Supreme Court Patent Ruling Deals Blow to Tech Companies

By Robert Ambrogi Esq
Underscoring the presumption of validity given to U.S. patents, the Supreme Court has ruled that proof of a patent’s invalidity must be established by clear and convincing evidence. In so ruling, the court rejected arguments by Microsoft Corp., and supported by other technology companies, that a more lenient standard, proof by a preponderance of the evidence, should apply.

For the parties to this appeal, Microsoft and i4i Limited Partnership, the ruling means that the $290 million a jury ordered Microsoft to pay i4i for patent infringement will stand. For patent lawyers, the broader significance of the ruling is that it affirmed the standard of proof that the Federal Circuit Court of Appeals had applied for nearly 30 years and that had been the common law of patents prior to enactment of the Patent Act of 1952.

Interpretation of that 1952 act was the principal issue for the Supreme Court. Although the act stated that a patent is to be presumed valid and that a party challenging its validity bears the burden of proof, the act did not specify the standard of proof that courts should apply in such cases.

In a 1934 decision, the Supreme Court had held that the presumption of a patent’s validity is “not to be overthrown except by clear and cogent evidence.” The Federal Circuit, in a 1984 case, concluded that Congress intended to carry forth that standard when it wrote the 1952 act.

At the Supreme Court, Microsoft raised two arguments against that standard. First, it asserted that, for all invalidity cases, the correct standard under the 1952 act was the more-lenient “preponderance of the evidence.” Second, it contended that the preponderance standard should apply at least in cases where the invalidity challenge rests on evidence never considered by the U.S. Patent and Trademark Office.

In an opinion written by Justice Sonia Sotomayor, the court was unequivocal in rejecting Microsoft’s arguments. “Basic principles of statutory construction” require the conclusion that Congress meant to incorporate the clear and convincing standard, Justice Sotomayor wrote. “Squint as we may,” she continued, “we fail to see the qualifications that Microsoft purports to identify in our cases.”

With regard to Microsoft’s contention that the lesser standard should apply at least in cases where there is new evidence, Justice Sotomayor was no more sympathetic. Congress intended to codify the common-law standard of proof, she reiterated, and that common-law standard “never adopted or endorsed the kind of fluctuating standard of proof that Microsoft envisions.”

Mixed Reaction to the Ruling

Ronald Mann, a professor of law at Columbia, praised the opinion in a commentary he posted at SCOTUSblog. This ruling, together with other patent cases the court decided this term, mark “the end of the court’s willingness to let concerns about excessive patenting drive rejection of long-settled rules of patent law,” he wrote.

“Justice Sotomayor’s opinion for the court sidestepped the policy questions that have dominated recent opinions in cases like eBay, KSR, and Bilski,” Mann noted. “Instead, it relied almost entirely on precedent.”

Michael Barclay, patent lawyer and fellow at the Electronic Frontier Foundation, wrote at the EFF’s Deeplinks Blog that he disagreed with the decision, especially with regard to the court’s analysis of the pre-1952 cases. EFF filed an amicus brief in the case supporting Microsoft’s arguments.

“We argued that those earlier cases did not establish a clear and convincing standard in all circumstances, but only when a defendant tries to relitigate a patent's validity using evidence that was already unsuccessfully used in an earlier case,” Barclay explained. “Unfortunately, the Supreme Court did not agree.”

Some say the biggest loser in the case may end up being the technology consumer, as technology companies will now be forced to tread carefully in developing new products.

“Tech companies have been put on notice that they have to vet their products for potential violation of existing patents,” notes technology journalist Dennis O’Reilly at the CNET blog Worker’s Edge. “This will make software and other tech products more expensive to develop. It will also add to the legal bills of tech organizations of all types and sizes.”

The full opinion in Microsoft v. i4i Limited Partnership is available on the Supreme Court’s website.

Tell us: Do you agree with the decision? Why or why not?

Robert Ambrogi Esq

We are proud to partner with an author of Bob’s caliber to provide exclusive articles for our legal clients and leading industry experts. Robert J. Ambrogi is a news media veteran and the only person ever to hold the top editorial positions at the two leading national U.S. legal newspapers, the National Law Journal and Lawyers Weekly USA. He is currently a Massachusetts lawyer who represents clients at the intersection of law, media and technology. He is also internationally known for his writing and blogging about the Internet and technology. Media and Technology Law Bob represents a range of businesses and individuals, concentrating in print and electronic media companies and the editorial, sales, marketing and technology professionals who work in them. He also counsels businesses and individuals in employment matters. Arbitration and Mediation An established professional in alternative dispute resolution, Bob has been an arbitrator since 1994, focusing on labor and employment and securities disputes. A mediator in a range of civil disputes, Bob completed the training required by Massachusetts law to protect confidentiality.

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