Supremes Raise Hurdle For Invalidating Patents And For Antitrust Counterclaims
Antitrust counterclaims are going to be more difficult to prove in patent cases as a result of the Supreme Court’s recent ruling that all court challenges to the validity of a patent must be proved by clear and convincing evidence.
In Microsoft v. i4i Partnership, the Court held that although the Patent Act is silent on the standard of review that courts should apply to patent defenses based on invalidity, the common law standard of “clear and cogent evidence” must apply.
The plaintiff is i4i, a software company that sued Microsoft for infringement of a software patent. Microsoft argued that i4i should not have received a patent in the first place because the invention claimed in the patent was in use more than a year before the patent application, in another i4i software program that wasn’t disclosed to the Patent and Trademark Office (the “PTO”). Microsoft’s evidence was disputed and uncertain because the source code for the earlier program had been lost. The Supreme Court affirmed the long-held position of the Court of Appeals for the Federal Circuit and held that the clear and convincing evidence standard applies to all invalidity defenses.
The court also rejected Microsoft’s alternate argument that a lower (preponderance of the evidence) standard should apply when the patent plaintiff failed to disclose material information to the patent examiner. Although the court ruled that nothing in the statute or prior cases justified a variable standard of proof, it also held that new evidence that the PTO didn’t consider should be given more weight in deciding whether to invalidate a patent.
Supporters of Microsoft argued in amicus briefs that the PTO faces a shortage of skilled patent examiners while applications have proliferated, and that internal rules favor granting a patent if an examiner is unaware of prior art or other factors that might sink an application. They asserted that considering the limited time and information available to examiners, the presumption that an issued patent is valid is weak and should not require a heavy burden to overcome. In that sense, the Supreme Court’s decision can be seen as a missed opportunity to align the law with the administrative reality of the patent examination process.
A likely consequence of the Court’s ruling is that antitrust claims based on enforcement of an invalid patent will become harder to bring.
A defendant in a patent suit may bring an antitrust counterclaim, alleging that the patent holder is litigating an invalid patent to gain monopoly power that is not actually justified by the patent laws. But the defendant must overcome the Noerr-Pennington doctrine, which provides First Amendment protection to litigation unless the litigation is a sham. In patent suits, showing that the patent is invalid is the most common way of establishing that the litigation is a sham and that the patent holder can be liable for an antitrust violation. By establishing a universally high standard of proof for patent invalidity, the Supreme Court has also raised the hurdle for a successful antitrust counterclaim.