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.
Before jumping into the oral argument, it is probably worthwhile to give some background. On August 11, 2009, that the United States District Court Judge in the Eastern District of Texas issued its final order in the trial between Microsoft and i4i. Microsoft was found to infringe U.S. Patent No. 5,787,449, and in addition to losing approximately $300 million, Judge Leonard Davis also entered a permanent injunction that was to become effective 60 days from the judgment date. Microsoft was ordered to cease selling the ubiquitous word processing program Word that contained certain XML functionality that was found to infringe the i4i patent. On August 21, 2009, the United States Court of Appeals for the Federal Circuit issued an Order granting Microsoft an expedited appeal of its patent infringement loss to i4i Limited Partnership. The Federal Circuit granted the stay of the permanent injunction on September 3, 2009, pending hearing of the appeal. Oral arguments were also granted in expedited fashion, and were held on September 23, 2009. On December 22, 2009, the Federal Circuit issued its decision upholding Judge Davis’ decision with one small exception. The Federal Circuit found the 60 day period in which the injunction was to become effective too short, instead preferring to give Microsoft 5 months to comply with the permanent injunction, which meant that the permanent injunction went into effect on January 11, 2010. Subsequently, Microsoft filed a petition for writ of certiorari with the United States Supreme Court. The Supreme Court granted certiorari in Microsoft Corporation v. i4i Limited Partnership on November 29, 2010, 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 prior to determining whether to take the case, choosing rather to accept the matter with no input from the United States government.
The attorney for Microsoft, Thomas Hungar, came out firing right away, arguing right out of the box:
The Federal Circuit’s clear and convincing evidence standard ensures the enforcement of invalid patents, even though this Court recognized in KSR that invalid patents stifle rather than promote the progress of liberal arts. Under this Court’s decisions Grogan and Huddleston, the default preponderance standard should govern in all cases because section 282 does not specify a heightened standard of proof.
Hungar would go on to say that the clear and convincing standard “makes no sense,” which nearly immediately drew the first comment from the bench with Justice Ginsburg saying that it would be difficult to say the standard makes no sense when it was supported by Justice Cardozo and Judge Rich. Ginsberg would later, in a nearly annoyed way, say “then you have to be saying that Judge Rich got it wrong…” Hungar cut off Justice Ginsburg, not typically a wise move.
Those familiar with Justice Scalia know how he likes to mention horses during oral argument, frequently talking about horse drawn carriages during patent arguments. He did not disappoint. On the heels of Justice Ginsberg’s comment Scalia cut straight to the chase and explained that what didn’t seem to make sense was applying different standards “only when the prior art hadn’t been considered,” pointing out “you can’t ride both horses. They’re going in different directions.”
Justice Kagan next got into the act after Hungar attempted to parse Justice Cardozo’s words and say they related to “the limited context of priority inventions.” Kagan observed: “But Justice Cardozo certainly didn’t limit his holding in the way you suggest. The language of that opinion is extremely broad. And if you read that opinion, no one would gather from that opinion the kinds of limits that you’re suggesting on it.”
What is at issue here is Justice Cardozo’s opinion in Radio Corp. of Am. v. Radio Eng’gLabs., Inc., 293 U.S. 1, 8-10 (1934), where over and over again he talked about a heightened standard or proof required to invalidate claims. Justice Cardozo endeavored to make sense of the various articulations of the heightened standard and said: “Through all the verbal variances, however, there runs this common core of thought and truth, 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.” Cardozo would go on to talk about that a “clear conviction” is necessary to invalidate claims, and also used the following language:
- “unless the countervailing evidence is clear and satisfactory.”
- “the conviction might not be clear enough to overthrow…”
- “evoke a clear conviction that the patents were invalid…”
Thus, the Justices seemed enormously skeptical of any rule that would overrule Justice Cardozo’s pronouncement relative to the heightened level of scrutiny.
The discussion turned away from Supreme Court precedent and Judge Rich to the 1952 Patent Act and the Federal Circuit handling of the presumption. Justice Ginsburg correctly observed that the Federal Circuit has nearly since its inception uniformly applied a clear and convincing standard since at least 1984. She opined: “one would have expected that there would have been bills proposed to change it. Were there any?” To which Hungar had to reply: “No, Your Honor, not that I’m aware of.”
Justice Sotomayor took a slightly different approach, pointing out that the Federal Circuit cases that have allegedly softened the clear and convincing standard have done so through instruction to the jury that some of the prior art was not considered by the patent examiner. She then asked: “You didn’t ask for such an instruction in this case; is that correct?” After initially dodging the question Hungar finally responded: “We didn’t ask—” He was immediately cut of as if being cross examined by Sotomayor, which of course he was. Justice Sotomayor was clearly troubled with the all or nothing request of Microsoft of the District Court; namely charge preponderance of the evidence and do not explain the standard as clear and convincing but with some prior art not being considered by the patent examiner.
Next to express skepticism was Justice Breyer, who pointed out that at least some of the amici who characterize themselves as supporting the Microsoft position “but they really don’t.” Justice Breyer continued the probing regarding jury instructions and why careful jury instructions don’t solve the problem. Hungar explained: “I don’t think it addresses the problem because the fundamental problem is imposing this heightened standard on the jury that has no moorings in the statute and no moorings in common sense…” Personally, I would have left the “common sense” argument by now because it was readily apparent the Court didn’t like the implication that neither Justice Cardozo or Judge Rich could be characterized as lacking “common sense” when both directly endorsed a heightened standard well above a mere preponderance.
Ginsburg, who was turning out to be one of the hotter members of this extremely hot Court, asked to return to the enactment of the 1952 Patent Act. In a very loaded way she asked: “So by adding a presumption of validity, must Congress have intended to do something more than simply repeat that the defendant has the burden of proof?” Hungar said no, this elicited a question about whether we are referring to the burden of production or the burden of persuasion from Justice Kennedy, followed by Justice Alito saying:
If the challenger has the burden of persuasion, wouldn’t it almost go without saying that the challenger would also have the burden of production on the issue of invalidity? So what would be added then by — what role is played then by that sentence, a patent shall be presumed valid?
Soon thereafter Hungar’s time expired.
Next up was Attorney Seth Waxman, representing i4i. In his opening remarks he dropped a phrase clearly captured the attention of the Court. Waxman pointed out that “for the past 28 years Congress has actively acquiesced in the Federal Circuit’s consistent holding expressly drawn from RCA that the standard is ‘clear and convincing.'” Immediately Justice Ginsburg and Justice Scalia jumped to inquire. Ginsburg asking, “How actively do we acquiesce?” Scalia saying, “It’s like passive activity, right?” Laughter abounded as Waxman, seemingly comfortable and laid back quipped “I may want to submit a supplemental brief on that point.” Ultimately, Waxman would point out that Congress has been quite active in the patent arena during the past 28 years and simultaneously have been “well aware of the clear and convincing evidence standard…” It seems clear to me that Waxman dropped the phrase he knew would get a rise out of the Court, almost as if he were a batter skillfully convincing the pitcher to throw the pitch he knew he could hit out of the park.
Justice Alito then articulated the difficult he was having accepting the i4i position based on his interpretation of the statute. This exchange followed:
JUSTICE ALITO: If I could take you back to first principles, which is where you started, I have three problems in seeing your interpretation in the language of section 282. First, the statute says the burden of establishing invalidity of a patent, et cetera, et cetera, shall rest on the parties asserting such invalidity. If Congress wanted to impose a clear and convincing burden, why in the world would they not have said that expressly in that sentence? Number two, if the first sentence, “a patent shall be presumed valid,” means that — is talking about the burden, then it’s superfluous, because that’s dealt with in the second sentence. And, third, the phrase “shall be presumed valid” doesn’t seem to me at all to suggest clear and convincing evidence. A presumption normally doesn’t have anything to do with clear and convincing evidence. Most presumptions can be disproved by much less than clear and convincing evidence. So how do you read that in — your — your position into the language of the statute?
MR. WAXMAN: Well, as to presumptions generally, I found particularly persuasive your opinion for the Third Circuit in GI Holding. But more -
JUSTICE ALITO: I’ve gotten a lot smarter since then. (Laughter.)
After apologies to Justice Scalia, who has little regard for legislative history, Waxman pointed out that “the Senate committee report said that they were… ‘codifying the existing presumption of patent validity…'”
Justice Ginsburg, who clearly wasn’t buying the Microsoft position, gave Waxman a soft-serve question about whether in keeping with Judge Rich’s articulation of the standard could the District Court could have given an instruction that “defendant’s evidence would carry more weight if it hadn’t been presented to the Patent Office?” Waxman said, “Yes, and the Federal Circuit has said that over and over and over again.”
Justices Scalia and Sotomayor continued to probe Waxman regarding a potential jury instruction. At one point Waxman articulated a possible jury instruction thusly: “the burden of proof is clear and convincing evidence, but you may find that burden more easily met if you find that there was, in fact, evidence relating to validity that was not, in fact, considered by the PTO when it issued this property right.” This lead Sotomayor to notice that “it’s not clear and convincing evidence if you phrase it that way, that is something less than that.” Scalia also noted such a jury instruction “would require determining what it was that the Patent Office considered.” That was something Scalia said “would better be avoided.”
As the discussion turned away from a possible jury instruction Justice Ginsburg for the first time seemed to ask a question suggesting she may be friendly to the Microsoft position, but of course it could have been simply an easy question to help Waxman get back on strong footing. With respect to the Patent Office not having considered certain prior art, Ginsburg asked, “but if they haven’t judged anything, what is the justification for continuing to have the clear and convincing standard?” Waxman pointed out there were four justifications, but only got to three of them. They were: (1) “an fringer’s validity challenge is a collateral attack on a government decision”; (2) “the harm from an erroneous determination is hugely asymmetrical”; and (3) “this is a grant of a property right that under the Constitution is specifically designed to induce reliance in exchange for the inventor’s honoring her half of the patent bargain, that is public disclosure…”
Next up was Malcolm Stewart, on behalf of the United States as amicus curiae supporting the respondents, i4i. Much of Stewart’s time, which was brief, was taken up by the language of the statute itself. What Justice Kennedy and Justice Alito were concerned with earlier captured Justice Sotomayor’s attention when questioning Stewart. The statutory language of 35 U.S.C. § 282 starts out by saying: “A patent shall be presumed valid.” Then the last sentence of the first paragraph says: “The burden of establishing invalidity of a patent or any claim thereof shall rest on the party asserting such invalidity.” The following exchange took place regarding the statutory language:
JUSTICE SOTOMAYOR: Counsel, the problem with your argument, assuming its validity, is why do you need the second sentence? If Congress was intending to sweep up in the use of the word “presumption” the need to overturn it by clear and convincing evidence, why did you need the second sentence saying that the other side now bore the burden of persuasion?
MR. STEWART: I think there is a belt and suspenders quality to the statute, no matter how you parse it, but I think that Microsoft has essentially the same problem, because they have constructed a theory under which the second sentence does something that the first has not, does not, but they haven’t constructed any theory as to why the first sentence is not superfluous. That is, given the second sentence to the effect that the burden of establishing invalidity is on the challenger, there’s no more work to be done by the first sentence.
Justice Alito continued to express skepticism with respect to applying a heightened standard across the board relative to prior art never considered by the Patent Office. Stewart pointed out that there were three reasons that this makes sense, but then provided only two. Stewart explained:
The first one is that the patent — the grant of a patent has historically been understood to reflect a quid pro quo between the applicant and the government, and the applicant’s part of the bargain was disclose that which might otherwise be maintained as a trade secret…
The second is related to the patentee’s reliance interests, but is more instrumental. That is, independent of our concerns for fairness to the patent applicant, Congress could reasonably determine that there are enough uncertainties along the way to getting a patent, to having it overturned on various other grounds that in an invalidity suit the patent — the patentee should have reasonable confidence that it won’t be overturned unless the evidence is clear.
Lastly, Stewart turned to address a question earlier brought up by Justice Kagan about the insufficiency of reexamination to solve all invalidity challenges. Stewart recognized that the alleged infringer could not go back to the Patent Office for reexamination and have the “expert agency” consider all evidence because reexamination only allows the presentation of patents and printed publications. He did, however, bring up that Congress is currently on the verge of amending the patent laws in a way that would allow for post grant review of a greater scope “where for a limited window of time after a patent is issued, people who oppose the issuance of the patent can come in and object on any ground.”
During rebuttal, Justice Breyer asked Hansen a very difficult question regarding why shouldn’t the alleged infringer have to return to the Patent Office if they could have and if they don’t then they should be forced to live with the heightened burden because if they had wanted a lower burden they could have gone back to the Patent Office with reexamination. After trying to dodge the question and Justice Breyer not letting him off the hook with repeated follow-up questions, Hansen explained: “the problem is, re-exam takes a long time, patents plaintiffs generally oppose stays of litigation for re-examination, because they want to get to the jury because they know that juries are much more likely to uphold patents than either judges or the Patent Office on re-exam. So they want to get the case litigated as quickly as possible so you get through the court system before the re-exam has been completed.”
At 12:02 pm, 59 minutes after oral argument began, Justice Scalia utter the words: “The case is submitted.” Now the wait begins for a decision, which should come out this term, which means before the end of June.
While I reserve my right to change my mind after further consideration, analysis and feedback from others, it is my feeling that i4i will prevail. Whether that prevailing is as the result of a 4 to 4 tie, which would uphold the underlying Federal Circuit opinion, or as the result of an outright majority victory time will tell. With Justice Roberts recusing himself i4i only needs 4 votes to effectively win, although that would hardly settle the matter and assuredly lead to another case on these same issues. With the Court knowing that Justice Roberts would recuse himself because of the presence of Microsoft in the case it would seem unlikely that going into the oral argument it was believed that a 4 to 4 tie would be likely.
Based on the oral argument it would seem to me that Justices Ginsburg and Scalia are squarely in favor of i4i. It would seem that Justices Sotomayor and Breyer would lean toward resolving the matter through the use of jury instructions, which would be in keeping with current Federal Circuit case law. Justice Kagan, along with Ginsburg and Scalia, seemed keenly aware that Microsoft’s position would require overruling Justice Cardozo’s opinion in RCA, which is something the Supreme Court is almost always loathe to do. Justices Kennedy, Alito and Sotomayor seem troubled by the belt and suspenders approach of Congress to § 282. And we know absolutely nothing about what Justice Thomas thinks other than it would seem quite likely he will agree with Justice Scalia, with whom he seems to share nearly identical philosophies. So the way I would count the votes is at least 6 to 2 in favor of at least a clear and convincing standard that relies on jury instructions to inform the jury that they may give more weight to prior art that was not in front of the patent examiner, which is how the Federal Circuit has increasingly handed the presumption over the years.
The waiting game begins.