“Clear and Convincing Evidence” is Still Required To Invalidate a Patent

By Thomas Carey. Chair of the Business Practice Group

June 2011 IP Update

Thomas CareyWe reported earlier on Microsoft v. i4i Limited Partnership, in which a small Canadian software company accused Microsoft of infringing its patent rights.  The i4i victory was recently affirmed in a Supreme Court opinion that drew not a single dissent. Explicitly, the Court stood by its long-standing rule that patent invalidity must be proven by clear and convincing evidence. Implicitly, it acknowledged the patentability of software and the enforceability of software patents.

The i4i patent claimed an improved method for editing computer documents. The method involves storing a document’s content separately from its metacodes.  Although  aware of the i4i patent, Microsoft included in Word 2003 a “Custom XML” feature that allowed users to create documents that infringed the i4i patent claims.

i4i successfully sued Microsoft for patent infringement. The trial court judge upheld the damages award of $290 million and issued a permanent injunction against the sale of Word with the Custom XML feature.

Microsoft appealed the case to the Federal Circuit, which upheld both the damages award and the injunction. Not satisfied, Microsoft appealed to the Supreme Court.

I4i had sold a software product called S4 more than one year before the patent application was filed. The S4 product was not mentioned in the prosecution of the i4i patent. Thus, no patent examiner had reviewed the question of whether it constituted invalidating prior art.

In its Supreme Court appeal, Microsoft focused on this question of prior art. The source code of S4 had been destroyed years before the commencement of the litigation, so it was impossible to prove whether S4 practiced the art claimed in the i4i patent. The creators of S4, who were also the inventors named in the i4i patent, testified that it did not.

Following a long line of Supreme Court cases, the trial court judge instructed the jury that, to invalidate the i4i patent, Microsoft would have to prove its case by “clear and convincing evidence.” The jury found that Microsoft had not met this burden.

On appeal to the Supreme Court, Microsoft did not argue that its evidence was clear and convincing. Instead, it argued that the exacting “clear and convincing” standard of proof was not the correct standard to apply, and that it should only have had to prove invalidity by the more relaxed “preponderance of the evidence” standard.

Microsoft presented two arguments: first, that the “clear and convincing” standard should not apply at all to patent challenges; and second, that at least it should not apply when the challenge is based upon evidence not presented to the patent examiner who approved the patent application. It lost on both counts.

In considering Microsoft’s arguments, the Supreme Court referred to its opinion inRadio Corporation of America  v. Radio Engineering Labs., Inc. In that 1934 case, Justice Cardozo reviewed 100 years of case law involving the standard of proof required to invalidate a patent. He firmly concluded that the Supreme Court and most appellate courts had consistently required clear and convincing evidence in order to invalidate a patent.

In i4i, the Supreme court held that Congress had effectively codified the venerable “clear and convincing” standard in 1952 when it enacted §282 of the Patent Act, which says: “A patent shall be presumed valid. The burden of establishing invalidity of a patent shall rest on a party asserting it.” The court concluded that there was no basis for overriding the “clear and convincing” standard as ratified by Congress.

The court acknowledged that the rationale for the “clear and convincing” standard was not as powerful where the patent examiner had not had the opportunity to consider the prior art that was the basis of the challenge. Nonetheless, the court suggested that the benefit of that rigorous standard was part of the bargain with the inventor, an inducement to motivate him or her to disclose the invention in the patent application process. The court saw no reason to withdraw that inducement.

Justice Thomas, in concurrence, was unable to agree that §282 can be read as dictating a “clear and convincing” standard, but did not see any persuasive reason to change the standard that had been applied for more than 170 years.

Microsoft took a shot at radically changing the patent landscape. Had it succeeded, defendants would universally have found it much easier to challenge a patent’s validity.

It lost. The standard that has been in place almost as long as the United States has been a nation continues. Clear and convincing evidence is needed to invalidate a patent — even a software patent.