Chapter §19.05 Invalidity

• Jurisdiction: United States

§19.05 Invalidity

Sections 282(b)(2) and (b)(3) of 35 U.S.C. permit the defense of invalidity of an issued patent to be asserted on the same grounds that could have prohibited patentability in the USPTO; that is, a failure to satisfy one or more of the statutory criteria set forth at 35 U.S.C. §§101, 102, 103, and 112 (with the post-AIA exception of the best mode requirement of 35 U.S.C. §112(a)). Patents reissued in accordance with 35 U.S.C. §251 also are susceptible to invalidation under the same statutory grounds.⁸⁵⁴ A growing body of empirical data charts the successes and failures of asserting the invalidity defense.⁸⁵⁵

[A] Burden of Proof

[1] Generally

Section 282(a) of the Patent Act, 35 U.S.C., provides that

In general.—A patent shall be presumed valid. Each claim of a patent (whether in independent, dependent, or multiple dependent form) shall be presumed valid independently of the validity of the other claims; dependent or multiple dependent claims shall be presumed valid even though dependent upon an invalid claim. The burden of establishing invalidity of a patent or any claim thereof shall rest on the party asserting such invalidity. ⁸⁵⁶

An issued U.S. patent is thus entitled to a presumption of validity in accordance with 35 U.S.C. §282(a). This presumption is based, at least in part, on an assumption of "administrative correctness"—that the USPTO did a thorough, competent job when it examined the patent application and decided to issue the patent.⁸⁵⁷ Because the patent owner benefits from the presumption of validity, it need not affirmatively establish that its patent is valid in order to bring an infringement lawsuit. Rather, the burden is on the accused infringer to rebut the presumption of validity created by 35 U.S.C. §282(a).

The statute does not specify what evidentiary quantum is needed to satisfy the burden of proof on invalidity. However, judicial decisions make clear that the burden in federal court litigation challenging patent validity is "clear and convincing" evidence. In other words, a validity challenger (i.e., the accused infringer) can rebut the presumption only if it establishes invalidity by "clear and convincing" evidence.⁸⁵⁸ The quantum of evidence represented by the "clear and convincing" burden is understood to be somewhat more than a mere "preponderance" (or 51 percent) of the evidence, the typical burden of proof in civil litigation, and somewhat less than "beyond a reasonable doubt,"⁸⁵⁹ the burden for criminal convictions. The Supreme Court defines clear and convincing evidence as "plac[ing] in the ultimate factfinder an abiding conviction that the truth of its factual contentions are 'highly probable.' "⁸⁶⁰

Twenty-first-century patent litigation reflects the growing impact of patent-enforcing "non-practicing entities" (NPEs) or "patent assertion entities" (PAEs), sometimes pejoratively referred to as "patent trolls."⁸⁶¹ NPEs own patents but do not manufacture or sell the products covered by the patents and do not compete in the marketplace through such manufacture or sale. The number of infringement lawsuits filed by NPEs rose sharply in the decade of 2000–2010.⁸⁶² In a comprehensive 2016 study, the Federal Trade Commission observed two primary business models for NPE/PAEs: "portfolio PAEs," which "negotiated licenses covering large portfolios, often containing hundreds or thousands of patents, frequently without first suing the alleged infringer," and "licensing PAEs," which "typically sued potential licensees and settled shortly afterward by entering into license agreements with defendants covering small portfolios, often containing fewer than ten patents."⁸⁶³

Several leading technology companies, including those frequently targeted by NPEs,⁸⁶⁴ took the position that the burden of proof to invalidate issued patents should be less than the "clear and convincing" quantum described above. The technology firms contended that accused infringers in infringement actions need only establish the defense of invalidity by a preponderance of the evidence. In particular, the firms asserted that the lesser preponderance standard should apply when an invalidity defense rested on "newly discovered" prior art, that is, evidence of invalidity that was never considered in the first instance by the USPTO during the patent examination process.⁸⁶⁵ These arguments did not succeed.

[2] Microsoft v. i4i (U.S. 2011) Confirms "Clear and Convincing Evidence" Burden of Proof

The Supreme Court in 2011 rejected the arguments for a lessened burden to invalidate patents in Microsoft Corp. v. i4i Ltd. P'ship.⁸⁶⁶ The Court in Microsoft affirmed the Federal Circuit's interpretation of 35 U.S.C. §282 that invalidity of a patent must be established by clear and convincing evidence. Relying on its earlier decision in Radio Corp. of America v. Radio Eng'g Labs., Inc.,⁸⁶⁷ the Court reasoned that when Congress stated that a patent is "presumed valid" in enacting §282 of the 1952 Patent Act, it implicitly incorporated the established common law meaning (i.e., as expressed in judicial decisions) of that phrase.⁸⁶⁸ By the time of the 1952 Act, the presumption of patent validity had the "settled meaning" that "a defendant raising an invalidity defense bore 'a heavy burden of persuasion,' requiring proof of the defense by clear and convincing evidence."⁸⁶⁹

The Microsoft Court also rejected the argument that the "clear and convincing" burden should not be required when an accused infringer's proffered evidence of invalidity was never considered by the USPTO. The Court responded that if Congress had intended the burden of proof to vary with the facts of every case, it would have said so expressly when enacting §282 (but it did not).

The Microsoft Court recognized, however, that a number of appellate decisions predating the 1952 Act characterized the presumption of validity as "weakened" or "dissipated" in cases involving evidence never considered by the USPTO. The Court viewed these decisions as simply "reflect[ing] the same commonsense principle that the Federal Circuit has recognized throughout its existence—namely, that new evidence supporting an invalidity defense may 'carry more weight' in an infringement action than evidence previously considered by the PTO."⁸⁷⁰ Accordingly, the Microsoft Court observed that "if the PTO did not have all material facts [e.g., prior art] before it, its considered judgment may lose significant force . . . [a]nd, concomitantly, the challenger's burden to persuade the jury of its invalidity defense by clear and convincing evidence may be easier to sustain."⁸⁷¹

The Microsoft Court further observed that juries should generally be instructed on the effect of new prior art that the PTO had not considered, stating that

although [we have] no occasion to endorse any particular formulation, we note that a jury instruction on the effect of new evidence can, and when requested, most often should be given. When warranted, the jury may be instructed to consider that it has heard evidence that the PTO had no opportunity to evaluate before granting the patent. When it is disputed whether the evidence presented to the jury differs from that evaluated by the PTO, the jury may be instructed to consider that question. In either case, the jury may be instructed to evaluate whether the evidence before it is materially new, and if so, to consider that fact when determining whether an invalidity defense has been proved by clear and convincing evidence. ⁸⁷²

Thus, the burden of proof to invalidate a patent remains "clear and convincing," but that burden may be more easily met by an accused infringer when it presents materially new prior art.

A post-Microsoft empirical study using mock jurors suggests that such instructions regarding burdens of proof in patent cases may make little or no difference to outcome, however. In an experimental study to test the impact of standards of proof in patent invalidity challenges, Professors Schwartz and Seaman found that delivering the jury instruction directed by the Microsoft v. i4i decision "resulted in mock jurors finding a patent invalid at rates statistically indistinguishable from the preponderance of the evidence standard explicitly rejected by the Court in that case."⁸⁷³

[B] Collateral Estoppel Effect of Invalidity Adjudication

In Blonder-Tongue Labs., Inc. v. Univ. of Ill. Found.,⁸⁷⁴ the Supreme Court held that once a U.S. patent has been declared invalid by a federal court, the patent owner is collaterally estopped to assert validity of that patent against another accused infringer. In colloquial terms, once a U.S. patent has been declared invalid, it is dead and cannot be resuscitated. This rule assumes, of course, that the patentee had a full and fair opportunity to litigate the issue of invalidity in the earlier proceeding and did not obtain a reversal on appeal.

In announcing the rule of collateral estoppel for patent invalidity, the Supreme Court in Blonder-Tongue specifically rejected the requirement of "mutuality of estoppel" that it had previously espoused in Triplett v. Lowell,⁸⁷⁵ a decision roundly criticized by other courts and commentators.⁸⁷⁶ Continued reliance on the mutuality doctrine would work an economic harm on participants in the patent system, the Court reasoned. Among those who would bear the brunt of this harm were alleged infringers, who would be forced to choose between bearing the high cost of defending against a patent already declared invalid or accepting a license and making royalty payments as a cost of litigation avoidance. In the words of the 1966 President's Commission on the Patent System, the Court concluded that the patentee whose patent has been declared invalid has already "had his 'day in court' and should not be allowed to harass others on the basis of an invalid claim."⁸⁷⁷

[C] Statutory Grounds for Invalidity

Section 282(b) provides that invalidity of a patent can be based on "any ground specified in part II...