'Tea Leaves' Difficult to Read at High Court, Attendees at 'Microsoft' Oral Arguments Say

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Patent stakeholders attending the oral arguments at the U.S. Supreme Court April 18 heard certain justices slightly favor retaining the heightened clear-and-convincing evidence standard as to evidence presented in a district court in a challenge to a patent's validity, but none predicted a clear victory for the patent holder. Microsoft Corp. v. i4i L.P., No. 10-290 (U.S., argued April 18, 2011).

Microsoft Corp. is challenging the heightened standard, particularly when the evidence presented at trial was not considered by the Patent and Trademark Office when it granted the patent.

Members of the patent community reflected April 19 on which arguments were most persuasive and how the justices' questions might have indicated their leanings.

The Case to Date.

The case originated when i4i L.P. sued Microsoft, alleging that the 2003 and 2007 versions of the word processing software Microsoft Word infringed i4i's patent (5,787,449).

A district court judge instructed the jury that Microsoft had to show patent invalidity by clear and convincing evidence, the standard set by the U.S. Court of Appeals for the Federal Circuit since 1984.

The jury found willful direct, contributory, and induced infringement, and the damages award against Microsoft eventually totaled $290 million (78 PTCJ 508, 8/21/09).

On appeal-- 598 F.3d 831, 93 USPQ2d 1943 (Fed. Cir. 2010) (79 PTCJ 538, 3/12/10)--and now at the Supreme Court, Microsoft argued that one piece of evidence, that would invalidate the patent under the on-sale bar of 35 U.S.C. §102(b), was not seen by the PTO and thus the heightened evidence standard was improper.

The high court granted certiorari Nov. 29 (81 PTCJ 137, 12/3/10). The question presented is whether, when the defendant in an infringement suit asserts as a defense that the relevant patent is invalid, the defendant must prove invalidity by clear and convincing evidence.

The following counsel presented oral arguments in court:

• Thomas G. Hungar of Gibson, Dunn & Crutcher, Washington, D.C., argued for Microsoft. Hungar is a former deputy solicitor general.

• Former Solicitor General Seth P. Waxman of Wilmer Cutler Pickering Hale and Dorr, Washington, D.C., represented i4i.

• Deputy Solicitor General Malcolm L. Stewart argued on behalf of the government as a friend of the court.

Predicting Outcome Difficult in This Case.

“The fact that the justices focused on the broader question of a standard of 'clear and convincing' versus 'preponderance' for all cases, as opposed to focusing more on the specific facts of this case, bodes well for respondent's chances of victory,” Harold C. Wegner of Foley & Lardner, Washington, D.C., said to BNA after the session.

In his April 19 listserv mailing, Wegner added, “The Court appeared to recognize the long-standing precedent in support of a 'clear and convincing'” standard.

His Foley colleague, Jacqueline D. Wright Bonilla, said that reading the tea leaves in this case was difficult, but her gut reaction was that the justices seemed more sympathetic to i4i's point of view.

However, Andrew J. Pincus of Mayer Brown, Washington, D.C., who authored an amicus brief supporting Microsoft on behalf of the Business Software Alliance, felt otherwise. At most, one could argue that Justice Ruth Bader Ginsburg seemed supportive of the clear-and-convincing standard and Justice Antonin Scalia seemed skeptical, he told BNA. Otherwise, he said, “It was one of those arguments that is hard to predict.”

Robert M. Masters of Paul, Hastings, Janofsky & Walker, Washington, D.C., had a broader general observation that echoed Pincus's comment. He was surprised that the court was “not as engaged in the issues as much as I expected,” comparing the justices' questions in the instant case to their enthusiastic involvement during oral arguments in Bilski v. Kappos, 129 S.Ct. 2735, 95 USPQ2d 1001 (2010) (80 PTCJ 285, 7/2/10).

RCA Gets Most Traction.

Most surprising to Wegner and Bonilla, though, and the basis for their tendency to think the respondents had the upper hand, was the court's focus on a 1934 Supreme Court case, Radio Corporation of America v. Radio Engineering Laboratories Inc., 293 U.S. 1, 2 (1934).

I4i had relied on Justice Benjamin Cardozo's comment--acknowledged by Waxman to be dictum--in the case: “Even for the purpose of a controversy with strangers, there is a presumption of validity, a presumption not to be overthrown except by clear and cogent evidence.”

“The court's focus on RCA was more than I expected,” Bonilla said. In his listserv mailing, Wegner noted Breyer's reference to the brief filed on behalf of the American Intellectual Property Law Association, which argued for the heightened standard based on “the historical development of the presumption of validity … reflected in this Court's 1934 decision in [RCA].”

“Waxman started with it,” Bonilla said, “and the judges appeared to be persuaded by it.”

Does 'Presumption of Validity' Imply a Standard?

Section 282 of the Patent Act, 35 U.S.C. §282, states, “A patent shall be presumed valid. … The burden of establishing invalidity of a patent or any claim thereof shall rest on the party asserting such invalidity.”

I4i is contending that the statute is not “silent” with respect to the standard of review for the evidence burden of the accused infringer's challenge of invalidity, but rather that the presumption of validity necessarily implies a clear-and-convincing standard. “The requirement of heightened proof was part and parcel of the presumption [of validity] itself,” Waxman said, “in the same way that I think most lawyers in this country would say that the requirement of proof beyond a reasonable doubt is part and parcel of the presumption of innocence in criminal cases.”

Masters did not accept the parallel. The presumption cited in Section 282 is about deference to the expertise at the PTO, he said, “but it doesn't mean that a particular standard goes with that deference, or that the burden should be heightened.”

Pincus agreed. “It certainly means that the burden of persuasion is borne by those trying to overturn the patent,” he said. “But I don't think it tells you how much that burden is.”

Pincus said further that the Waxman's argument also cuts against requiring a heightened standard when the PTO did not consider the evidence, as the parallel to a criminal charge fails in that circumstance. “The respondents and the government don't have a good argument about why there should be deference in that case,” he said.

Adequacy of Jury Instructions Debated.

The issue many briefs pointed out, Bonilla said, was the potential for the court to require a dual standard: one to be applied to evidence the PTO considered, and the lowered standard to evidence the office did not consider. In court, the participants argued about the difference between the dual standard and a jury instruction to apply the clear-and-convincing standard, but to apply a different weight to evidence that the jury heard in trial but was not considered by the PTO.

Waxman argued: “There is a great difference between telling individual jurors what amount of weight they may or may not give to certain evidence in creating a dual standard of proof which … would require the jury first to determine whether this evidence was or wasn't considered and was or wasn't more pertinent.”

Bonilla agreed with that point generally, and provided a couple of scenarios that would make the dual standard approach particularly difficult. “If the patent applicant cited 1,000 references buried in an Invention Disclosure Statement,” she suggested, “should we assume all those references were considered by the PTO?” She also built on an argument Stewart made in court, that the alleged infringer's evidence supposedly not considered by the PTO is often “substantively equivalent” to art the PTO did consider. “The additional evidence might then be cumulative or less relevant,” she argued, “and you will have created a situation where the patent could be invalidated on something less than what the PTO considered.”

Masters felt that the justices “seemed to latch onto Waxman's argument,” except that Justice Samuel A. Alito “pushed back a little, pointing out that we already argue to the jury whether prior art was considered or not considered.”

Pincus countered Waxman by stating that point more emphatically. He said that once a judge identifies certain evidence as having special weight, “the jury is going to have to divide the evidence into two piles anyway.”

“To me that issue is best reflected in the question--'What's the hurdle?'--he said. “How certain does the jury have to be?”

Still, Bonilla was impressed with Waxman's argument in court, based on a study by John R. Allison and Mark A. Lemley, reported in the article Empirical Evidence on the Validity of Litigated Patents, 26 AIPLA Q.J. 185, 231 (1998), that looked at jury findings when judges made the “added weight” instruction. “Juries get it,” Waxman claimed.

“That implies that the current jury instruction is effective,” Bonilla said, “whereas the dual standard would be pretty hairy.”

Further, she noted a colloquy between Justice Sonia Sotomayor and Hungar that addressed these types of jury instructions.

Microsoft's counsel was arguing that RCA was distinguished as suggesting a higher standard for questions of priority of invention only. He contended that circuit courts opinions prior to the Federal Circuit's formation “all rejected the across-the-board heightened standard that i4i is arguing for.”

But Sotomayor pointed out that she had read the jury instructions in those cases, Bonilla remarked, and each, in fact, was asking the jury to weigh the evidence not considered by the PTO similar to the way i4i was requesting. “That to me provided some insight on what she thought on the matter,” Bonilla said.

Reexamination as Backstop Insufficient.

During oral arguments, Justice Stephen G. Breyer tried to focus on the differences between the reexamination option for a patent challenger and litigation. Reexamination, with its preponderance-of-the-evidence standard as to all prior art, presumably gives the patent challenger a path at the lower proof level, the argument goes.

However, in court, Hungar identified the limitations in what the PTO can consider in reexamination--publications and patents--and what statutory requirements it can assess--not including the on-sale bar, written description, etc.

Masters said that most district courts will not grant a stay during reexamination, and therefore, “In today's world, there's almost no chance to reexamine a patent when you're sued. You're left to litigate and bring your best evidence forward in court.”

Pincus appreciated Breyer's underlying intent to prevent “false positives”--the grant of patents that should be found invalid by the PTO--but agreed with Hungar and particularized the problem to the software industry. Much of the prior art in software is either “in people's heads or exhibited in articles that were distributed in commerce,” he explained, rather than in printed publications. Prior references in software are “not written down or memorialized the way they have been in other fields,” he said.

Pincus also pointed out the number of times the justices and counsel discussed patent reform efforts in Congress that would add a post-grant opposition procedure and modify existing inter partes reexamination. And he claimed that the government and advocates supporting patent owners were being duplicitous.

In court in this case, Pincus said, those parties are arguing that reexamination is a viable option to challenge a patent under the lowered standard. But on the Hill, he said, while “the tech community thinks easier reexamination would be a great thing,” the anti-Microsoft crowd in this case “is fighting to constrain use of reexamination as hard as they can.”

By Tony Dutra

Transcript of oral arguments at http://www.supremecourt.gov/oral_arguments/argument_transcripts/10-290.pdf