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Source link: http://archive.mises.org/17243/another-day-another-patent-decision/

Another Day, Another Patent Decision

June 9, 2011 by

The US Supreme Court unanimously reaffirmed a higher standard of proof for proving “patent invalidity” today, rejecting a challenge by Microsoft to a jury verdict that the company infringed a patent held by i4i Limited Partnership and Infrastruc- tures for Information Inc. i4i said Microsoft’s Word application infringed an i4i patent related to “an improved method for editing computer documents.”

At trial, Microsoft claimed the patent was invalid and unenforceable. The trial judge instructed the jury to use a “clear and convincing evidence” standard — and not the lower “preponderance of the evidence” standard requested by Microsoft — in deciding whether the patent was invalid. The Federal Circuit Court of Appeals, and now the Supreme Court, agreed with that standard.

Federal patent statutes specify no standard of proof. Congress merely declared that a “patent shall be presumed valid”  and that anyone challenging its validity will have the burden of establishing as much. The Court said there is a “common law” presumption, however, that the presumption of patent validity carries with it a “clear and convincing” standard of proof.

Justice Sonia Sotomayor, speaking for the Court, acknowledged, without taking a side, the underlying policy debate over the impact of patents:

The parties and their amici have presented opposing views as to the wisdom of the clear-and-convincingevidence standard that Congress adopted. Microsoft and its amici contend that the heightened standard of proofdampens innovation by unduly insulating “bad” patents from invalidity challenges. They point to the high invalidation rate as evidence that the PTO grants patent protection to too many undeserving “inventions.” They claimthat inter partes reexamination proceedings before the PTO cannot fix the problem, as some grounds for invalidation (like the on-sale bar at issue here) cannot be raised in such proceedings. They question the deference that the PTO’s expert determinations warrant, in light of the agency’s resources and procedures, which they deem inadequate. And, they insist that the heightened standard of proof essentially causes juries to abdicate their role in reviewing invalidity claims raised in infringement actions.

For their part, i4i and its amici, including the United States, contend that the heightened standard of proof properly limits the circumstances in which a lay jury overturns the considered judgment of an expert agency. They claim that the heightened standard of proof is an essential component of the patent “bargain,” see Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U. S. 141, 150–151 (1989), and the incentives for inventors to disclose their innovations to the public in exchange for patent protection. They disagree with the notion that the patent issuance rate is above the optimal level. They explain that limits on the reexamination process reflect a judgment by Congress as to the appropriate degree of interference withpatentees’ reliance interests. Finally, they maintain that juries that are properly instructed as to the application of the clear-and-convincing-evidence standard can, and often do, find an invalidity defense established.

In a concurring opinion, Justice Stephen Breyer, speaking for himself and Justices Antonin Scalia and Samuel Alito, noted that the “clear and convincing” standard applies only to questions of fact, not law:

Many claims of invalidity rest, however, not upon factual disputes, but upon how the law applies to facts as given. Do the given facts show that the product was previously “in public use”? Do they show that the invention was “nove[l]” and that it was “non-obvious”? Do they show that the patent applicant described his claims properly? Where the ultimate question of patent validity turns on the correct answer to legal questions—what these subsidiary legal standards mean or how they apply to the facts as given—today’s strict standard of proof has no application.

Courts can help to keep the application of today’s “clear and convincing” standard within its proper legal bounds by separating factual and legal aspects of an invalidity claim, say, by using instructions based on case-specific circumstances that help the jury make the distinction or by using interrogatories and special verdicts to make clear which specific factual findings underlie the jury’s conclusions. By isolating the facts (determined with help of the “clear and convincing” standard), courts can thereby assure the proper interpretation or application of the correct legal standard (without use of the “clear and convincing” standard). By preventing the “clear and convincing” standard from roaming outside its fact-related reservation, courts can increase the likelihood that discoveries or inventions will not receive legal protection where none is due. [Citations omitted]

{ 5 comments }

Stephan Kinsella June 9, 2011 at 10:55 am

This is horrible. I had hoped the Court would lower the standard. What a travesty. Microsoft is exactly right that it is unfair to have a “heightened standard of proof” that “unduly insulating “bad” patents from invalidity challenges.” They are right that “some grounds for invalidation (like the on-sale bar at issue here) cannot be raised in” the inter parte proceedings (the arguments between the patentee and the PTO, with no adversaries involved). And they are right to “question the deference that the PTO’s expert determinations warrant, in light of the agency’s resources and procedures, which they deem inadequate.”

The claims of i4i are absurd: that the opinions of a mere “lay jury” should not lightly “overturn the considered judgment of an expert agency.” Expert agency?! This is one reason patents are not overturned: the jury just assumes the PTO is fair and competent. They do not realize that the patent law is inherently vague and nonobjective, and very complex, and that the PTO is staffed by engineer-bureaucrats who cannot be trusted to “get it right”.

In addition, the argument that “They claim that the heightened standard of proof is an essential component of the patent “bargain,”…and the incentives for inventors to disclose their innovations to the public in exchange for patent protection” is laughable–in fact as I noted here, quite often the patentee would have had to reveal his invention anyway, in order to sell his product (if you sell a new mousetrap people see how it’s made; in fact you will trumpet its innovative features to garner customers!), so giving him a monopoly to protect him from competition doesn’t get the public their part of the bargain anyway! And for really important types of innovations that can be kept secret, the inventor will often keep it as a trade secret and skip the patent process, so the public gets no bargain there either. So it’s all a huge con.

Oh, and using a common law standard of proof for interpretation of an artificial, unjust patent scheme is a travesty. The standards evolved under the much more libertarian and fair common law are being imported into monstrous statutory regulatory monopoly granting schemes to try to impart the legitimacy of the common law onto the dictates of a horde of ignorant, scheming, corrupt politicians.

By the way, the disclosure function is set to be undermined anyway with upcoming patent reform–as I pointed out here, the upcoming patent amendment will likely eliminate the best mode defense–this removes one possible defense that can be used against patentees who game the system or flout the best-mode disclosure requirements. That is, under current law you have to disclose your invention in writing, it has to enable others to make it, AND you have to disclose the “best mode” — you can’t keep that secret. If you fail to do any of these a patent defendant that you sue can invalidate your patent. But with patent “reform” it will be harder for defendant-victims to use the patentee’s intentional hiding of best mode as a defense!

see also Patent Shills want to make patents “incontestable”.

Wildberry June 9, 2011 at 12:45 pm

Olivia and Kinsella make some good points, and give me reason to raise the issue of legislative bias as a mechanism of mercantilism, which I strongly oppose.

While relevant to developments like those raised in this article and by Kinsella, this bias is also a driving force behind mercantilist conduct in general, where commercial interests successfully use political means to achieve competitive and other market advantages, to the detriment of the general consumer and free markets in general.

I encountered the concept in an article concerning the CTEA legislation (term extension for copyrights) and the subsequent court case (so called Mickey Mouse Protection Act). It goes like this:

When an issue like term extension or revisions to patent laws are being legislated, the advocates for the change are well organized, well funded, and have a very clear idea of what the positive impact of the proposed change will do. In the case of CTEA, those whose copyrights protection was about to expire (think Disney/Mickey Mouse) would clearly and directly benefit from a term extension, which was retroactive. For most of those who would be acquiring a copyright under the extended term, the benefit is negligible. Also, because live +70 years is, for all practical purposes perpetual in the context of the economics of copyrights, it runs contrary to the initial concept of grants of protection for limited terms.

Those who would be harmed by this change, for reasons that the terms for IP protection are limited in the first place, are diverse, unorganized, and in the case of a life+70 year term, may not even be born yet. Therefore, the beneficiaries, who are well represented and focused on a specific legislative objective, create an environment of overwhelming representation among sympathetic (and paid for?) politicians. The CTEA, for example was sponsored by Sonny Bono (you remember Sonny and Cher? That Sonny.)

Many of our most important and broad-reaching legislative acts, (Federal Reserve Act, Obama Care, etc.) were orchestrated and enacted in this manner. In other words, this is simply the internal mechanism of mercantilism; it is the “way things get done” for powerful, special interest enterprises.

This is important, I think, because it highlights the nature of the problem for libertarianism, and all of those who want a reversal of big government. Who, in the current legislative process, is looking out for the interests of the general public? The problem of returning (or perhaps creating) balance to this process is the challenge that faces those who oppose the use of political means to achieve private, commercial advantage at the expense of the general public, consumers, free markets, and ultimately liberty itself.

While I most often disagree with Kinsella on the principles of IP legitimacy, I agree with him here that decisions like this one, concerning something as obtuse and esoteric as the burden of proof employed to challenge the validity of the initial determination of the PTO, seems wrong.

The implications of this move serve to strengthen the presumption that the PTO gets it right, and makes it more difficult than it already is to challenge that presumption in court. This is particularly onerous in light of the fact that the scope of patent subject matter is growing far too broad, and patents are being issued far too generously.

Like many other aspects of our current commercial/government complex, mercantilism is winning important legislative and legal battles at an alarming rate, to the detriment of our economic well being and even our liberty.

While I disagree that the foregoing arguments undermine the very principle of IP, no more than the Federal Reserve Act undermines the very principle of banking, I do agree that the trend for longer terms, easier attainment, less disclosure and more difficult challenges to the process, is moving us in the wrong direction.

Peter Surda June 9, 2011 at 1:39 pm

Maybe in order to vote for a law that extends the boundaries of rights to 70 years after death, you would have to prove that you have been dead for 70 years. You know, kind of like homesteading.

El Tonno June 10, 2011 at 1:42 am

http://www.theregister.co.uk/2011/06/09/microsoft_loses_supreme_battle_to_i4i/

With nowhere left to go in this four-year case, Microsoft said on Thursday that it would now concentrate on trying reform US law to prevent abuses of the patent system. “This case raised an important issue of law which the Supreme Court itself had questioned in an earlier decision and which we believed needed resolution,” a Microsoft spokesperson said, “While the outcome is not what we had hoped for, we will continue to advocate for changes to the law that will prevent abuse of the patent system and protect inventors who hold patents representing true innovation.”

[i4i chairman] Owen, in a statement, called it one of the most significant business cases the Court has decided in decades. “Affirmation of the Federal Circuit on a ruling in favor of patent holders is virtually unprecedented. While this ruling maintains the prevailing standard, the innovation community must be ever-vigilant to defend its property rights,” he said.

On that note, Microsoft is actively using the existing system that it feels is unfair and ripe for abuse to lodge claims against others. Microsoft has lodged patent infringement claims against Nook makers Barns & Noble, Foxconn and Inventec, and Android phone maker Motorola. It has also rattled its saber at others who have settled without going to court. These include Android phone maker HTC and Linux sat nav specialist TomTom.

Wildberry June 10, 2011 at 1:05 pm

@ El Tonno June 10, 2011 at 1:42 am

Your post highlights the mercantilism and legislative bias I describe above.

The question I have is what is your proposal? On the one hand, we can attempt to solve this problem by tossing out the very system of patents that MS is using to their advantage.

On the other hand, we could seek to overwhelm the existing bias in favor of the big players like MS, Disney, etc., with legislative and political reform, such that the bias is in favor of consumers, or at least neutral.

I suggest that the reason the former is so attractive to anarchists is because it is much easier to imagine a world without patents than one where we truly fulfill our duty for vigilance in the service of liberty. That is so much harder, and requires cooperation on a level which anarchists, “one-drop libertarians”, etc. disdain. So it is just easier to advocate that we tear the whole rotten system down to the ground.

The remarkable presumption in all of this, of course, is that the phoenix of “true” liberty will somehow arise from the ashes. This is a pipe dream. At best, if nothing fundamental changes, they are merely expecting to do the same things and achieve a different outcome. Someone once said this is the definition of an idiot.

Of course, I would never suggest such a thing!

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