Supreme Court Keeps High Standard for Invalidating Patents

by Stephan Kinsella on June 9, 2011

I’ve discussed the Microsoft v. i4i case previously –Summary of Microsoft v. i4i Oral Argument (“Clear and Convincing” Standard for Patent Invalidity); Microsoft Wants Galactic Patent; Supreme Court Prepares to Chop Down “Clear and Convincing” Standard for Proving Patent Invalidity. Well, the Court decided to keep the clear and convincing standard for proving patent invalidity. Unfortunately. Here’s Skip Oliva’s report:

Another Day, Another Patent Decision

June 9, 2011 by S.M. Oliva

The US Supreme Court unanimously reaffirmed a higher standard of proof for proving “patent invalidity” today, rejecting a challenge by Microsoft to a jury verdict that the company infringed a patent held by i4i Limited Partnership and Infrastructures for Information Inc. i4i said Microsoft’s Word application infringed an i4i patent related to “an improved method for editing computer documents.”

At trial, Microsoft claimed the patent was invalid and unenforceable. The trial judge instructed the jury to use a “clear and convincing evidence” standard — and not the lower “preponderance of the evidence” standard requested by Microsoft — in deciding whether the patent was invalid. The Federal Circuit Court of Appeals, and now the Supreme Court, agreed with that standard.

Federal patent statutes specify no standard of proof. Congress merely declared that a “patent shall be presumed valid”  and that anyone challenging its validity will have the burden of establishing as much. The Court said there is a “common law” presumption, however, that the presumption of patent validity carries with it a “clear and convincing” standard of proof.

Justice Sonia Sotomayor, speaking for the Court, acknowledged, without taking a side, the underlying policy debate over the impact of patents:

The parties and their amici have presented opposing views as to the wisdom of the clear-and-convincingevidence standard that Congress adopted. Microsoft and its amici contend that the heightened standard of proofdampens innovation by unduly insulating “bad” patents from invalidity challenges. They point to the high invalidation rate as evidence that the PTO grants patent protection to too many undeserving “inventions.” They claimthat inter partes reexamination proceedings before the PTO cannot fix the problem, as some grounds for invalidation (like the on-sale bar at issue here) cannot be raised in such proceedings. They question the deference that the PTO’s expert determinations warrant, in light of the agency’s resources and procedures, which they deem inadequate. And, they insist that the heightened standard of proof essentially causes juries to abdicate their role in reviewing invalidity claims raised in infringement actions.

For their part, i4i and its amici, including the United States, contend that the heightened standard of proof properly limits the circumstances in which a lay jury overturns the considered judgment of an expert agency. They claim that the heightened standard of proof is an essential component of the patent “bargain,” see Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U. S. 141, 150–151 (1989), and the incentives for inventors to disclose their innovations to the public in exchange for patent protection. They disagree with the notion that the patent issuance rate is above the optimal level. They explain that limits on the reexamination process reflect a judgment by Congress as to the appropriate degree of interference withpatentees’ reliance interests. Finally, they maintain that juries that are properly instructed as to the application of the clear-and-convincing-evidence standard can, and often do, find an invalidity defense established.

In a concurring opinion, Justice Stephen Breyer, speaking for himself and Justices Antonin Scalia and Samuel Alito, noted that the “clear and convincing” standard applies only to questions of fact, not law:

Many claims of invalidity rest, however, not upon factual disputes, but upon how the law applies to facts as given. Do the given facts show that the product was previously “in public use”? Do they show that the invention was “nove[l]” and that it was “non-obvious”? Do they show that the patent applicant described his claims properly? Where the ultimate question of patent validity turns on the correct answer to legal questions—what these subsidiary legal standards mean or how they apply to the facts as given—today’s strict standard of proof has no application.

Courts can help to keep the application of today’s “clear and convincing” standard within its proper legal bounds by separating factual and legal aspects of an invalidity claim, say, by using instructions based on case-specific circumstances that help the jury make the distinction or by using interrogatories and special verdicts to make clear which specific factual findings underlie the jury’s conclusions. By isolating the facts (determined with help of the “clear and convincing” standard), courts can thereby assure the proper interpretation or application of the correct legal standard (without use of the “clear and convincing” standard). By preventing the “clear and convincing” standard from roaming outside its fact-related reservation, courts can increase the likelihood that discoveries or inventions will not receive legal protection where none is due. [Citations omitted]

My comment there is reproduced below:

Stephan Kinsella June 9, 2011 at 10:55 am [edit]

This is horrible. I had hoped the Court would lower the standard. What a travesty. Microsoft is exactly right that it is unfair to have a “heightened standard of proof” that “unduly insulating “bad” patents from invalidity challenges.” They are right that “some grounds for invalidation (like the on-sale bar at issue here) cannot be raised in” the inter parte proceedings (the arguments between the patentee and the PTO, with no adversaries involved). And they are right to “question the deference that the PTO’s expert determinations warrant, in light of the agency’s resources and procedures, which they deem inadequate.”

The claims of i4i are absurd: that the opinions of a mere “lay jury” should not lightly “overturn the considered judgment of an expert agency.” Expert agency?! This is one reason patents are not overturned: the jury just assumes the PTO is fair and competent. They do not realize that the patent law is inherently vague and nonobjective, and very complex, and that the PTO is staffed by engineer-bureaucrats who cannot be trusted to “get it right”.

In addition, the argument that “They claim that the heightened standard of proof is an essential component of the patent “bargain,”…and the incentives for inventors to disclose their innovations to the public in exchange for patent protection” is laughable–in fact as I noted here, quite often the patentee would have had to reveal his invention anyway, in order to sell his product (if you sell a new mousetrap people see how it’s made; in fact you will trumpet its innovative features to garner customers!), so giving him a monopoly to protect him from competition doesn’t get the public their part of the bargain anyway! And for really important types of innovations that can be kept secret, the inventor will often keep it as a trade secret and skip the patent process, so the public gets no bargain there either. So it’s all a huge con.

Oh, and using a common law standard of proof for interpretation of an artificial, unjust patent scheme is a travesty. The standards evolved under the much more libertarian and fair common law are being imported into monstrous statutory regulatory monopoly granting schemes to try to impart the legitimacy of the common law onto the dictates of a horde of ignorant, scheming, corrupt politicians.

By the way, the disclosure function is set to be undermined anyway with upcoming patent reform–as I pointed out here, the upcoming patent amendment will likely eliminate the best mode defense–this removes one possible defense that can be used against patentees who game the system or flout the best-mode disclosure requirements. That is, under current law you have to disclose your invention in writing, it has to enable others to make it, AND you have to disclose the “best mode” — you can’t keep that secret. If you fail to do any of these a patent defendant that you sue can invalidate your patent. But with patent “reform” it will be harder for defendant-victims to use the patentee’s intentional hiding of best mode as a defense!

see also Patent Shills want to make patents “incontestable”.

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