supctOn April 18, 2011, the U.S. Supreme Court will hear oral arguments in Microsoft Corp. v. i4i Limited Partnership, in which i4i accused Microsoft of patent infringement.  i4i won a verdict in the 2009 case, but Microsoft has pursued the matter on appeal, claiming, among other things, that i4i’s patent was not valid.  The Supreme Court is now being asked to address the standard of proof required to establish whether a patent is invalid in patent litigation.

 Section 282 of the Patent Act, 35 U.S.C. § 282, provides that “[a] patent shall be presumed valid” and imposes the burden of proving the invalidity of a patent on the party claiming that the patent is invalid.  But the Act does not indicate the strength of that presumption.  In 1984, the Federal Circuit Court of Appeals, in American Hoist & Derrick Co. v. Sowa & Sons Inc., 725 F.2d 1350 (Fed. Cir. 1984), held that invalidity must be proved by clear and convincing evidence.  This means that sometimes invalid patents will benefit from the gloss of validity because the standard of proving invalidity is so high.  Although the U.S. Supreme Court has not yet addressed this issue, Microsoft has pointed to the Court’s language in KSR International Co. v. Teleflex Inc., 550 U.S. 398 (2007), in support of its challenge to the clear and convincing language.  In KSR, the Court stated that at least under the circumstances of that case “the rationale underlying the presumption . . . seems much diminished.”

 If the Supreme Court were to reject the clear and convincing standard and impose one based upon, for example, a preponderance of the evidence, alleged infringers would have an easier time challenging the validity of the holder’s patent.  All participants in patent litigation would feel the impact, including patent holders, challengers, and judges.

 How will the Microsoft v. i4i decision impact nanotech firms?

 Patents incorporating nanotechnology often involve newer innovations, with the patent holders seeking to establish a place in commerce.  If a party challenging the patent’s validity must prove invalidity by clear and convincing evidence, the holder of the patent may have an advantage in litigation. And this litigation advantage could translate into a commercial advantage.  By contrast, if the Supreme Court lowers the threshold for the presumption of validity, holders of newer and more innovative patents could lose their competitive edge.  The impact in the nanotechnology field would be felt most strongly by smaller, upstart firms.

 I will report again on this matter after the oral arguments on April 18.