Supreme Court Unanimously Holds that Invalidity of U.S. Patents Must be Proven by Clear and Convincing Evidence

June 10, 2011

On June 9, 2011, the Supreme Court issued a decision unanimously affirming, 8-0, the Court of Appeals for the Federal Circuit’s 2010 judgment in i4i Ltd. Partnership v. Microsoft Corp., 598 F.3d 831 (Fed. Cir. 2010), concluding as correct that court’s unwavering interpretation that the patent statute imposes on those challenging a patent’s validity in court to do so by clear and convincing evidence. Justice Sotomayor delivered the Court’s opinion, while Chief Justice Roberts took no part in the decision. Justices Breyer and Thomas separately filed concurring opinions.

In 2007, i4i claimed that Microsoft’s manufacture and sale of its word processing software willfully infringed an i4i patent. Microsoft denied infringement and counterclaimed that i4i’s patent was invalid in view of i4i’s sale of a software product more than one year prior to the date on which the i4i patent was filed. The two parties disputed whether i4i’s software embodied the invention claimed in i4i’s later-filed patent. However, there was no dispute that this pre-patent-filing sale activity and software on which Microsoft’s defense relied was not considered by the Patent Office prior to the patent’s issuance. Microsoft sought a jury instruction that it bore a burden of establishing invalidity on this basis by preponderant evidence. The district court disagreed and instructed the jury that Microsoft bore a burden of proving invalidity by clear and convincing evidence—a higher burden. The jury returned a verdict that Microsoft failed to meet that higher burden of proof and the district court entered judgment against Microsoft after denying Microsoft’s post-trial motions complaining about the jury instruction. On appeal the Federal Circuit affirmed, relying on its settled interpretation of the patent statute (35 USC § 282) and discerning no error in the district court’s jury instruction. Slip Op. at 4-5.

On writ of certiorari from the Federal Circuit’s judgment, Microsoft contended that a defendant in a patent infringement action need only establish invalidity by preponderant evidence and, alternatively contended that only preponderant evidence is necessary to prove a defense of invalidity where the pre-patent-filing sale activity on which the defense relies was not considered by the Patent Office prior to the patent’s issuance. The Court rejected both contentions. Id. at 5-6.

The Court acknowledged as "true enough" its observations in KSR Int’l Co. v. Teleflex Inc., 550 U. S. 398, 426 (2007), that "the rationale underlying the presumption—that the PTO, in its expertise, has approved the claim—seems much diminished" where the basis for invalidity was not evaluated by the Patent Office before it issued the patent. Id. at 14. But, in the opinion of all of the participating Justices except Justice Thomas, Congress codified the common-law presumption of validity as encompassing not only an allocation of burden of proof but also an imposition of a heightened standard of proof to overcome the presumption. Id. at 8. In view of that codification, the Court rejected Microsoft’s primary contention. And none of the Court’s decisions or those of the courts of appeals predating that codification adopted or endorsed the fluctuating standard Microsoft advanced as its alternative contention. Id. at 15-17.

Citing its decision in KSR, the Court stated that the Patent Office’s "considered judgment may lose significant force" in instances where the Patent Office does not have all material facts before it when issuing a patent "[a]nd, concomitantly, the challenger’s burden to persuade the jury of its invalidity defense by clear and convincing evidence may be easier to sustain. Id. at 17. Continuing, the Court stated that, a "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." Microsoft, however, did not request that instruction. Id. at 18.

Lastly, the Court acknowledged the various policy concerns advanced by the parties and their amici, yet refused to weigh those concerns. Importantly, the Court acknowledged that Congress has left intact the Federal Circuit’s settled interpretation that the patent statute imposes on those challenging a patent’s validity in court to do so by clear and convincing evidence. "Any recalibration of the standard of proof remains in [Congress’] hands." Id. at 20. Accordingly, the Court unanimously affirmed the Federal Circuit’s judgment, 8-0.  In a short concurrence, Justice Breyer (joined by Justices Scalia and Alito) joined the Court’s opinion in full, but emphasized that the "evidentiary standard of proof applies to questions of fact and not to questions of law." Further, he counseled the district courts to help juries to understand that distinction. This concurrence is uncontroversial, yet remarkable because less than a majority of the Justices joined it.

In an even shorter concurrence, Justice Thomas, stated that he was not persuaded that Congress codified a standard of proof. Instead, he concluded that, because the patent statute is silent on the standard of proof, it did not alter the common-law rule, which the Court applied in Radio Corp. of Am. v. Radio Eng’g Labs., Inc., 293 U.S. 1 (1934), and which he would apply here to affirm the judgment.

While the Court has now unanimously confirmed that the patent statute imposes on those challenging a patent’s validity in court to do so by clear and convincing evidence, it also has confirmed that a jury may be instructed to scrutinize whether the evidence before it is materially new relative to what the Patent Office evaluated when it issued a patent, and if so, to consider that fact when determining whether an invalidity defense has been proved by clear and convincing evidence.