coupled with: Tell the district judges to stick very closely to their job, allow the clear and convincing standard to apply to facts, and by that we mean brute facts, and let them decide the brute facts, but let the judge decide whether that amounts to obviousness, novelty, or any of the other prerequisites.

Now, I've gotten that out of the amicus briefs, some of which say they support you but they really don't. . . . [W]hat struck the thought in my mind that careful instructions limiting the juries to brute facts and giving the judge the notion, the job of characterizing that -- you heard what I said -- that that will go a long way towards curing the problem you're worried about.


Next was Seth Waxman, who argued for i4i, noting that congress was "well aware of the clear and convincing evidence standard, and it has done nothing whatsoever to change it, even make any effort to consider making such a sweeping change in long-standing doctrine."

Which led to the following exchange with Justice Alito:
JUSTICE ALITO: I have three problems in seeing your interpretation in the language of section 282. First, the statute says the burden of establishing invalidity of a patent, et cetera, et cetera, shall rest on the parties asserting such invalidity. If Congress wanted to impose a clear and convincing burden, why in the world would they not have said that expressly in that sentence?

Number two, if the first sentence, "a patent shall be presumed valid," means that -- is talking about the burden, then it's superfluous, because that's dealt with in the second sentence ["The burden of establishing invalidity of a patent or any claim thereof shall rest on the party asserting such invalidity"].

And, third, the phrase "shall be presumed valid" doesn't seem to me at all to suggest clear and convincing evidence. A presumption normally doesn't have anything to do with clear and convincing evidence. Most presumptions can be disproved by much less than clear and convincing evidence. So how do you read that in  your position into the language of the statute?

WAXMAN: Well, as to presumptions generally, I found particularly persuasive your opinion for the Third Circuit in GI Holding. But more -

JUSTICE ALITO: I've gotten a lot smarter since then.

With regard to the jury instructions and standards of proof, Waxman had this interesting point:

WAXMAN: I'm not aware of any instance in Anglo-American jurisprudence, and certainly Microsoft and its amici have not cited one in which the jury is told that depending on the weight you ascribe to the evidence you heard, you should apply a different standard of proof.

The issue goes to the weight of the evidence. I mean, imagine a case in -- a regime in which you said, well, you've heard eyewitness testimony.  If you, ladies and gentlemen of the jury, find that the eyewitness really had an unimpeded view, the standard is preponderance, but if you think that the view was impeded or obscured, the standard is clear and convincing evidence.

Waxman went further and proposed a jury instruction "that the burden of proof is clear and convincing evidence, but you may find that burden more easily met if you find that there was, in fact, evidence relating to validity that was not, in fact, considered by the PTO when it issued this property right."  This elicited a response from Justice Sotomayor, who pointed out that "it's not clear and convincing evidence if you phrase it that way, that it's something less than that."  Scalia added that the instruction "would require determining what it was that the Patent Office considered" and that such a circumstance "would better be avoided."


Next up was Malcolm Stewart, Deputy Solicitor General, Department of Justice, on behalf of the United States, as amicus curiae, supporting i4i.  Early in the argument, Justice Sotomayor repeated Justice Alito's question regarding the language of section 282: " If Congress was intending to sweep up in the use of the word 'presumption' the need to overturn it by clear and convincing evidence, why did you need the second sentence saying that the other side now bore the burden of persuasion?"

Stewart replied:

STEWART: I think there is a belt and suspenders quality to the statute, no matter how you parse it, but I think that Microsoft has essentially the same problem, because they have constructed a theory under which the second sentence does something that the first has not, does not, but they haven't constructed any theory as to why the first sentence is not superfluous. That is, given the second sentence to the effect that the burden of establishing invalidity is on the challenger, there's no more work to be done by the first sentence.

Judging from the oral arguments alone, it appeared that Ginsburg, Sotomayor and Breyer (and to a lesser extent Kagan) were not hell-bent on overturning the "clear and convincing" standard.  While Scalia was not particularly active, it would not be unreasonable to expect him (and probably Justice Thomas, who did not comment during oral arguments) to maintain the status quo as well.  Being that i4i needs only four Justices to "win" (since a 4-4 tie would maintain the Federal Circuit's ruling), there is a good likelihood that it will prevail.

Read/download a copy of the oral transcript here (link)

See also:

Wall Street Journal:  "Microsoft Takes Patent Fight to Supreme Cour" (link)

PC Magazine: "Microsoft, i4i Argue Patent Rights at Supreme Court" (link)

Financial Post: "Chairman of i4i confident Microsoft defeated" (link)

Computer World: "Patent expert gives Microsoft edge after Supreme Court hearing" (link)

Wednesday, March 16, 2011

Secretary Locke Leaving Commerce Dept.?

Press reports indicate that Commerce Secretary Gary Locke is expected to become the next US ambassador to China, taking over for Jon Huntsman.  In a March 9 press release, President Obama stated

In replacing Ambassador Huntsman, I can think of nobody who is more qualified than Gary Locke.  More than 100 years ago, Gary’s grandfather left China on a steamship bound for America, where he worked as a domestic servant in Washington State.  A century later, his grandson will return to China as America’s top diplomat.
[A]s Commerce Secretary, Gary oversaw a Census process that ended on time and under budget, returning $2 billion to American taxpayers.  He’s earned the trust of business leaders across America by listening to their concerns, making it easier for them to export their goods abroad, and dramatically reducing the time it takes to get a patent.  When he’s in Beijing, I know that American companies will be able to count on him to represent their interests in front of China’s top leaders.

Locke enjoys overwhelming support from various groups, and is expected to breeze through the confirmation process.

For more, see, "US: Apparel industry backs Locke as top China diplomat" (link)

AGIPNews: "Locke Nomination for China Ambassadorship Encouraging for Copyright Holders" (link)

China Hearsay: "Gary Locke to be Next US Ambassador to China. And There Was Much Rejoicing" (link)

Tuesday, March 15, 2011

Fed. Cir. Takes False Marking Down Another Peg, Holds Claims Must Be Pled "With Particularity"

In re BP Lubricants UA Inc., Misc. Docket No. 960 (Fed. Cir., March 15, 2011)

BP's CASTROL motor oil products are distributed in a unique bottle design for which BP received a design patent.  The patent expired in 2005, but BP continued to mark its bottles with the patent numbers.  Respondent Thomas A. Simonian (a patent attorney) filed a qui tam relator complaint under 35 U.S.C. §292.

BP attempted to dismiss Simonian's complaint in the district court under FRCP Rule 9(b), which provides:

In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, in-tent, knowledge, and other conditions of a person’s mind may be alleged generally.

When the district court concluded the complaint stated an actionable claim, BP petitioned the Federal Circuit for a writ of mandamus seeking to dismiss the complaint.  The Fed. Cir. granted the petition in this regard, noting that FRCP Rule 9(b)'s particularity requirement for false marking was "one of first impression for this court."

Simonian's complaint asserted mostly "upon information and belief" that: (1) BP knew or should have known that the patent expired; (2) BP is a sophisticated company and has experience applying for, obtaining, and litigating patents; and (3) BP marked the CASTROL products with the patent numbers for the purpose of deceiving the public and its competitors into believing that something contained or embodied in the products is covered or protected by the expired patent.

The Federal Circuit found this sort of pleading deficient:

A plaintiff is not empowered under the Rules “to plead the bare elements of his cause of action, affix the label ‘general allegation,’ and expect his complaint to survive a motion to dismiss.” . . . Instead, a complaint must in the § 292 context provide some objective indication to reasonably infer that the defendant was aware that the patent expired . . . Because the relator’s complaint here provided only generalized allegations rather than specific underlying facts from which we can reasonably infer the requisite intent, the complaint failed to meet the requirements of Rule 9(b).

* * *

First, relator contends that asserting in the complaint that BP is a “sophisticated company and has experience applying for, obtaining, and litigating patents” is enough under Rule 9(b). This court disagrees. That bare assertion provides no more of a basis to reasonably distinguish a viable complaint than merely asserting the defendant should have known the patent expired. Conclusory allegations such as this are not entitled to an assumption of truth at any stage in litigation.

Second, relator contends that a false marking inherently shows scienter. This argument is also unpersuasive. In Merck & Co., v. Reynolds, 130 S. Ct. 1784, 1793 (2010), the Supreme Court stated “[w]e recognize that certain statements are such that, to show them false, is normally to show scienter.” The Court gave as an example one claiming “I am not married” when in fact the person is married. Id. However, in other contexts where the relationship between factual falsity and state of mind is not nearly as apparent, Merck rejected this proposition. Id. This situation clearly falls into the latter category, requiring more than a mere statement.

Third, relator contends that unlike the inequitable conduct claim featured in Exergen, false marking is “anonymous” and is not an individualized fraud. . . . Overlooked by the relator is that the naming of specific individuals is not the only way to set forth facts upon which intent to deceive can be reasonably inferred. In an amicus brief, the United States points out that a relator can, for example, allege that the defendant sued a third party for infringement of the patent after the patent expired or made multiple revisions of the marking after expiration. None of these or similar assertions are present in the complaint here.

Read/download a copy of the opinion here (link).

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