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The U.S. Supreme Court on Monday seemed reluctant to make it easier to challenge the validity of patents. At the same time, some justices raised concerns about too many “bad” patents in the marketplace and a federal patent office too overwhelmed “to separate the sheep from the goats,” in the words of Justice Stephen Breyer. The court heard arguments in Microsoft v. i4i, in which the Redmond, Wash.-based software giant is urging the justices to hold that patent challengers must prove invalidity by a preponderance of the evidence and not by clear and convincing evidence — the heightened standard applied by the U.S. Court of Appeals for the Federal Circuit. The challenge has drawn a blizzard of amicus briefs from high-tech companies such as Apple and Google, supporting Microsoft, as well as from such large patent holders as 3M, Bayer and Genentech, backing i4i. Microsoft is fighting a nearly $300-million jury award won by i4i, a Canadian software consulting company, for infringing i4i’s patent on a form of markup language called Extensible Markup Language (XML), a method for determining how the content of an electronic document will look. Microsoft had incorporated the XML language into its 2003 and 2007 Word software. It claimed that the i4i patent was invalid because i4i had sold the product for four years before receiving a patent. Prior use rends an invention ineligible for patenting. But a jury found, and the Federal Circuit agreed, that Microsoft was unable to prove by clear and convincing evidence that i4i’s patent was based on technology already in the marketplace. Justice Antonin Scalia presided over Monday’s arguments because Chief Justice John Roberts Jr. recused from the case. (Roberts, according to his financial disclosure statement, owns Microsoft stock.) Scalia ranks second in seniority to the chief justice and took the helm for the first time. During arguments, Microsoft’s counsel, Thomas Hungar of Gibson, Dunn & Crutcher, told the justices that the federal Patent Act does not specify a standard of proof. He argued that when a statute is vague or ambiguous as to a standard, the default standard — here, preponderance of evidence — applies. And at the very least, that standard should apply when the U.S. Patent and Trademark Office considers a patent application and has failed, as in this case, to look at so-called prior art — pre-existing technology, he said. Hungar almost immediately faced a challenge by Justice Ruth Bader Ginsburg. She noted that the Supreme Court had held in Radio Corp. of America v. Radio Eng’g Labs (1932) that there is a presumption of patent validity that cannot be overthrown “except by clear and cogent evidence.” But Hungar countered that the 1932 decision applied only to questions involving prior inventions. Ginsburg said the Federal Circuit, which has had a monopoly on patent cases since 1984, has applied the clear and convincing standard “consistently.” If the standard were wrong, she added, one would have expected to see bills in Congress to change it. “Were there any?” she asked. Hungar said no, but the real question is what Congress thought the state of the law was in 1952 when it enacted the Patent Act. “Congress could not have thought in 1952 that the law was an across-the-board heightened standard, because case after case after case rejected the proposition that there is a heightened standard or that the presumption was unaffected when the evidence was not considered by the Patent Office,” he said. Hungar argued that the policy interests of the patent holder here “are outweighed if anything by this Court’s repeated recognition that invalid patents stifle innovation and competition and are very harmful.” Representing i4i, former Solicitor General Seth Waxman of Wilmer Cutler Pickering Hale and Dorr called the clear and convincing evidence standard “long settled and correct” as a matter of statutory interpretation and stare decisis “in a field in which stability is of particular importance.” Congress, he said, has been very active in amending the 1952 Patent Act to address problems. “It is well aware of the clear and convincing evidence standard, and it has done nothing whatsoever to change it, even to make any effort to consider making such a sweeping change in long-standing doctrine,” he added. Justice Samuel Alito Jr. told Waxman that he had several problems with his argument. Alito questioned “why in the world” Congress did not explicitly express the clear and convincing standard in the statute if it wanted that standard. And he noted that the statute’s language stating that patents 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.” Waxman pointed to the legislative history of the act and said it states that Congress was codifying the existing presumption in the court’s 1932 decision that the presumption of patent validity could only be overthrown by “clear and cogent” evidence. To Justice Breyer’s concerns about how to deal with bad patents, Waxman replied, “Congress is on the job,” and the policy reasons for making a change in the standard of evidence “say nothing” about what Congress thought about the Patent Office in 1952 when it applied the Court’s 1932 standard. Deputy Solicitor General Malcolm Stewart, supporting i4i, said the 1932 RCA decision was not announcing for the first time what weight should be given to a prior patenting decision. As that court explained, he said, “This is what the Court had done since the latter part of the 19th century and in fact it had been done by Justice Story riding circuit in the early part of the 19th century.” Former Solicitor General Gregory Garre of Latham & Watkins, who attended the arguments as “an interested observer,” said, “While all sides got plenty of questions, there did not appear to be any sustained push back against i4i or the government’s position.” The most important factor in the outcome, he added, “may be the that the ordinary Rule of 5 (votes needed to prevail) does not apply in this case because the chief justice is recused, so i4i needs only four votes to prevail.” Marcia Coyle can be contacted at [email protected].

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