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10 June 2011

Supreme Court Decision Affirms Federal Circuit’s Interpretation of Section 282 of the Patent Act, 35 U.S.C. § 282

In a decision that largely maintains the status quo but is nevertheless of considerable interest to patent holders and patent users, the Supreme Court held that to establish a patent-invalidity defense an alleged infringer must prove the patent’s invalidity by “clear and convincing” evidence. Today’s decision in Microsoft Corp. v. i4i Limited Partnership, No. 10-290, affirms the Federal Circuit’s long-standing interpretation of Section 282 of the Patent Act, 35 U.S.C. § 282, which states that “[a] patent shall be presumed valid” and that “[t]he burden of establishing invalidity . . . shall rest on the party asserting” the invalidity.

The case arose from a patent held by respondent i4i for a method of storing and editing computer code. i4i sued Microsoft, alleging that the popular Microsoft Word program infringed the patent. Microsoft defended on the ground that the patent was invalid because an implementation of the patent had been sold in a program manufactured by i4i more than a year before the patent application was filed. At trial, the jury was instructed over Microsoft’s objection that the invalidity defense must be proved by clear and convincing evidence. The jury found for i4i. The $290 million verdict was upheld by the Federal Circuit, making it the largest patent verdict ever sustained by a circuit court.

The Supreme Court affirmed, rejecting Microsoft’s argument that patent invalidity need be proven only by a preponderance of the evidence. The Court found that “presumed valid” was a term of art under existing case law when Congress incorporated the phrase in § 282, and that the phrase had been interpreted to encompass the clear-and-convincing evidentiary standard. Because Congress is presumed to have known of that interpretation when it enacted § 282, the Court concluded that § 282 requires clear and convincing evidence to overcome the presumption of validity.

The Court rejected Microsoft’s alternative argument that a patent invalidity defense need be proven only by a preponderance of the evidence if, as Microsoft contended was the case here, the defense rests on prior art that had not been considered by the Patent and Trademark Office (PTO) in granting the challenged patent. Notwithstanding Microsoft’s contention that dicta in KSR International Co. v. Teleflex, Inc., 550 U.S. 398 (2007), suggested that outcome, the Court found no indication that pre-§ 282 case law distinguished between prior-art evidence considered by the PTO and prior-art evidence not considered by the PTO, and held that § 282 makes no such distinction.

The Court did indicate that juries could be instructed to give greater weight to prior-art evidence that had not been considered by the PTO in granting a patent when assessing whether the defendant has proven the patent invalid by clear and convincing evidence. But the validity of such an instruction was not at issue here because Microsoft did not request such an instruction.
Justice Breyer, joined by Justices Scalia and Alito, joined the opinion in full but wrote separately to emphasize that the clear-and-convincing standard applies only to questions of fact, not law. Justice Breyer believed this distinction particularly important in the technical area of patent disputes.

Justice Thomas concurred in the judgment. Although he was not convinced that Congress had codified a standard of proof when it adopted § 282, he believed that the clear-and-convincing standard of proof for patent invalidity was correct as a matter of common law.
Chief Justice Roberts did not participate in the case.

Mayer Brown LLP filed an amicus brief in support of the petitioner on behalf of the Business Software Alliance.

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