BIO Sends Letter to DOJ on "Clear and Convincing Evidence" Question Raised in Microsoft v. i4i

By Kevin E. Noonan --

The Biotechnology Industry Organization (BIO) sent a letter today to Attorney General Eric H. Holder, Jr. and Acting Solicitor General Neal K. Kaytal regarding the Supreme Court's request for the government's views on the questions presented by petitioners in Microsoft v. i4i (the Court granted Microsoft's petition for writ of certiorari on November 29, 2010).  BIO and the letter's 171 signatories write to voice their concerns over the government being unduly influenced by industries (most notably the information technology and computer industries) that have spent the past decade attempting to limit patent rights and the ability of patent holders to challenge (in some cases alleged) infringement by companies in that industry.

The letter expresses "great[] concern" over the prospect of the Court reversing the decisions below affirming that Microsoft failed to prove that the patent-in-suit (U.S. Patent No. 5,787,449, having survived reexamination under Control No. 90/010,347) was invalid.  Such an outcome "could seriously weaken the presumption of validity that attaches to millions of [U.S.] patents."  This would "undermin[e] longstanding investment-backed reliance interests . . . critical for domestic job creation and economic growth" considerations that should resonate in view of the lingering downturn in the economy.  The letter expresses the opinion (supported by empirical evidence for the pharmaceutical and biotechnology industries even acknowledged by the most diehard patenting opponents) that patents promote innovation by "facilitating . . . investment necessary for small businesses to form and grow," as well as permitting "more established businesses to continue [to] compet[e] and thriv[e] in an increasingly competitive global environment."  The public reaps the benefits of such innovation by promoting job creation and opportunities for growth "in every state and every sector of our economy," according to BIO's letter.

These benefits only exist, BIO asserts, if businesses can "rely on the strength and presumed validity of issued patents," which is necessary for "product development, partnering and licensing decisions."  Because patent applications are examined and patents granted by an agency (the U.S. Patent and Trademark Office) but validity challenges thereto are heard by a "lay jury or generalist judge," "since long before enactment of the 1952 Patent Act . . . those that seek to challenge a patent . . . must carry a heightened burden of proof," namely  "clear and convincing evidence."  Should the Court permit validity challenges to be won under a lower evidentiary standard (such as a preponderance, as petitioners argue) this "could thus frustrate decades of settled expectations under which large investments [have been] made in reliance on patents . . . believed to carry a strong presumption of validity."  Such a result could "profoundly change the behavior of patent applicants and litigants" as well as affecting (negatively) investment and product development decisions regarding these (most) innovative businesses, as well as affecting (negatively) "public-private technology transfer" such as commercialization of university scientific research under the Bayh-Dole Act.

BIO and its signatories favor none of these outcomes, and warn that the issue is "of critical importance for domestic innovation, job creation and the Nation's [international] technological leadership."  Accordingly, BIO requests ("respectfully") not only that the government "carefully consider these implications" but also "seek input from a wade range of stakeholders" both inside and outside the administration before deciding to take a position on this issue (an entreaty made more poignant in view of the recent amicus brief filed by the Department of Justice in AMP v. ACLU (the Myriad case; see "DOJ Tries to Be All Things to All Constituencies in Myriad Amicus Brief").

The issue (as alluded to in BIO's letter) stems from a decision by the District Court and affirmed by the Federal Circuit that Microsoft did not establish, by clear and convincing evidence, that i4i's patent-in-suit was invalid under the statutory bar contained in 35 U.S.C. § 102(b), failure to file an application within one year of the date that the patented invention was "on-sale."  While this is a basis for invalidation unlikely to come before the Patent Office, the District Court and the Federal Circuit required, under prevailing and long-standing precedent, that Microsoft establish the factual basis for invalidating i4i's patents by clear and convincing evidence.  The stakes are high:  the damages assessed against Microsoft amounted to $240 million, and the Federal Circuit affirmed a permanent injunction against Microsoft over its Word program (causing the company to disable certain features (involving XML editing) in order to stay on the market).  Etan Chatlynne has recently published on Patently-O the results of a study showing that in 119 recent Federal Circuit decisions the lower standard would not have changed the outcome in 88 cases (74%) but could have made a difference in the remaining 30 cases.

BIO's letter was signed by 171 companies, including biotechnology companies (Amgen, Genentech, Gen-Probe, Genzyme, Human Genome Sciences, Life Technologies, Tessera), pharmaceutical companies (Eli Lilly & Co., GlaxoSmithKline, Hoffman-La Roche, Johnson & Johnson, Merck, Pfizer, Sanofi-Aventis), bio-agricultural companies (Bayer CropScience, Cargill, Monsanto, Pioneer Hi-Bred) and universities and technology transfer organizations (Regents of the University of California, Research Corporation Technologies, University of Kentucky, WARF), as well as several perhaps unexpected firms, such as 3M Company, BASF, BP America, Dolby Labs, Illinois Tool Works, Proctor & Gamble, and Uniloc, illustrating the range of corporate concern over the potential for the Supreme Court to (once again) "upset settled expectations" should it foray once more into patent law's waters.

Comments

[Skeptical]

I think it worthwhile to point out that

"While this is a basis for invalidation unlikely to come before the Patent Office,"

is a statement with a compelling background.

Congress knew of and considered all the various ways that a patent could have been issued in error and purposely choose to provide a path of correction based only on items that fall to the category of "clear and convincing" evidence.

This is a tacit and undeniable implication that Congress, while silent on the degree of presumption, clearly intended that there be some increased presumption, that credit to an agency's expert opinion must carry some defacto weight, and that over-turning such an expert opinion (no matter how improvidently granted with limited hours of examination) can only be done with clear and incontrovertible evidence.

[Kevin E. Noonan]

Dear Skeptical:

I agree, but - it is hard to argue that there should be a heightened evidentiary requirement for art not before the examiner. It is even harder to make that argument over things like "on-sale" activity.

Now, one way of handling on-sale and other non-art prior art is through inequitable conduct - because, after all, the entity with the best knowledge will be the inventor/assignee. You still have the same evidentiary considerations, but there it should be easier to establish knowledge, materiality and intent.

Thanks for the comment.

[moocow]

Kevin:
there are a number of reasons why the presumption of validity requires a heightened evidentiary burden, deference to the PTO being only one of them.
For one, current law already permits juries to give more weight to evidence that was not also before the patent examiner. But properly, such facts underlying the invalidity defense must be established to a high degree of probability. Alleged offers for sale or public uses are a prime example - they must be established to a high degree of proof even if they were not before the examiner, because evidence supporting them is typically much more inferential than a prior patent or printed publication. We don't want patents to be overturned on a coin-toss by lay juries because the loss of a patent right that has been relied on by both the patentee and the public is a bigger deal than losing a mere contract dispute that is far less affected by the public interest. Revocation of vested rights that were granted or approved by the government often require more than a mere probability of fact.
Revocation of U.S. citizenship is a good illustration of the principle. Why should the Government bear a heavy "clear and convincing" burden to take away someone's naturalization certificate if the fact that someone once was a member of a terrorist organization was never before the naturalization officer? Or why does reformation of a deed to land likewise require clear and convincing evidence? So as much as the presumption of validity is a presumption of administrative correctness, it is at least equally important as a safeguard to protect vested rights that are affected by a strong public interest. Requiring a heightened burden of proof simply allocates the risk of a wrong decision in favor of the rightholder; and it's being done all the time in comparable situations.

[Kevin E. Noonan]

Good points, Moo, but the problem is that the presumption is based on the considered judgment of the examiner, and when the art or invalidating behavior is not before her the rationale seems to slip if not collapse altogether. You raise important policy issues about why the burden needs to be higher than a preponderance, which is why I mentioned inequitable conduct as one way of preventing non-art grounds for invalidation be handled in that way.

The attractive argument is that being able to reduce the burden by eliminating the presumption will create another incentive for applicants to present the best art they can find to the examiner. In practice, a litigant will almost always be able to find art not considered, but just because it was not considered doesn't make it invalidating - it could be cumulative, it could be of lesser value than art that was considered, or it could be a complete reach by trial counsel. But as the study shown on Patently-O demonstrates, almost 3/4 of the time such art would not have resulted in a different judgment if the standard was lowered (and of the other 25% it only might have made a difference).

I would suggest that one way of protecting the "settled expectations" would be to not make any change retroactive, but that would require Congressional action (which is unlikely).

Perhaps the best argument to make is the "doesn't make a difference in practice + settled expectations" one, since logic seems to favor Microsoft's position (at least with regard to facts where the Office could not have known unless the applicant disclosed it). Which brings us back to inequitable conduct. In addition, you could make an argument that the Court should not use this case to address traditional (printed) prior art, since that was not at issue below.

Thanks for the comment.

[Noise above Law]

Kevin,

I must take issue with

"The attractive argument is that being able to reduce the burden by eliminating the presumption will create another incentive for applicants to present the best art they can find to the examiner."

As it currently stands with the legal setting for applicant supplied art, this incentive is a mirage, a fallacy. Rather than help, this line of thought will bring a deluge; rather than focus, there will be a white-out; rather than "best art," the incentive will be to put before the examiner any art that remotely touches the application.

Deciding which is the best art is the heart of the examiner's job - and if there is any lesson at all to be learned from the Tafas debacle, it is that the government cannot offload the difficult job of examination, and that includes deciding just what is the best prior art, to the applicant.

Also "consider" that "Considered" is a very loose term and does not mean what most think it means. Most think it means a thoughtful reflection on the contents of the art, "considering" all of its teachings and accomplishing a full and nuanced understanding. It does not.

Thus, "having it before" the examiner is a fallacy. With the reach of technology today, most everything already is "before" that can be "before."

I would posit that watering down the law in this area is a rather poor response, one fraught with the catastrophe of unintended consequences with misguided thoughts of actual to be derived benefits.

Merry Christmas, happy holidays, and may God bless us each and everyone.

[Kevin E. Noonan]

Dear Noise:

I agree that there will be unintended consequences, but frankly if presented with the question the Supreme Court will not even "consider" this aspect of the issue. They will focus on whether the applicant "deserves" the presumption if the art was not before the Office, and have no trouble deciding that she does not. This is what comes of a generalist Court having oversight over a specialized court, where the generalist Court evinces no willingness to give any deference to the expertise that the specialist court may have. It would be better if the Court were to exercise the institutional restraint to venture more gingerly into this area, as was the case when they were faced with opining on decisions by judges like Rich and Markey. (If you want a chuckle, re-read Judge Rich's In re Bergy opinion with regard to reconsidering Bergy in light of Flook.)

And as for the administrative problems such a decision might cause the PTO, that is also beneath the Court's notice - "let the Office adapt to do its job" will be their advice. (There is some justice to that position, I think - if the Office needs more money/time/examiners to do its job properly, then Congress and the President should make sure they get it - it isn't the Court's job to make it easier for the other branches to shirk their responsibilities).

All the best for your holidays as well.

[Skeptical]

Kevin,

Isn't it up to the Office to decide what is "before" the Office? Sure, I understand that an applicant has a duty to divulge what he knows under the IDS section, but that same section winks at the very submission as "not [to] be construed to be an admission that the information cited in the statement is, or is considered to be, material to patentability." No matter what an applicant submits, the power to decide "patentability" always remains with the Office.

Further, the Legislative edict for presumption does not carve out a denial of presumption for materials "not before the Office" - notwithstanding the dicta from the Court in any previous rulings. The Legislature simply provided for a flat out presumption for an application that matured into a patent. There clearly is no intent for multiple levels of presumption - the presumption derives from the entire examination process and is not so finely tuned to particular art (again, notwithstanding the Supreme Court musings). Once the application matures to a patent, it has earned a "singular" presumption, not a split and varied one.

Since it is the Office that (still) is 100% responsible for examination, it is up to the Office to consider any and all prior art. It is a stretch for the Court to basically override the Legislature and add such a limitation as increased legislative detail - even one that can be made to feel "obvious" post facto. And truthfully, this would be a Court writing law if it were to add such a detailed limitation to the open-ended Legislative mandate of presumption.

The Court would do well to remember its own words: "Today, the Court once again declines to impose limitations on the Patent Act that are inconsistent with the Act's text." Bilski 130 S. Ct. 3218, 3231.

Does the Court really want to step into the lawmaker's role? We have just seen their reluctance to do so last term - and wisely so.

[patent litigation]

I'm with BIO on this one. The presumption of validity attaching to US-issued patents is one of the strengths of our system. A ruling in favor of Microsoft would undermine the value of US patents, and would almost certainly lead to an abundance of myriad unforeseen and unfortunate consequences. In fact, were Microsoft to win this case, it would quite possibly come to regret the win at a later date, after inevitably finding itself a plaintiff in a patent enforcement case. This lawsuit seems like short-sighted thinking on Microsoft's part.
http://www.generalpatent.com/media/videos/patent-suits

[6]

"it would quite possibly come to regret the win at a later date, after inevitably finding itself a plaintiff in a patent enforcement case."

Like MS really cares if it wins a patent case or 2. Have you seen their balance sheet? Patents, and everything having to do with them, come to something like 1% of total $$$ they're concerned with. Which, I have to admit, was rather surprising to me when I heard it the other day, but it probably shouldn't have been.

Here's a singing dancing wapanese anime girl to cheer up ur day:

http://www.youtube.com/watch?v=dgjfpoIA054&feature=player_embedded#!

[6]

For noise:

http://scholar.google.com/scholar_case?case=15630530803884913425&q=In+re+Bergy&hl=en&as_sdt=80000000000002&as_ylo=1978&as_yhi=1980

My favorite quote so far from all of patent jurisprudence:

"The sky is falling, the sky is falling!" cried Chicken Little."

Followed by a great portion:

"The CCPA is indulging in "wholesale judicial legislation," says the solicitor, by "extending" the patent laws to "encompass living organisms—life itself." Come, let us return to reason. The 985*985 solicitor himself tells us the precise question we have here is one of first impression in the courts. While that is probably so, the fact that it has not come to a court before in this precise form does not mean that it has never before been considered where it matters—in the PTO. We shall presently show how the PTO has regularly been issuing patents on non-process inventions involving "life itself," even, potentially, in the cases before us now, apart from the appealed claims."

Where Rich fails to address whether or not the PTO was also rejecting many of those same type of applications since examiners apply the lawl however they please. (usually without regard to what he says as well)

And then we see where Kev got off on his recent kick of citing Louis Pasteur:

"With respect to past PTO construction of the word "manufacture" in the statute, Genentech's amicus brief informs us that Louis Pasteur in 1873 obtained United States patent 141,072 containing this claim:

2. Yeast, free from organic germs of disease, as an article of manufacture."

Where, I think it would have been hilarious to have seen claim 2 before Rich in place of the Bergy claim. Complete with an examiner's objection to the use of the term "manufacture" to describe an organism. Which, I think, and have found in practice, is the most appropriate way to stem the tide of ridiculousness in claiming these days. Simply object to the nonsensical. Claims must be written in English and with appropriate grammer and usage of words taking into account any lexicography the applicant wishes to employ.

"Most think it means a thoughtful reflection on the contents of the art, "considering" all of its teachings and accomplishing a full and nuanced understanding. It does not."

You should listen to Noise on this point, she can tell you, as she has first hand exp in ignoring references I have no doubt.

Good to have you back btw Noise, little un' doin aight?

[Kevin E. Noonan]

Now, 6, give old Louie a break, that patent was from the 19th century (where their conception of English was a little different than ours).