U.S. Supreme Court Continues to Fiddle with Patents

Court Will Review Burden of Proving Patent Invalidity When Prior Art Was Not Before Examiner

by: John R. Harris

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On November 29, 2010, the U.S. Supreme Court agreed to hear the appeal in the case of Microsoft Corp. v. i4i Limited Partnership, U.S. Supreme Court No. 10-290, cert. granted 11/30/2010. This case will consider the question whether the invalidity of a patent must be proved by “clear and convincing” evidence when the prior art presented at a court trial was not considered by the USPTO examiner during prosecution of the patent.

The Court’s agreement to hear the case continues the recent trend of the U.S. Supreme Court to closely oversee the operations of the Court of Appeals for the Federal Circuit (CAFC), and generally to involve itself in the detailed workings of the patent system. Most recently (June 28, 2010), the Supreme Court handed down its decision in Bilski v. Kappos, which affected the ability to obtain patents on business methods and software.

The case involves U.S. Patent No. 5,787,449, which supposedly covers an improved method for editing documents containing markup languages like XML. Some versions of Microsoft’s MS WORD word processing software allegedly contained an infringement. A jury found the patent valid, willfully infringed, and awarded $290 million in damages (including willful infringement damages). In addition, the district court entered a permanent injunction against sales of the infringing version of WORD.

The Patent Act provides that “[a] patent shall be presumed valid” and that “[t]he burden of establishing invalidity of a patent or any claim thereof shall rest on the party asserting such invalidity.” 35 U.S.C. § 282. This is called the “presumption of validity.” This burden requires proof of invalidity by “clear and convincing evidence.”

Microsoft contends that the patent was invalid based on prior art, and that the courts should not apply this strict standard of the “presumption of validity” when a defendant presents prior art that was not considered during prosecution of the patent.

Microsoft’s appeal was followed by eleven amicus briefs, indicating strong interest in the community of larger technology companies. These amicus briefs represent companies that have been estimated to employ more than 3 million people and have market capitalization of $1.2 trillion. Among the companies filing briefs were Apple, Dell, Facebook, and Intel, all high-tech companies that are frequently hit with what they view as frivolous patent infringement suits.

A ruling favorable to Microsoft would have profound changes on the way that patents are litigated, and would likely result in the invalidity of many more patents. Such a ruling would also have a big impact on the way that patents are prosecuted at the USPTO – likely by forcing patent attorneys to present more information to the examiners during prosecution, in an effort to get more prior art considered during the examination phase.

The long term implications of a decision either way are not clear, but what is clear is this: having the courts involved in managing the patent process almost always leads to more uncertainty, delay in enforcement, and costs of patents. In this writer’s view, the subject of patent reform is better dealt with by Congress – if it would take the time to carefully consider the economic and societal issues. Oral argument is expected in the spring of 2011, with a ruling expected in fall 2011.

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