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IP, Patent

Practical Implications Of Supreme Court’s Role In Patent Policy

Microsoft has asked the Supreme Court to overturn a long-standing rule that requires patent challengers to demonstrate invalidity of a patent by “clear and convincing” evidence (as opposed to the more common civil standard of “more likely than not”).  I’ve mentioned before that this case could have a significant impact on patent value across the board.  Despite the empirical questions about the statistical impact of this change, and academic questions about the importance of this change, any reduction in the burden of proof will affect licensing negotiations simply because of perceived positions of strength.

If a ruling by the Supreme Court makes a company believe that it is more likely to succeed in proving your patent invalid at trial, then the company is less likely to agree to a settlement, or more likely to hold out for a lower price.  Whether or not the company actually has a strong invalidity defense is largely irrelevant.  Thus, while your patents may very well be valid under either a preponderance, or a clearly and convincing standard, a lower burden of proof means patent owners will invariably have to spend more and possibly collect less.

via Supreme Court Decision Will Influence Patent Value Across The Board

Beyond value, another very practical implication stems from the argument Microsoft is making. As summarized by the Written Description blog:

Microsoft has argued that the standard should be a preponderance of the evidence, especially when the prior art used to contest validity is “unconsidered evidence,” or evidence not considered by the Patent and Trademark Office (PTO).

via Does Microsoft v. i4i Matter?

If the Court is looking for yet another way to increase confusion and costs on patent owners and inventors, taking Microsoft’s bait would be a great way to do it.  Introducing different standards for cited versus uncited references would basically make a mockery of the Information Disclosure Statement (IDS) practice.

An IDS is the inventor’s opportunity to identify any information of relevance that the patent office should consider.  But these days, lawyers don’t leave anything to chance.  A little incentive will go a long way toward transforming a typical IDS from the 5 or 10 most relevant pieces of prior art, to submitting several inch-thick stacks of forms to the USPTO.  A related issue in McKesson Information Solutions v. Bridge Medical has already reportedly resulted in ridiculous IDS submissions that likely add little, if any real value to examiners.

Some advocates of Microsoft’s position argue that Examiners get very little time with each patent application, which justifies making it easier to invalidate patents.  For example, Peter Huber today writes that the “typical patent gets eight to 25 hours of review.”  Huber doesn’t give a source for this statistic, and given the increasing patent office delays, I suspect that this figure is grossly distorted by excluding the full amount of prosecution time before a patent issues.  (For example, if an application gets abandoned after three rejections in favor of a CIP, which subsequently issues, is the prosecution time spent on the earlier application counted in the “25 hours” of review?)

Of course, if the patent office is so bad at examining patents, then we might start thinking about eliminating the examination process altogether, but that’s a topic for another day. At its core, Microsoft and its allies might be seeking a return to the state of events before a uniform court of appeals for patent cases was created, and courts invalidated 4 out of every 5 patents.

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