As we have previously noted (here, for example), whatever else you may want to say about the folks at Microsoft, they certainly are not quitters. Now, their perseverance has raised an issue which is of paramount importance to all patent owners, but which has gone largely unnoticed – until now.
As intimated above, we have, from time to time, written about the ongoing battle between Microsoft and i4i L.P. For the benefit of those readers who have not faithfully followed our column, we shall briefly recapitulate. i4i sued Microsoft, alleging infringement of a patent directed to a computer markup language. In its defense, Microsoft claimed that the patent was invalid in view of certain software previously sold by i4i.
Prior to trial, i4i had, no doubt innocently, destroyed the source code of this software, thereby vastly complicating Microsoft’s efforts to prove its contents. i4i capitalized on this difficulty by repeatedly reminding the jury, over Microsoft’s repeated objections, that Microsoft had the burden of proving invalidity by CLEAR AND CONVINCING EVIDENCE.
Microsoft failed to meet the burden. The jury found for i4i, awarded $200M in damages – this was a TEXAS jury – and held the infringement to be willful. The trial judge added $40M for the willfulness and $50M in interest and post judgment damages for a total of $290 MILLION.
Needless to say, Microsoft appealed this decision to the C.A.F.C. The appellate court affirmed the trial court judgment, in the process taking a shot at Microsoft’s counsel. Microsoft requested that the C.A.F.C. reconsider its decision. They did – no luck there.
That brings us to the present. Microsoft has filed a petition for a writ of certiorari to the U.S. Supreme Court (legalese for “please, please, PLEASE hear our case”). In its papers, Microsoft argues that the C.A.F.C. “erred in holding that Microsoft’s invalidity defense must be proved by clear and convincing evidence,” “even though the prior art on which the invalidity defense rests was not considered by the Patent and Trademark Office prior to the issuance of the asserted patent.” There it is. The submarine issue has surfaced.
As pointed out by Microsoft in its petition, dicta in the Supreme Court’s KSR decision supports its position. It is “’appropriate to note’ that the rationale for the presumption of patent validity – on which the Federal Circuit bases its deferential clear-and-convincing-evidence standard – ‘seems much diminished’ when an invalidity defense rests on evidence that the PTO never considered.”
Microsoft went on to emphasize that, prior to the creation of the C.A.F.C. in 1982, ALL TWELVE of the regional courts of appeal had held – albeit to somewhat varying degrees – that the presumption of validity is weakened with respect to prior art which the patent office did not consider.
In what may be considered by some to be hypocritical, Microsoft – not a notable friend of the patent system – argued that the less stringent standard which it espoused would “avoid distorting” the system by facilitating the removal of invalid patents which “tended to hinder, rather than promote, progress.” Microsoft also noted that this case is of the utmost importance – at least to Microsoft – because the $290M judgment is “the largest patent infringement verdict ever to be affirmed on appeal.”
Obviously, a decision on this petition will be of supreme importance. In the meantime, we note that in July the PTO issued a re-examination certificate confirming the patentability of the patent-in-suit.
I'm not sure the Court will go for Microsoft's argument. The entire patent system is weighted in favor of encouraging the issuance of patents -- which the "clear and convincing" standard is meant to facilitate, and which Microsoft obviously wants to debilitate by replacing it with a "preponderance" standard. Odds are that, if Microsoft did win this round, it would later regret it, as soon as it became a plaintiff in some other big-ticket patent enforcement suit.