Supreme Court Holds That Invalidity Must Be Proved by Clear and Convincing Evidence

    By Donald Zuhn —

In the third patent decision to be issued by the Supreme Court in little more than a week, the Court in Microsoft Corp. v. i4i Limited Partnership held today that 35 U.S.C. § 282 requires an invalidity defense to be proved by clear and convincing evidence.  Justice Sotomayor delivered the opinion of the Court, and was joined by all but Justice Thomas (who concurred in the judgment) and Chief Justice Roberts (who took no part in the decision).  Justice Breyer authored a concurring opinion, in which he was joined by Justices Scalia and Alito.

Justice Sotomayor begins by noting that Congress has charged the U.S. Patent and Trademark Office with the task of examining patent applications and issuing patents where "the applicant is entitled to a patent under the law" (35 U.S.C. § 131), and that Congress has set forth the prerequisites that the Office must evaluate in determining whether a patent should be issued.  The opinion also notes that a patent grants exclusive rights to the holder, including the exclusive right to use the claimed invention, which can be enforced by bringing a civil action for infringement.  An accused infringer may counter by asserting one of the defenses under 35 U.S.C. § 282, including that the patent is invalid (i.e., "never should have issued in the first place").  The opinion points out that in asserting an invalidity defense, the accused infringer "must contend with the first paragraph of §282, which provides that '[a] patent shall be presumed valid' and '[t]he burden of establishing invalidity . . . rest[s] on the party asserting such invalidity,'" and that under the Federal Circuit's reading of § 282, the presumption of validity can only be overcome by persuading the factfinder of the patent's invalidity by clear and convincing evidence.  Justice Sotomayor notes that in American Hoist & Derrick Co. v. Sowa & Sons, Inc., 725 F. 2d 1350 (Fed. Cir. 1984), Judge Rich — citing Radio Corp. of America v. Radio Engineering Laboratories, Inc. ("RCA"), 293 U. S. 1 (1934) — concluded that:

[Section] 282 creates a presumption that a patent is valid and imposes the burden of proving invalidity on the attacker.  That burden is constant and never changes and is to convince the court of invalidity by clear evidence.

In the case before the Court, i4i brought suit against Microsoft in 2007, asserting that Microsoft's manufacture and sale of Microsoft Word infringed i4i's patent to an improved method of editing computer documents.  Microsoft denied infringement and counterclaimed for a declaration of invalidity and unenforceability.  With regard to its invalidity defense, Microsoft contended that i4i's sale of the S4 software program rendered the asserted patent invalid under 35 U.S.C. § 102(b).  At trial, Microsoft objected to i4i's proposed instruction that Microsoft was required to prove invalidity by clear and convincing evidence because the S4 program had never been presented to the USPTO during prosecution of the asserted patent, and requested the following instruction:

Microsoft's burden of proving invalidity and unenforceability is by clear and convincing evidence.  However, Microsoft's burden of proof with regard to its defense of invalidity based on prior art that the examiner did not review during the prosecution of the patent-in-suit is by preponderance of the evidence.

The District Court rejected Microsoft's hybrid standard of proof and instructed the jury that "Microsoft has the burden of proving invalidity by clear and convincing evidence."  The jury found that Microsoft failed to prove invalidity and that Microsoft had willfully infringed the i4i patent.  The Federal Circuit affirmed, saying that it could discern no error in the jury instruction requiring Microsoft to prove invalidity by clear and convincing evidence.  In response to this affirmance, Microsoft petitioned for certiorari, contending that the proper standard for proving invalidity is preponderance of the evidence, and at the very least, that the preponderance of the evidence standard should apply when an invalidity defense rests on evidence that was never considered by the USPTO during examination of the asserted patent.

Justice Sotomayor (at left) first notes that "by its express terms, §282 establishes a presumption of patent validity, and it provides that a challenger must overcome that presumption to prevail on an invalidity defense," adding that "while the statute explicitly specifies the burden of proof, it includes no express articulation of the standard of proof."  Turning to the issue of standard of proof, the opinion points to RCA (cited by Judge Rich in American Hoist & Derrick Co.), in which Justice Cardozo explained that "there is a presumption of validity, a presumption not to be overthrown except by clear and cogent evidence," and added that "one otherwise an infringer who assails the validity of a patent fair upon its face bears a heavy burden of persuasion, and fails unless his evidence has more than a dubious preponderance."  Justice Sotomayor therefore concludes that:

The common-law presumption [i.e., the pre-1952 Act presumption] . . . reflected the universal understanding that a preponderance standard of proof was too 'dubious' a basis to deem a patent invalid.  . . .  Thus, by the time Congress enacted §282 and declared that a patent is "presumed valid," the presumption of patent validity had long been a fixture of the common law.  According to its settled meaning, a defendant raising an invalidity defense bore "a heavy burden of persuasion," requiring proof of the defense by clear and convincing evidence.

Although § 282 does not expressly specify a standard of proof, the opinion states that "[u]nder the general rule that a common-law term comes with its common-law meaning, we cannot conclude that Congress intended to 'drop' the heightened standard [of] proof from the presumption simply because §282 fails to reiterate it expressly."  Pointing again to RCA, Justice Sotomayor writes that the case "leaves no doubt that attached to the common-law presumption of patent validity was an expression as to its 'force,' that is, the standard of proof required to overcome it" (citation omitted).  Although Microsoft argued that the Court had applied a clear-and-convincing standard of proof in only two limited circumstances in its pre-1952 cases, Justice Sotomayor responds that:

Squint as we may, we fail to see the qualifications that Microsoft purports to identify in our cases.  They certainly make no appearance in RCA's explanation of the presumption of patent validity.  . . .  Nor do they appear in any of our cases as express limitations on the application of the heightened standard of proof.

As for Microsoft's argument that that a preponderance of the evidence standard should at least apply where the evidence before the factfinder was not before the USPTO during the examination process, the opinion states that "[t]he question remains, however, whether Congress has specified the applicable  standard of proof," and responds that "Congress did just that by codifying the common-law presumption of patent validity and, implicitly, the heightened standard of proof attached to it."  Justice Sotomayor notes that "[o]ur pre-1952 cases never adopted or endorsed the kind of fluctuating standard of proof that Microsoft envisions," adding that "the Court's statement [in RCA] that a 'dubious preponderance' will never suffice to sustain an invalidity defense, admitted of no apparent exceptions" (citation omitted).  In footnote 10, Justice Sotomayor points out the "impracticalities" of Microsoft's fluctuating standard of proof, observing that because an examiner has no duty to cite every reference considered, whether an examiner has considered a particular reference will often be "a question without a clear answer."

Justice Breyer, who joined the Court's opinion, writes separately to "emphasiz[e] that in this area of law as in others the evidentiary standard of proof applies to questions of fact and not to questions of law."  He adds that "[w]here the ultimate question of patent validity turns on the correct answer to legal questions — what these subsidiary legal standards mean or how they apply to the facts as given — today's strict standard of proof has no application."  Looking to lower courts for help, Justice Breyer writes that "[b]y preventing the 'clear and convincing' standard from roaming outside its fact-related reservation, courts can increase the likelihood that discoveries or inventions will not receive legal protection where none is due."  Justice Thomas, while concurring with the Court's judgment, differs with the Court as to whether Congress' use of the phrase "[a] patent shall be presumed valid" codified a standard of proof.  He reaches the same outcome as the Court, however, because § 282 is silent as to the standard of proof.  As a result, Justice Thomas writes that § 282 did not alter the common-law rule, which he characterizes as a "heightened standard of proof set forth in Radio Corp. of America v. Radio Engineering Laboratories, Inc., 293 U. S. 1 (1934) — which has never been overruled by this Court or modified by Congress."

Microsoft Corp. v. i4i Limited Partnership (2011)
Opinion of the Court by Justice Sotomayor, joined by Justices Scalia, Kennedy, Ginsburg, Breyer, Alito, and Kagan;
Concurring opinion by Justice Breyer, joined by Justices Scalia and Alito;
Opinion concurring in the judgment by Justice Thomas;
Chief Justice Roberts took no part in the consideration or decision of the case.