Justice Scalia, who presided over the Court in Microsoft v. i4i

At 11:03 am this morning Justice Scalia, sitting in for the recused Chief Justice John Roberts, called the most recent Supreme Court foray into patent law saying: “We’ll hear argument now in… Microsoft Corporation v. i4i Limited Partnership.”  The Chief Justice recuses himself from any and all Microsoft cases before the Supreme Court, so eight Justices are left to decide whether it is appropriate to require clear and convincing evidence to find an issued patent claim invalid during litigation.  In a nutshell, Microsoft and the amici supporting Microsoft would rather have a lower threshold (i.e., preponderance of the evidence) at least with respect to prior art that was not considered by the patent examiner during prosecution of the patent application at the United States Patent and Trademark Office.  On the other side of the case, i4i, along with its amici and the Solicitor General, argue that the current standard should not be changed.

UPDATED: 6:35pm

Last week the amicus briefs were due in support of i4i in their dispute with Microsoft, which is now at the United States Supreme Court. In what can only be characterized as a huge development, the United States has decided to participate openly on behalf of i4i and has argued that the presumption of validity must remain the same as it exists now. There were a number of interesting amici filings, portions of which appear below to create something of a readers-digest version of the amici in support of i4i.  The five that I highlight here are the U.S. government brief (which is excellent), the venture capital brief and BIO brief (both which eloquently discuss the negative impact there would be on investment if Microsoft’s position is adopted), the brief filed by Dr. Triantafyllos Tafas (of claims and continuations rule fame) and the brief of Ron Katznelson (making an economic argument based on asymmetry of risks).

What becomes clear in reading these briefs (and the excerpts below) is that despite what you might have heard to the contrary the Supreme Court has already previously addressed this issue and has done so in support of a standard appreciably higher than the mere preponderance supported by Microsoft. The argument of those in support of Microsoft has been that at least some Circuit Courts of Appeal had a lower presumption of validity prior to when the Federal Circuit announced the clear and convincing standard of proof and thereby settled patent law. While that may be true it seems abundantly clear that law setting a preponderance standard was directly in conflict with the clear and unambiguous Supreme Court precedent directly on point. In fact, there is even Supreme Court precedent directly on point saying that more than a mere preponderance is necessary even when the prior art has not been previously considered. So perhaps i4i and the amici, including the U.S. government by and through the Solicitor General and the USPTO General Counsel Bernie Knight can convince the Supreme Court not to overrule its own prior decisions and keep an appropriately high standard.

On Friday, March 11, 2011, lawyers representing i4i Limited Partnership filed the Brief for Respondents in the matter of Microsoft Corp. v. i4i Limited Partnership.  The fight is at the United States Supreme Court, which will hear oral arguments in the matter on April 18, 2011.  At issue is whether a patent in litigation deserves a heightened presumption of validity under the clear and convincing evidence standard or not.  Today, in order for a defendant to invalidate a patent claim there must be clear and convincing evidence that the claim should have have been issued by the Patent Office.  Microsoft seeks to lower the standard and make it easier to challenge issued patents in court.

More specifically, Microsoft would like to have the standard for invalidating a patent claim lowered to a mere preponderance of the evidence standard.  They say that prior art not considered by the Patent Office should not be afforded the same level of deference.  I say — why not?

Live from New York it’s the 5th Annual PLI Patent Law Institute.  Okay, it doesn’t roll off the tongue quite the same way, but over the next two days we will explore all aspects of the practice of patent law, from litigation, to transactional practice to patent prosecution.

Starting off day one is the newly minted private citizen Sharon Barner, who most recently was the Deputy Director of the United States Patent and Trademark Office.  Barner was introduced by John White (of PLI patent bar review fame), who pointed out that during her tenure she continued to commute weekends back to Chicago from Alexandria, VA so as to not uproot her family.  Over her tenure, which was about 16 months, Barner also managed to fit in no less than 8 trips to China on official government business, among the 17 foreign missions she participated in.  Let’s just say she really racked up some frequent flyer miles!

Today Barner is here to talk to us about what is going on at the USPTO.  She is discussing the USPTO Strategic Plan, which she was primarily responsible for pulling together during her tenure.  She also went on to discuss appeals to the BPAI, the IT system overhaul, patent reform, patent politics, Microsoft v. i4i and much more.  As a former Deputy Director we are getting not only the facts, but her opinions as well.  An excellent, informative and candid presentation.

When the United States Supreme Court decides Microsoft v. i4i, which should happen sometime before the Court recesses in June 2011, we may have a very different patent landscape.  By now most probably are aware of the fact that the Supreme Court has been asked by Microsoft and a swarm of amici to reduce the standard of proof necessary to invalidate patent claims.  By definition a patent claim that is easier to challenge is one that is weaker, so don’t be fooled by the pretenders who dismiss this case as meaningless and charge the patent community with crying wolf.  Anyone who isn’t willing to admit that lowering the presumption of validity will have extremely negative implications for innovators as a result of weaker patent rights is either not paying attention, isn’t very knowledgeable about patent law or simply has an agenda.

But what are the consequences?  In addition to weaker patents making it easier for competitors to ignore patent rights and engage in infringing activities, there is a real possibility, if not probability, that it will become harder to come by funding for start-up technology companies that are seeking to build on an innovative foundation through the use of proprietary (and patented) technology.  Investors love patents because they provide a competitive advantage, which allows companies that invest in developing innovation to realistically have an opportunity to recoup funds expended on research and development and turn a profit.  It will also create an enormous burden on the USPTO and tax the already inadequate IT systems.

On Monday, April 18, 2011, the United States Supreme Court will hear oral arguments in Microsoft  Corp. v. i4i Limited Partnership.  At stake in this case is nothing short of whether a meaningful presumption of validity for a patent will remain or whether the United States patent system is turned into a ridiculously complicated and expensive proposition that delivers innovators nothing more than a registration akin to a permit that can be challenged at will.  The fate of innovation as we have known it over the past two decades is on the line, and since strong patent rights are virtually a prerequisite to obtaining funding any downward shift in the relative strength of patents will make it harder for start-up companies and small businesses to attract the capital funds they so desperately need to expand and create jobs. 

U.S. Supreme Court Building, 11-9-2009.

The January 17, 2011, edition of Fortune magazine has Chief Justice John Roberts on the cover.  Roberts is the Chief Justice of the United States Supreme Court, a Court now made up predominantly of conservatives by a 5 to 4 majority.  It is the contention of the author of the article on Roberts that the Roberts Court is the most pro-business Court the United States has ever seen.  If that is the case, which I am not at all sure is the case, it would have to mean that one can be “pro-business” while being “anti-patent,” which given the state of American manufacturing and the future of the U.S. economy seems questionable.

Of course, if you are anti-patent then you are anti-innovation because those who innovate are not the behemoths of industry, but rather start-up companies that absolutely require patents in order to attract funding, expand and create jobs.  Thus, given the hostility toward patents it is entirely accurate to characterize the Roberts Court as anti-innovation.  The Roberts Court increasingly puts hurdles in the way of high-tech job growth.  You see, it is easy for anyone to characterize the Supreme Court as “pro-business” because selecting a victor in a “business case” almost necessarily means that a business has been victorious.  But what business?  One that is likely to innovate, expand, create jobs and form new industry?  Or one that once innovated and expanded, but now finds themselves stagnant and laying off employees?

Back in 2008, Apple, Inc. filed an application for trademark for “APP STORE” (Serial Number 77525433). Who knew that it would present a wonderful opportunity for us to discuss disclaimers and the distinction between descriptive and generic marks? Thanks, Apple! And thank you, too, Microsoft! But I’ll get to that in a bit. We need to start with a discussion of what a disclaimer is, how a mark can be merely descriptive or, worse, generic, and what it means to a trademark owner and the public. A very thorough discussion of disclaimers, merely descriptive marks, and generic marks can be found in the Trademark Manual of Examination Procedure (“TMEP”) §1200 and 15 U.S.C. §1056; my explanation is definitely the abridged version. Let’s start with descriptive marks, shall we?

It is impossible to search for technology related news online anymore without being inundated with the days wave of open source news stories that are seemingly proliferating faster than a human engineered bacterium, which by the way is patentable subject matter in the United States. In any event, “open source” has become the new “cyberspace” or “technological age” or even “telecommunications.” All of these terms are certainly understood by every reader, but part of the beauty of the term is that it can mean all things to all people, without ever really conveying a standardized meaning that everyone can agree with; much like the term “compassionate conservative,” which was so frequently used by the Bush Administration. What is a “compassionate conservative”? I really have no idea, but it sounds like a good thing and something to aspire to! After all, how could being a compassionate anything be bad?

So what does “open source” mean? The term is nebulous at best and confusing at worst.  The term, however, has undeniably become associated with the easy to understand but always misleading term – “free.” Certainly everyone knows the meaning of “free,” a term so universally understood that men (who are from Mars) and women (who are from Venus) both accept the term as meaning the very same thing. Even children understand the meaning of “free,” which leads to a plurality of interesting ironies.

The main front of the on-going war between Microsoft and i4i regarding the latter’s U.S. Patent No. 5,787,449 is certainly the Supreme Court. There, Microsoft has asked the Court to reverse a $290 million verdict against it for infringement of the ‘449 patent, arguing that the burden on an accused infringer of proving that a patent is invalid over the prior art should be “preponderance of the evidence” rather than the traditional standard applied by the trial court of “clear and convincing” evidence, at least where the reference asserted was not before the examiner in the original patent prosecution. The Court’s grant of certiorari in this case has understandably generated enormous concern in the patent community, fearful of the potential for undermining the strength of hundreds of thousands of commercially significant patents.

At the same time that Microsoft pursued its appeal of the verdict for i4i, both at the Supreme Court and earlier at the Court of Appeals for the Federal Circuit, Microsoft requested that the Patent Office undertake a new reexamination of the ‘449 patent on the basis of previously considered prior art, but art presented “in a new light” according to Microsoft. This request was dismissed by commentators as a side-show, a mere attempt to support its argument before the Supreme Court, or even a “Hail Mary” (actually, I said that). Indeed, that estimation seemed to be correct when the patent examiner refused to grant Microsoft’s request to grant reexamination – a sharp rejection in view of the very high percentage of reexamination requests that are granted.

Earlier today Uniloc USA, Inc. won a partial victory today in an appeal to the United States Court of Appeals for the Federal Circuit in their case against Microsoft.  See Uniloc USA, Inc. v. Microsoft Corp. Truth be told, while the Federal Circuit ruled that Microsoft did infringe and the patent claim in question (claim 19 of U.S. Patent No. 5,490,216) was valid, it was Microsoft who was the big winner here.  The damages awarded by the jury to Uniloc were $388 million, which was set aside by the district court, a ruling that the Federal Circuit affirmed.  The Federal Circuit also agreed there was no willful infringement.  So while Uniloc has won at least something from Microsoft as a result of its infringement of a valid patent claim, it seems like it will be far less than the $388 million, particularly given the Federal Circuit threw out the 25 percent rule and said the entire market value rule was not applicable in this case.

At this time of the year all typically sit back and reflect on the year that has been, spend time with family and friends, watch some football and set a course to follow into the new year.  It is also that time of the year where we are inundated with lists, top 10 this, top 10 that, it gets rather mind numbing after a while.  So with that in mind — I have my own top 10 list.  I know, I know, but they are so much fun to put together and there is something useful about looking back and reflecting that helps put things into perspective.

Without further ado, here are the top 10 events that shaped the patent, innovation and intellectual property industry during 2010 — at least according to me, and with a heavy patent emphasis.  What did you expect?

Earlier today the United States Supreme Court granted certiorari in Microsoft Corporation v. i4i Limited Partnership, with Chief Justice John Roberts taking no part in the decision or petition. The Supreme Court did not request the views of the Solicitor General, choosing rather to accept the matter with no input from the United States government.  The decision to grant cert. comes only days after the United States Patent and Trademark Office refused to grant reexamination of the patent in question.

Microsoft had filed an ex parte reexamination request on the patent in question, US Patent No. 5,787,449. The ’449 patent exited reexamination unchanged. Microsoft then filed a second ex parte reexamination request, and it is this second request that was denied by the Patent Office on Wednesday, November 24, 2010. The denial of this second request means that the Patent Office did not believe there to be a substantial new question of patentability.

On Friday, October 1, 2010, Microsoft Corporation brought a patent infringement lawsuit against Motorola in the United States Federal District Court for the Western District of Washington, which is located in Microsoft’s backyard in Seattle, Washington.  The complaint filed by Microsoft alleges that the smartphones made by Motorola that include the Android operating system are infringing upon nine Microsoft patents.  Simultaneously with filing in the Western District of Washington, Microsoft also filed a companion lawsuit in the International Trade Commission, which will seek an order to prohibit the importation into the United States of infringing smartphones.  Damages are not available at the ITC, which is why an ITC complaint filed simultaneously with a federal district court action is becoming the en vogue thing to do these days.  The ITC can and does typically wrap up its cases far quicker than most federal district courts, and that proceeding can also significantly influence a federal district court judge given that validity and infringement will already have been litigated.

Professor Mark Lemley

On Friday, September 17, 2010, I had the opportunity to chat with Professor Mark Lemley, who is the William H. Neukom Professor at Stanford Law School and partner in the San Francisco law firm Durie Tangri LLP.  Lemley is well known both in the academic community and the practice community.  In fact, he is one of only a select few that have managed to simultaneously have a stellar career both in academia and in private practice.  I chat with Lemley via e-mail from time to time on various matters, and we have talked about an interview for some time.  Then a draft of a amicus brief Lemly filed today with the United States Supreme Court arrived in my inbox and I knew this was the issue that would make for an excellent interview.  Lemley is leading the charge  for 36 law, business and economics professors who are asking the Supreme Court to review i4i v. Microsoft and address the presumption of validity enjoyed by an issued patent.  Lemley et al would tie the presumption of validity to those references considered by the patent examiner during prosecution.