Sunday, April 17, 2011

Does Microsoft v. i4i Matter?

Tomorrow, the Supreme Court will hear oral argument in Microsoft v. i4i Limited Partnership, which examines whether the invalidity defense of 35 U.S.C. § 282 must always be proved by clear and convincing evidence. Microsoft has argued that the standard should be a preponderance of the evidence, especially when the prior art used to contest validity is "unconsidered evidence," or evidence not considered by the Patent and Trademark Office (PTO).

Amicus briefs from the legal academic community generally support Microsoft. A brief of 37 law, business, and economics professors (with counsel Mark Lemley) argues that given the constraints on PTO review (e.g., that examiners only have 16-17 hours per patent), the clear and convincing evidence standard is appropriate only when the PTO considered an issue on the record. This echos a 2007 Stanford Law Review article by Lemley and Doug Lichtman, and Lichtman makes the same point in a (tritely titled) New York Times op-ed. Microsoft is also supported by a brief from the William Mitchell Intellectual Property Institute, arguing that the clear and convincing evidence standard is "historically anomalous" and "conflicts with general legal principles," and a brief from digital IP scholar Lee Hollaar, arguing that the heightened standard raises particular problems for software patents. But does the standard of patent validity actually matter?

Perhaps not, argue Hughes Hubbard patent practitioners Etan Chatlynne, Stephen Kenny, and Lucas Watkins in Investigating Patent Law's Presumption of Validity, Part II: An Empirical Analysis of How Unconsidered Evidence and Evidentiary Standards Affect Jury Verdicts. This new paper looks at two data sets of obviousness and novelty challenges: (1) from Graham (1966) to the first Federal Circuit opinion (1982) (when invalidity could be proved by a preponderance of the evidence if you have unconsidered evidence); and (2) from KSR (2008) until October 2010 (under the Federal Circuit's current clear and convincing evidence standard).* In the pre-1982 period, validity challengers using unconsidered evidence succeeded 32% of the time, while those using only considered evidence succeeded only 13% of the time. In the post-2008 period, validity challengers using unconsidered evidence still succeeded 34% of the time. The authors argue that their data "suggest that a shift to a preponderance of the evidence standard will not significantly affect a validity challenger's ability to establish the factual bases of invalidity to a jury"—in other words, that the outcome of Microsoft v. i4i doesn't really matter.

The authors acknowledge that the over 25-year gap between the datasets "surely implicates additional factors such as changes in applicable practice, procedure, search technology and much of the surrounding body of legal rules." Lichtman and Lemley also addressed this point in their Stanford Law Review article: "The lack of empirical evidence on [whether presumptions matter] may be endemic . . . changes in substantive legal rules also change the behavior of parties in deciding which cases to litigate, so it is far from a simple matter to predict how changes in a legal presumption would change actual case outcomes."

It seems unlikely that one could find a clean natural experiment to determine whether presumptions matter—the cases immediately before and after a doctrinal change in the burden of proof might be somewhat helpful, but there are probably not enough such cases to draw any statistically significant conclusions. A controlled experiment, however, could be more illuminating. For example, Dan Kahan showed that legal definitions of rape have relatively little impact on judgments of guilt based on identical sets of facts. A similar result in the patent context would provide additional support to those arguing that the clear and convincing / preponderance distinction does not matter for showing patent invalidity. (If you know of other empirical work about the impact of burdens of proof or other jury instructions, feel free to add links in the comments!)

* The paper doesn't explain how the cases for the datasets were selected, but an inquiry to one of the authors revealed that the pre-1982 cases were "any cases published in a federal reporter between 1966 and 1982 that mentioned that a jury had an opportunity to render a verdict on a patent's validity," and the post-2008 cases were all Federal Circuit cases that were "a final judgment on the merits of invalidity from an appeal of a judgment based on a jury verdict," which is the same dataset from Part I of the study, which showed that at least 74% of those cases "were evidentiary-standard independent."


  1. I just noticed that Michael Risch posted some other thoughts about why "a change in standard will not clearly make a difference" at PrawfsBlawg back in November:

  2. Consider an invalidity argument relying on a combination of three references to show a claimed invention is obvious where two references were considered by the PTO during prosecution and a third non-cumulative reference was not. What type of showing would the alleged infringer have to meet if Microsoft prevails in this case?

    Consider a case in which an alleged infringer argued an issued patent was anticipated by a non-cumulative reference that was not considered by the PTO during prosecution and obvious by a combination of references that were considered by the PTO during prosecution. Could the court wind up using a preponderance of the evidence standard to evaluate the anticipation argument and a clear and convincing evidence standard to evaluate the obviousness argument, thus applying two different evidentiary standards to invalidity arguments for the same patent?

  3. Good questions, David. I would guess that proponents of a two-standard system would say the answer to your first question is that the heightened standard should apply, and the answer to your second question is that there could be two different standards.

    Though it sounds like Tom Hungar (arguing for Microsoft yesterday) was focusing on the argument that the preponderance of the evidence standard should be used for ALL patent validity challenges. See argument recaps from SCOTUSblog and Patently-O. (And thanks to SCOTUSblog for the shout-out yesterday!)

  4. I don't see how one could practically apply two different standards to invalidity arguments relating to the same patent; I think I prefer the current approach, where the quantum of evidence sufficient to meet the clear and convincing standard would simply be a bit less for arguments relying on art not before the USPTO during examination compared to those relying on art disclosed to the Office.

    Also, I guess I don't agree with Microsoft's position that a decision by the USPTO -- despite its exhaustively-catalogued faults -- should be entitled to less deference than decisions made by other government agencies in their own areas of expertise -- all government agencies have flaws, after all. And I certainly don't agree with Todd Lichtman's notion (from a recent article in the NY Times) that it would be preferable to turn validity determinations over to lay juries, especially given the state of science education in this country. I work in the biotech sector in Silicon Valley, and I think one would be hard-pressed to find a jury of twelve people who would understand the technology at issue in the average biotechnology patent here, where the average level of education is higher than in most of the country. What are the odds of doing so in, say, St. George, Utah?

  5. I agree that there are a lot of problems with lay juries (and lay judges) evaluating patents (see, e.g., Peter Lee's Two Cultures), but this case and Lichtman's op-ed aren't about whether lay juries should evaluate patent validity—juries are already invalidating patents in about 1/3 of cases with unconsidered evidence, as I discuss in my blog post. The question is just what standard those juries should use—and whether that standard actually matters at all.

  6. Well, obviously that's the issue in the Microsoft case (and just as obviously that has been happening in infringement litigation for ages), but that's not the only issue discussed by Mr. Lichtman, who also argued that the PTO's determination of patentability should not be entitled to any deference at all ("The key difference would be that the examiner's view would then rise or fall on the merits, rather than enjoying substantial deference from the jury") -- that's a point I inadvertently left out of my earlier post (my apologies, but I'm overseas at the moment and am rather jet-lagged).

    I simply don't think it's a good idea to discard the PTO's assessment wholesale, nor do I think that lowering the standard of proof is a good idea. Yes, the PTO has problems, but more often than not it does a reasonable job examining patent applications. I just don't understand the contempt some commentators appear to have towards it...