Microsoft Corporation  v.  i4i Limited partnership Et Al.

The issue in the case was whether §282 of the Patent Act of 1952 require an invalidity defense to be proved by clear and convincing evidence.

Respondents i4i held the patent at issue in the suit. The i4i patent claimed an improved method for editing computer documents, which store a document’s content separately from the meta codes associated with the document’s structure. In 2007, i4i sued petitioner Microsoft Corporation for willful infringement, claiming that Microsoft’s manufacture and sale of certain Microsoft Word products infringed i4i’s patent. In addition to denying infringement, Microsoft counterclaimed and sought a declaration that i4i’s patent was invalid and unenforceable. Specifically Microsoft claimed that the on-sale bar of §102(b) rendered the patent invalid, pointing to i4i’s prior sale of a software program known asS4. The parties agreed that, more than one year prior to the filing of the i4i patent application, i4i had sold S4 in the United States. They presented opposing arguments to the jury, however, as to whether that software embodied the invention claimed in i4i’s patent. Because the software’s source code had been destroyed years before the commencement of the litigation, the factual dispute turned largely on trial testimony by S4’s two inventors—also the named inventors on the i4i patent—both of whom testified that S4 did not practice the key invention disclosed in the patent. Relying on the undisputed fact that the S4 software was never presented to the PTO examiner, Microsoft objected to i4i’s proposed instruction that it was required to prove its invalidity defense by clear and convincing evidence.

According to Microsoft, a defendant in an infringement action need only persuade  the jury of an invalidity defense by a preponderance of the evidence. In the alternative, Microsoft insisted that a preponderance standard must apply at least when an invalidity defense rest on evidence that was never considered by the PTO in the examination process.

Rejecting the hybrid standard of proof that Microsoft advocated, the District Court instructed the jury that Microsoft had the burden of proving invalidity by clear and convincing evidence.

The jury found that Microsoft willfully infringed the i4ipatent and that Microsoft failed to prove invalidity due to the on-sale bar or otherwise. Denying Microsoft’s post trial motions, the District Court rejected Microsoft’s contention that the court improperly instructed the jury on the standard of proof. The Court of Appeals for the Federal Circuit affirmed.

Among other defenses under §282 of the Patent Act of1952 (1952 Act), an alleged infringer may assert the invalidity of the patent—that is, he may attempt to prove that the patent never should have issued in the first place. §§282(2), (3). A defendant may argue, for instance, that the claimed invention was obvious at the time and thus that one of the conditions of patentability was lacking. §282(2)

In asserting an invalidity defense, an alleged infringer must contend with the first paragraph of §282, which provide that a patent shall be presumed valid and the burden of establishing invalidity rest on the party asserting such invalidity. Under the Federal Circuit’s reading of §282, a defendant seeking to overcome this presumption must persuade the fact finder of its invalidity defense by clear and convincing evidence. Judge Rich articulated the view for the court in American Hoist & Derrick Co. v. Sowa & Sons, Inc., 725 F. 2d 1350 (CA Fed. 1984). There, the Federal Circuit held that §282 codified “the existing presumption of validity of patents.” Relying on the Supreme Court’s pre-1952 precedent as to the “force of the presumption,” Judge Rich concluded that “Section 282 creates a presumption that a patent is valid and imposes the burden of proving invalidity on the attacker. That burden is constant and never changes and is to convince the court of invalidity by clear evidence.”

In the nearly 30 years since American Hoist, the Federal Circuit had never wavered in this interpretation of §282. [ Greenwood v. Hattori Seiko Co., 900 F. 2d 238, 240–241 (CA Fed. 1990); Ultra-Tex Surfaces, Inc. v. Hill Bros. Chemical Co., 204 F. 3d 1360, 1367 (CA Fed. 2000); ALZA Corp. v. Andrx Pharmaceuticals, LLC, 603 F. 3d 935, 940 (CA Fed. 2010)].

The first paragraph of §282 provide that “a patent shall be presumed valid” and “the burden of establishing invalidity of a patent or any claim thereof shall rest on the party asserting such invalidity.” Thus, by its express terms, §282 establish a presumption of patent validity, and it provide that a challenger must overcome that presumption to prevail on an invalidity defense. But, while the statute explicitly specify the burden of proof, it include no express articulation of the standard of proof.

The common-law presumption reflect the universal understanding that a preponderance standard of proof was too “dubious” a basis to deem a patent invalid. Thus, by the time Congress enacted §282 and declared that a patent is “presumed valid,” the presumption of patent validity had long been a fixture of the common law. According to its settled meaning, a defendant raising an invalidity defense bore “a heavy burden of persuasion,” requiring proof of the defense by clear and convincing evidence. That is, the presumption encompassed not only an allocation of the burden of proof but also an imposition of a heightened standard of proof.

Resisting the conclusion that Congress adopted the heightened standard of proof reflected in the Court’s pre-1952 cases, Microsoft contended that the cases applied a clear and-convincing standard of proof only in two limited circumstances, not in every case involving an invalidity defense. First, according to Microsoft, the heightened standard of proof applied in cases “involving oral testimony of prior invention,” simply to account for the unreliability of such testimony. Second, according to Microsoft the heightened standard of proof applied to “invalidity challenges based on priority of invention,” where that issue had previously been litigated between the parties in PTO proceedings.

The Supreme Court rejecting it held that its pre-1952 cases never adopted or endorsed the kind of fluctuating standard of proof that Microsoft envisioned. And they did not indicate, even in dicta, that anything less than a clear-and-convincing standard would ever apply to an invalidity defense raised in an infringement action. To the contrary, the Court spoke on the issue directly in RCA, stating that because the heightened standard of proof applied where the evidence before the court was different from that considered by the PTO, it applied even more clearly where the evidence was identical. Likewise, the Court’s statement that a “dubious preponderance” would never suffice to sustain an invalidity defense, admitted of no apparent exceptions. Also nothing in §282’s text suggest that Congress meant to depart from that understanding to enact a standard of proof that would rise and fall with the facts of each case.

The Court finally concluded that Congress specified the applicable standard of proof in 1952 when it codified the common-law presumption of patent validity. Since then, it had allowed the Federal Circuit’s correct interpretation of §282 to stand. Any recalibration of the standard of proof remain in its hands. The judgment of the Court of Appeals for the Federal Circuit was thus affirmed.