By Jon E. Wright and Byron L. Pickard, Sterne, Kessler, Goldstein & Fox P.L.L.C.
On June 9, 2011, the U.S. Supreme Court issued its decision in Microsoft v. i4i Limited Partnership,1 holding that the Patent Act requires the defense of patent invalidity to be proved by clear and convincing evidence. The decision marked the Supreme Court's third affirmance of the U.S. Court of Appeals for the Federal Circuit in the three patent cases heard this term. The other cases also touched on questions of interpretations of statutes governing patents. In Stanford v. Roche,2 the Supreme Court ruled that the Bayh-Dole Act, which governs control of intellectual property developed in connection with federally funded research, does not automatically vest title to an invention with the federal contractor. And, in Global-Tech Appliances v. SEB S.A.,3 the Court clarified the proper legal test governing claims for induced infringement under Section 271(b) of the Patent Act.
The Supreme Court's affirmance in these cases is a departure from a trend of reversals for the Federal Circuit at the Supreme Court. This trend was seen by many as reflective of concerns by the Supreme Court that patent law, as interpreted by the Federal Circuit, was excessive in its protection of patents. The Supreme Court's most prominent reversals have generally fallen into two broad categories.
First, the Supreme Court has rejected the Federal Circuit's use of rigid, formulaic tests. Most notable among these cases is the Supreme Court's 2007 KSR v. Teleflex4 decision, which rejected the Federal Circuit's teaching-suggestion-motivation test for obviousness in favor of a more flexible standard, generally believed to make it easier for an accused infringer to prove a patent invalid for being obvious. And two terms ago, the Supreme Court rejected another Federal Circuit test using a rigid standard in Bilski5 for determining whether an invention is considered eligible subject matter for patenting under the Patent Act. Although the Supreme Court affirmed the Federal Circuit's result, it rejected the Federal Circuit's test in favor of a more flexible standard.
Second, the Supreme Court has reversed the Federal Circuit where it was seen to have strayed from principles that govern most other areas of the law. Here, the most prominent examples are the 2006 Ebay6 decision, involving the standard for awarding an injunction against infringers, and Dickinson v. Zurko7 from 1999, resolving the question of what deference courts must give the Patent Office's findings of facts under the Administrative Procedures Act.
Among the Supreme Court's recent reversals, the KSR and Ebay decisions are the most significant examples of the Court cutting back on the strength of patent rights. KSR made it significantly easier for an accused infringer to prove a patent was invalid for obviousness. And the Ebay decision changed the long-standing rule in patent cases that a patent owner was automatically entitled to an injunction against any party judged to infringe its patent. Now, patent owners must prove, among other things, that they will be irreparably harmed in the absence of an injunction and that money damages are not sufficient to compensate for future infringement—the same showing that must be made in any case involving a request to impose an injunction. That is, KSR made it significantly easier to invalidate a patent, while Ebay fundamentally changed the state of the law for patent-infringement remedies, especially where the patent was owned by a non-practicing entity.
So what does the Supreme Court's three-for-three affirmances of the Federal Circuit this term mean? Has the Supreme Court stepped back from its earlier efforts that appear directed to diminishing patent protection, or has the Supreme Court continued to cut back at patent protection? A close look at this term's patent decisions show the pendulum may be swinging back in favor of stronger patent rights.
We need not reach the question whether the failure to disclose Asano during the prosecution of Engelgau voids the presumption of validity given to issued patents, for claim 4 is obvious despite the presumption. We nevertheless think it appropriate to note that the rationale underlying the presumption—that the PTO, in its expertise, has approved the claim—seems much diminished here
Microsoft is an unquestionably positive opinion from the perspective of those favoring strong patent rights. It reaffirms the long-standing rule that patents must be proved invalid by clear and convincing evidence and settles the open question of whether the presumption should apply with equal force where a new invalidity issue not considered by the Patent Office was raised for the first time at trial.
Stanford sued Roche for infringing patents invented by a Stanford researcher who was under a duty to assign his inventions to the university. Roche challenged Stanford's ownership of the patent, relying on a line of cases holding that a promise to make a future assignment of an invention does not vest title in the invention or any patents claiming the invention. Stanford countered that the Bayh-Dole Act, which gives contractors (often research universities) a statutory option to gain title to inventions arising from federally funded research programs, automatically vested title in the inventions and later-issuing patents to Stanford. The Supreme Court affirmed the Federal Circuit, ruling that Stanford did not own the patent because the Bayh-Dole act does not automatically vest title to the invention in the federal contractor, basing its decision mainly on the plain meaning of the act.
While this decision has significant consequences for the parties, it will likely not have far-reaching or long-lasting implications for patent cases. University technology transfer offices are likely to address the issues raised by this case with better drafted assignment agreements with their employees, if they have not done so already. The clarity provided by the Court in Stanford v. Roche should ultimately favor small innovators seeking to retain patent rights.
While it is always difficult to predict where the Supreme Court is heading, these three cases suggest that the Supreme Court may have ended what appeared to be active efforts to cut back on patent-owner rights and return to a more neutral disposition in resolving patent cases. Whether these cases mark an actual change of course remains to be seen.
Jon E. Wright is a director at Sterne, Kessler, Goldstein & Fox P.L.L.C. where he focuses on complex patent litigation and appellate litigation in the courts, and complex reexamination practice before the United States Patent & Trademark Office. In particular, he has represented patent owners in over thirty inter partes and ex parte reexaminations involving concurrent district court or USITC proceedings, including appeals to the Board of Patent Appeals and Interferences (BPAI). Contact him at email@example.com.
Byron L. Pickard is an associate at Sterne, Kessler, Goldstein & Fox P.L.L.C. where he focuses his practice on patent infringement and patent validity suits, trademark and trade dress issues, copyright matters, and licensing disputes. Contact him at firstname.lastname@example.org.
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