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)

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