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IP, Patent

Microsoft Takes Verbal Beating From Ginsburg And Supreme Court

Microsoft argued its case to the Supreme Court today, asking for a nine-figure judgment against it to be overturned. In the process, of course, the case could alter the requirement that patent challengers prove invalidity by clear and convincing evidence.  Right out of the gate, Microsoft attorney Thomas Hungar (from Gibson Dunn) asserted that the clear and convincing burden of proof “makes no sense” and was immediately interrupted by Justice Ginsburg:

It would be hard to argue, Mr. Hungar, that it makes no sense, but it made sense to Cardozo and Judge Rich.

Contradicting legal giants (Cardozo: a legend in New York and the Supreme Court, and Rich: one of two principal authors of the 1952 Patent Act, and legendary judge on the CCPA and CAFC) is not a thing to be taken lightly.  Justice Scalia quickly chimed in, saying “So, you’re contradicting Cardozo?”

Contrast Hungar’s first few minutes with that of his adversary, Mr. Seth Waxman (of Wilmer Hale), who was teased by Justices Ginsburg and Scalia about suggesting that Congress “actively acquiesced” in the clear and convincing standard:

JUSTICE GINSBURG: How actively do we acquiesce?
JUSTICE SCALIA: Yes, I would like that notion of active acquiescence.
MR. WAXMAN: I thought that might get a rise out of you.

Joking aside, Ginsburg’s discussion with Mr. Hungar highlighted the breadth of Cardozo’s jurisprudence on judicial interference with patent validity issues:

Cardozo said through all the verbal variances there runs this common core of thought and truth, that one otherwise an infringer who assails the validity of a patent bears — upon its face, bears a heavy burden of persuasion and fails unless his evidence has more than a dubious preponderance.

Hungar was also put through the wringer about the jury instructions Microsoft did (and didn’t) request during the original trial. Specifically, Justice Sotomayor asked Hungar why Microsoft didn’t ask the lower court to instruct the jury to consider the fact that the prior art at issue had not been considered by the PTO, saying:

But other judges give a slightly different standard. They give a clear and convincing standard, and they add a separate instruction that tells the jury, in applying that standard, you should consider the fact that the PTO did not see this evidence. You didn’t ask for that?

Appellate lawyers I spoke to agreed with me that Sotomayor’s questioning cuts to the heart of the Court’s current preference for avoiding rigid rules. Bottom line, if the Court believes that Microsoft’s policy considerations are adequately satisfied through an available jury instruction, they could fall back on the failure to ask for this instruction as way to avoid deciding the stickier issues.  East Texas lawyer Michael Smith noted in February that since Microsoft raised its challenge, East Texas judges have started asking juries to give a verdict on validity under both the preponderance and “clear and convincing” standards.

Waxman, on the other hand, had the much easier argument, which is to convince the Court that upholding the $200 M verdict in favor of his client would be consistent with stare decisis, statutory interpretation and first principles.  He also had the support of the Solicitor General, in the form of deputy solicitor Malcolm Stewart.  Waxman pointed out that several changes have been made to patent laws in the past 30 years, but there is no suggestion that Congress believed the invalidity burden of proof was being implemented incorrectly by the courts.

In addition, while Hungar primarily explained why Microsoft’s view was better policy, Waxman had the luxury of pointing out the policy reasons that support maintaining the current burden of proof. If the lower court’s interpretation is logical and consistent, the Supreme Court’s job is to maintain status quo and let Congress make policy changes. Three succinct points made by Mr. Waxman summarize this argument:

Number one, an infringer’s validity challenge is a collateral attack on a government decision that has already been made, quite unlike Grogan and Huddleston, that bestows property rights by written instrument.

Number two, the harm from an erroneous determination is hugely asymmetrical. A single holding of invalidity by a single lay jury vitiates for all time the patent and all of the reliance interest by the inventor and the investors and the licensees who have relied upon that ex ante.

Third, this grant of property rights not only induces reliance, which lack, like the land patent cases induce reliance, this is a grant of a property right that under the Constitution is specifically designed to induce reliance in exchange for the inventor’s honoring her half of the patent bargain, that is public disclosure of her intellectual property for the public benefit, and the commitment of capital by investors and licensees that’s necessary to bring into fruition for the public benefit.

Deputy Solicitor Stewart also gave two particularly strong arguments to maintain the clear and convincing standard. The first dealt with the historical understanding of presumptions:

The requirement of heightened proof was part and parcel of the presumption itself in the same way that I think most lawyers in this country would say that the requirement of proof beyond a reasonable doubt is part and parcel of the presumption of innocence in criminal cases. If a new criminal statute were enacted saying that the defendant is presumed innocent, but the presumption can be overcome by a preponderance of the evidence, that might be a presumption of innocence, but it wouldn’t be the presumption of innocence as it’s historically been understood in our country.

The second argument dovetailed nicely with Mr. Waxman’s first argument:

The defendant is asking the judge or jury to set aside a decision that has been made by then the Patent Office, now the PTO, and we would ask what sort of standard of proof ordinarily applies when a litigant asks a court to set aside an administrative decision.

Hal Wegner noted the “excellent advocacy” by all three attorneys, specifically mentioning that Seth Waxman “gave perhaps his finest performance among his several patent arguments at the Supreme Court.”  Waxman’s comfort and familiarity with the Supreme Court drips even from the pages of a paper transcript, and his side has the stronger argument, particularly from the stare decisis perspective.

That said, the Supreme Court rarely affirmed the CAFC, and even when affirming the result, the Court typically takes the time to point out disagreements in its reasoning.  Of course, those keeping an eye on the “law of averages” might say that the CAFC is due for a win.  This is as good a case as any for the Supremes to say that the CAFC got it right, but we likely won’t find out until June.

The entire oral argument transcript can be found here:

View this document on Scribd

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Discussion

3 thoughts on “Microsoft Takes Verbal Beating From Ginsburg And Supreme Court

  1. It looks to me like i4i’s got the upper hand in this patent litigation, and not only because of the U.S. arguing as amicus on its behalf. I’ve always thought i4i had the better arguments, not to mention the legal precedent and reliance issues on its side.

    Posted by patent litigation | April 25, 2011, 6:34 pm

Trackbacks/Pingbacks

  1. Pingback: The Nonobviousness Doctrine As An Innovation Tax « Gametime IP - April 19, 2011

  2. Pingback: Is Microsoft The “Clear And Convincing” Winner In The Patent Validity Battle? « Gametime IP - June 10, 2011

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