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.
Currently the presumption of validity is accorded great deference and in order to demonstrate that a patent claim is invalid in litigation there must be clear and convincing evidence established. This is a standard not often heard in the general public. Everyone is likely familiar with the preponderance of evidence standard and beyond a reasonable doubt standard that is employed in criminal proceedings. While legally it is an incorrect statement because percentages are not assigned, for those not marinated in the law these three standards are generally conveyed by pointing out that when the standard is preponderance the confidence level of the evidence needs to tilt ever so slightly in favor of the person challenging or the opponent wins (i.e., 51% confidence). For the beyond a reasonable doubt standard the confidence level does not need to remove all doubt, just reasonable doubt. This is sometimes articulated as a 99% confidence level. The clear and convincing standard is somewhere in between and is sometimes articulated as requiring a 75% certainty. So is it more likely than not (preponderance), is it far more likely than not (clear and convincing), is it virtually guaranteed (beyond a reasonable doubt).
There will no doubt be legal commentators who will disagree with the previous paragraph, but trust me, if you haven’t gone to law school and practiced law for many years this is a very good way to conceptualize what is at stake, and you must conceptualize what is at stake in order to understand the potential consequences.
Today it is quite difficult to demonstrate that a patent claim issued by the United States Patent and Trademark Office is invalid and should not have been issued. Microsoft, along with a great many others, is urging the Supreme Court to change that and make it easier for them to demonstrate that patent claims, and thereby the associated patent rights, are invalid and should not have been issued. A strange association of those who are large patent owners themselves are urging the Microsoft position because they are tired of getting sued on patents that they infringe and having to pay tens of millions or hundreds of millions of dollars because they have trampled on the rights of innovators. So in order to excuse their own infringement they are asking the Supreme Court to throw the entire patent system under the bus, which is sadly more likely to happen than not.
The Supreme Court typically only takes cases when there is a split among the lower Courts of Appeal, but in the patent scenario there will not be such a split because there is only one Court of Appeal that has jurisdiction over patent matters — the United States Court of Appeals for the Federal Circuit. The Federal Circuit was ironically created to bring uniformity to the area of patent law because the other regional circuits were so hostile to patent rights that virtually no patent litigated could be found valid. Those working on the legislative effort to create the Federal Circuit also hoped to reign in the Supreme Court, which itself was not particularly friendly to the rights of patent owners either.
After all, the Supreme Court had at one point in time said that magnesium and manganese were equivalent for purposes of patent infringement analysis, which is simply an erroneous factual statement that should both anyone who understands anything about chemistry. See Graver Tank v. Linde Air Products.
The Supreme Court also incredulously asked what utility converting hex-code into binary code could ever have since it could only be used in a computer. When confronted with whether to allow software to be patented in Gottschalk v. Benson, Justice Douglas wrote that “the mathematical formula involved here has no substantial practical application except in connection with a digital computer, which means that if the judgment below is affirmed, the patent would wholly pre-empt the mathematical formula and in practical effect would be a patent on the algorithm itself.” Never mind that Justice Douglas was incorrect. The claim in question clearly was tied to a machine and the mathematical formula would not be preempted. It could be continued to be used, just not in the fashion covered by the claim. For proof that the mathematical formula could not be preempted the claim in question specifically required this: “storing the binary coded decimal signals in a reentrantshiftregister.” So clearly one could employ the formula, but not the process as tied to the machine in the specified way. The fact that it had enormous implications for computers should have weighed in favor of patentability. Isn’t that the type of innovation we want? Isn’t this the very type of fundamentally important innovation that the Supreme Court claimed to want in KSR v. Teleflex?
The United States Supreme Court has also explained that in order to be entitled to reliance on the doctrine of equivalents as a theory for infringement the patent owner must demonstrate that they would have been unable to draft a claim to cover the equivalent at the time the patent application was filed. See Festo Corp. v. Shoketsu. This means that the patent owner would have to demonstrate that the written description provided was inadequate to support the equivalent sought, meaning that the patent application does not cover the property right that the Supreme Court so generously is giving after the fact.
These and so many other truly ridiculous patent rulings demonstrate that those who set up the Federal Circuit did exactly the right thing, although perhaps they didn’t go far enough. They took patent rulings away from hostile judges on the various Courts of Appeal and attempted to make one de facto patent court so that it would be unnecessary for the Supreme Court to hear patent cases and continue to embarrass themselves with provably incorrect scientific statements and rulings of law that show complete and utter ignorance of the field of patent law. Unfortunately, the Supreme Court is no longer cooperating and is taking more and more patent cases. In this recent flood of patent cases the Supreme Court only ever does one of two things; they either overrule the Federal Circuit, or they will say the ultimate outcome was appropriate but the Federal Circuit applied the wrong test, as they did in Bilski v. Kappos.
We should expect that the Supreme Court will throw away the presumption of validity enjoyed by a patent and say that patent claims only enjoy a presumption of validity based on a preponderance standard. That is the worst case scenario. Essentially the Supreme Court will have one of three options: (1) keep the status quo, as urged by the American Intellectual Property Law Association, IBM and others; (2) say that prior art not considered or submitted (big difference here) to the Patent Office enjoys only a preponderance standard while that which has been considered enjoys a clear and convincing standard, as urged by Microsoft, Apple and others; or (3) say that patents enjoy a presumption only to a preponderance standards for all prior art, whether considered by the Patent Office or not.
Frankly, option two, which is what Microsoft is pushing for and presents a certain logic, is unworkable. There is no way that juries can be expected to sort through this patent gets clear and convincing standard and that one gets preponderance standard. They would have to make determinations about whether a reference although not submitted to the Patent Office was cumulative and therefore gets a clear and convincing standard rather than a preponderance. We already operate under the fiction that lay jurors can understand the exceptionally complicated technologies involved, are we going to labor forward under the far more ludicrous assumption they can make these types of fine legal distinctions based on the standard of proof as it applies to scientific references? I think even the Supreme Court will have difficulty articulating such a ridiculous position, so that means it is clear and convincing or preponderance. Clear and convicing means status quo, so why would they have taken the case?
A preponderance standard is really a worthless standard. Essentially, a preponderance standard says that a tie goes to the runner, like in baseball. How often does an umpire yell “TIE! Therefore according to the rules of the game I award first base to the runner.” NEVER! A presumption standard is really no presumption of validity at all, and who would pay the tens of thousands of dollars and years of time for a “tie goes to the patentee” right? Such a ruling would force innovators to rely on trade secrets, thereby stripping the public of the benefit of the disclosures. This would set back scientific advance, not forward it, given that the undeniable reality is that innovators stand on the shoulders of those who come before them.
But what is the proof that trade secrets would rule the day? That is what happened prior to the creation of the Federal Circuit when patent claims were routinely invalidated in every litigation. All you have to do to look at the enormous upswing in interest in obtaining a patent is look at the number of patent applications filed prior to the creation of the Federal Circuit in 1982.
And you can take a look at the number of patent infringement litigations commenced during a similar time period to find that there is much greater interest in patent litigation. Interestingly, this cart demonstrates that the alleged “problem” of patent litigation is not only greatly exaggerated but is a total fabrication. As the number of issued patents has doubled, then tripled, the number of patent litigations has followed. A corresponding relationship is exactly what anyone who is intellectually honest would expect, and indeed what has happened. So it seems particularly ill advised to change something as fundamental as the presumption of patent validity based on a lie in order to favor those who would prefer to infringe rather than legitimately negotiate rights they seek to trample.
There is much at stake here and everyone who needs strong patents, from pharma to biotech to independent inventors to start-up technology businesses to research & development companies need to take action. Many of the usual suspect that would normally weigh in on an issue as important as this will be standing on the sideline because Microsoft and its allies are members of various industry groups. For a list of those briefs filed already see Patently-O – Briefing Microsoft v. i4i: Amicus Briefs Supporting Easier Invalidation of Patents in Court. So if you have a stake in seeing patents remain strong you need to stand up and be heard. There isn’t much time to support i4i by way of an amicus filing, but such filings could be critically important.