The following post comes from one of our newest Practice Center Contributor’s Clement S. Roberts.  Mr. Roberts is a founding partner at Durie Tangri where his practice focuses on intellectual property litigation and on complex commercial cases with a high-technology component.

A broad spectrum of academics and industry lined up Friday to support Microsoft’s request for Supreme Court review of its ongoing patent litigation against i4i.  In the underlying litigation, i4i won a pile of money on a patent dealing with the idea of separately storing metacodes and text in a markup language document.    While the litigation has an interesting factual history, the issue on appeal is a purely legal one – namely the application of the “clear and convincing evidence” standard to questions of invalidity.

As most people reading this blog already know, in order to invalidate a patent, a defendant must prove that the patent is invalid by “clear and convincing” evidence.  Ostensibly, this rule exists in order to reflect deference to the fact that the patent has been examined and found valid by an expert at the Patent and Trademark Office.    See e.g. American Hoist & Derrick co. v. Sowa & Sons, Inc, 725 F.2d 1350 at 1359 (Fed. Cir. 1984) (taking note of “the deference that is due to a qualified government agency presumed to have properly done its job.”).

Especially when taken together, however, the amicus briefs in Microsoft v. i4i overwhelmingly show that this is an exceptionally bad rule – at least when applied (as it is now) to all questions of invalidity.

The lead argument advanced by the amici is that this deference makes no sense where the PTO did not actually have the relevant prior art in front of it and therefore did not actually decide that the patent was novel as compared to that piece of prior art.  As the amici ask, why should the courts give deference  to a decision that the PTO did not actually make?

The standard argument in favor of applying a heightened standard of proof to invalidity challenges based on unexamined prior art is that part of showing appropriate deference to the PTO is to presume that it did its job and looked at all of the relevant prior art.  Thus, proponents of this rule argue, when a defendant comes into court claiming that a patent is invalid, it should have to show that the PTO did not do its job – i.e. that it did not consider all relevant prior art – by showing very clearly that the prior art on which the defendant relies is invalidating.

The bulk of many of the amici’s briefs are dedicated to rebutting this syllogism and – in my opinion – they are very successful in this endeavor.   In particular, they argue:  (1) the PTO’s examiners have very limited resources, (2) they only look at art in their electronic database and whatever is supplied by the applicant; and (3) they don’t have the power (because the application is confidential) nor the time to go out and talk to experts in the field.  Thus, it’s a fiction to presume that they try to consider all of the relevant prior art and it makes little sense to presume that they are doing something we know for a fact they aren’t doing.  Yet, that is exactly what the Federal Circuit requires when it applies the “clear and convincing evidence” standard to prior art that was not before the PTO.

Many of the amicus briefs go even farther, however, and argue that the courts should not be applying a heightened evidentiary standard to questions of invalidity in many (or perhaps even all) situations.

Google and Verizon point out, for example, that “[t]he Federal Circuit even applies its heightened burden of proof when the applicant misrepresented the relevant prior art, obscured it as a part of a last minute deluge of additional documents, or provided it only in a foreign language.” Google / Verizon at 19.  This argument is also compelling – why should the courts presume that the PTO made a decision on the merits in situations where the factual circumstances strongly suggest otherwise?  Shouldn’t there (as Google and Verizon argue) be at least some flexibility in whether and when the heightened evidentiary standard gets applied?

In the same vein, a number of the amicus point out that the Federal Circuit applies the “clear and convincing” standard even when – during a parallel re-examination – the PTO says that there are substantial new question of patentability warranting re-examination.  In other words, even where a panel of three PTO examiners says “hold on a moment, the initial examination was flawed and this thing may not be patentable” the Federal Circuit still says that the patent is entitled to a high level of deference based on the PTO’s earlier (and now rejected) conclusion of patentability. To be fair, there is (in my view) at least a good argument for not taking subsequent interim PTO decisions into account in a pending patent case.  But the broader point – that it makes no sense to have a bright line rule that always applies the clear and convincing evidence standard – is persuasive.

Indeed, the Supreme Court has, in recent years, been very hostile to the Federal Circuit’s “bright line” tests.  It has, for example, overturned such tests in the areas of obviousness, and patentable subject matter.  In KSR the Supreme Court even went so far as to note that the rational for showing deference to the PTO was “much diminished” when the PTO had not actually reviewed the prior art.  KSR International Co. v. Teleflex, Inc., 550 U.S. at 426 (2007).  Thus, there is reason to believe that the high court is likely (if it takes the case) to at least sympathize with the line of argument discussed above.

It is an open question, however, whether the Supreme Court would get rid of the “clear and convincing” evidence standard for all questions of validity – which some of the amici clearly want the Court to do.

Several of the amici argue, for example, that the patent prosecution process is so inherently pro-patentee, that it would be inappropriate to give much weight to the decision.  Google and Verizon point out, for example, that the PTO “itself presumes that all patent applications should be granted and therefore permits a patent examiner to reject an application only if the examiner demonstrates invalidity.”  Google/Verizon brief at 3.  They also point to other presumptions that “tip the scales in favor” of the applicant including the fact that the examiners are instructed to presume that the best mode, written description and enablement requirements are all met (MPEP 2165.03 and 2163 and 2164.04).  It makes no sense, they and other amici argue, to presume that a patent is valid when the initial determination of validity has been arrived at through a process that itself presumes validity and does not subject the patent to a rigorous, adversarial process.

The proponents of doing away with the “clear and convincing” evidence standard also point out that the statutory justification for the imposition of that standard is the requirement, in the Patent Act, that a patent must be “presumed” to be valid.  Outside of patent law, however statutory presumptions of this kind are usually embodied in a “preponderance of the evidence” standard.  For example, both Copyrights and Trademarks must be presumed valid, but questions of invalidity are judged by the preponderance of the evidence standard in both instances.

Underlying all of these argument, of course, is the drum beat of concern about abuses of the patent system and the extent to which the system favors plaintiffs.  All of the amici argue that the patent system is actually harming innovation because the law is overly biased in favor of plaintiffs.  To support this point, there is lots of data in the briefs about the number of patent litigations that have been filed, the percent of patents that are invalidated in re-examination, the cost of patent litigation and the like.  I won’t bore you by going through them all again here, but taken together they paint a pretty grim picture of the increasing burden imposed on the economy by patent litigation.

From this perspective, it is interesting to note that the only amici from the bio-tech industry were generics because (unlike the computer industry) drug developers typically favor strong patent protection to protect their drugs against competition from generics and because patent trolls are far less common.  Indeed, the amicus brief submitted by the Electronic Frontier Foundation makes the point that the clear and convincing evidence standard is especially harmful to software makers, because “plaintiffs often argue that it is necessary to use the source code of the prior art software product to prove a software patent invalid.  However, that source code is frequently unavailable when needed.”  EFF at 4.  This is interesting both because it is exactly what happened to Microsoft in the underlying case and because it reflects the extent to which this fight (should it reach the Supreme Court) is likely to attract substantial industry attention on both sides and not merely (as these briefs would suggest) against the Federal Circuit’s current rule.

At the end of the day, cert petitions are a bit of a crapshoot and (on the statistics alone) a grant of cert seems unlikely.  That seems especially true given the fact that the high court just failed (in a truly spectacular manner) to clarify the law on patentable subject matter in Bilski.  After that fiasco is the Court really going to be eager to take up and deal with another major area of patent law?  As a betting man, I would say no.

On the other hand, many of the amici point out that before the creation of the Federal Circuit in 1982, the regional circuits reduced or eliminated the presumption where the issue had not actually been before the PTO.  This point is important insofar as the appearance of a circuit split (even an historical one) makes it more likely that the Supreme Court will actually take this case.

To this end, the amici briefs in this case do exactly what you want amici briefs to do in this situation – they argue persuasively that the current law is wrong, and they provide a clear signal to the Court that the way in which the law is wrong creates a substantial problem for a meaningful section of U.S. industry, and not just for Microsoft.  Given the current composition of the Court, that signal may be just as important as the content of the amici’s arguments.

You can reach the author, Clem Roberts at croberts@durietangri.com.  By way of disclaimer, please note that Stanford Professor Mark Lemley – the principal author and signatory of the brief submitted by the law professors – is one of my law partners, although this blog post reflects my own opinions and not necessarily his.

Tags: CAFC, clear and convincing evidence, Clement Roberts, heightened evidentiary standard, Microsoft v. i4i, patent invalidity, preponderence of evidence, prior art, PTO, Supreme Court, USPTO

This entry was posted on Tuesday, October 5th, 2010 at 17:27 and is filed under Federal Circuit Cases, Patent Issues, posts, prior art, Supreme Court Cases, USPTO. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.