Microsoft v. i4i – Part III: Changing the Presumption of Validity: Impact on Reexamination Practice

Posted March 14, 2011

The prior post discussed only some of the many options the Supreme Court has in the Microsoft v. i4i case (i4i).  In summary, the presumption of validity of a patent as we currently know it may be changed and the standard of proof required for an accused infringer to prove invalidity may be lowered from the current “clear and convincing” evidence standard. 

But we have all read that the presumption of validity does not apply in reexamination, right?  And the i4i case turned on evidence of a statutory bar concerning offer of sale evidence that could have been difficult to introduce in a reexamination context because of the limited scope of reexamination.  So how can a change to the presumption of validity affect reexamination?  We have to assume different Supreme Court holding scenarios to answer that question.  Of course, these scenarios are not exhaustive and are used simply to demonstrate the commensurate impact on reexamination practice.

Scenario #1 – Sweeping Change to the Presumption of Validity by the Supreme Court

Suppose the Supreme Court lowers the requisite standard of proof for an accused infringer to prove invalidity of a patent.  Suppose further that the new standard of proof is lowered to a preponderance of evidence and that it applies to all prior art not before the Examiner in the ex parte prosecution of a patent application.  Were this to be the case, patent applicants would be prudent to cite even more prior art than the current practice to reduce the number of potential validity challenges under the preponderance of the evidence standard.  Some may even be inclined to perform “scorched earth citation” to eliminate as many chances of review under the reduced standard of proof as is possible.  As unsavory as this sounds, this probably means the citation of prior art that is cumulative to the prior art already cited to the Examiner.  Given the substantial submissions of prior art already commonplace in patent prosecution (and no word yet on Therasense v. Becton Dickinson from the Supreme Court), the volume of prior art cited to the Patent Office will almost certainly increase.

Now, the analysis forks into at least two prongs depending on whether you believe:

• Assumption (A) — that Examiners will do a better job of examination with more prior art cited to him/her, resulting in better prosecution quality (i.e., more valid patents); OR
• Assumption (B) — that Examiners are already burdened with the current volume of prior art submissions and may be unable to process more prior art effectively, which means that patent quality will not improve with the changed standard.

If you believe that Assumption (A) is more likely to be correct than (B), then the amount of reexaminations should decrease as the new legal standard squeezes invalid claims out of applications during ex parte prosecution (resulting in more valid issued claims).  In this mindset, substantial new questions of patentability (SNQ’s) in reexamination should decrease or be harder to prove, thus making fewer successful reexamination requests.

If you believe that Assumption (B) is more likely to be correct than (A), then the number of invalid issued patent claims will probably be about the same, which would tend to maintain the current volume of reexamination requests.  However, keep in mind that this sweeping change to the presumption of validity equalizes the burden of proof in litigation to that of reexamination (“preponderance of the evidence” standard), so reexamination becomes less desirable  to litigants than before.  Therefore, the net effect would likely be to decrease the overall number of reexamination requests.

This analysis shows that this standard of proof will probably result in a reduction of reexaminations overall.  But only Assumption (A) of the analysis yields fewer invalid patents.  Therefore, to adopt this sweeping change to the presumption of invalidity, the Supreme Court should believe that Assumption (A) is more likely to be correct than (B).

Furthermore, this sweeping change to the presumption of validity risks the possibility of eroding the presumption of administrative correctness.  For example, the current “clear and convincing” standard applies even to prior art not of record.  Thus, the presumption is that the Patent Office was correct in not including such prior art.  The proposed burden of proof in Scenario #1 is lower for prior art not of record.  Does that mean it should have been included and the Patent Office was not “as correct” in omitting it?  Thus, the presumption of administrative correctness is effectively eroded.  As we shall see in future posts, the erosion of the presumption of administrative correctness may have other interesting side effects in reexamination.

Scenario #2 – Measured Change to the Presumption of Validity by the Supreme Court

Suppose the Supreme Court lowers the requisite standard of proof to a preponderance of evidence but only for prior art that was: (1) not provided to the Examiner; and (2) not independently accessible by the Examiner at the time of the ex parte prosecution.  Were this to be the outcome, patent applicants would be prudent to cite any relevant prior art they know of and that could not otherwise be accessed by the Examiner (whether it was cumulative or not).  This would protect the applicant from challenges under the lowered standard for prior art that was known and cited by the applicant, but not in cases where the prior art was not known by the applicant and was not accessible to the Examiner at the time of the ex parte prosecution.

Unlike Scenario #1, this scenario demonstrates a situation where the patent examiner could not have obtained the prior art on his/her own, despite the presumption of administrative correctness.

In this Scenario #2, the volume of new prior art cited by the applicant would likely not increase as substantially as in Scenario #1, because the Applicant would not have to cite cumulative prior art that the Examiner could have independently accessed.  And prior art that is not accessible by the Examiner is less likely to be the basis of a SNQ in a reexamination due to the limited scope of reexamination.  Other than a potential reduction of issued patent claims that are invalid, reexamination practice is probably much less affected than in Scenario #1.

Scenario #2 is more harmonious with the presumption of administrative correctness than Scenario #1, and it offers fewer incentives for citation of cumulative prior art than Scenario #1.

Scenario #3 – Pinpointed Change to the Presumption of Validity by the Supreme Court

Suppose the Supreme Court lowers the requisite standard of proof to a preponderance of evidence but only for prior art that was: (1) in patent applicant’s control; (2) not provided to the Examiner in the ex parte prosecution; and (3) that was not independently accessible by the Examiner at the time of the ex parte prosecution.  Were this to be the outcome, patent applicants would be prudent to cite any relevant prior art in their control that could not otherwise be accessed by the Examiner, whether cumulative or not.

This scenario demonstrates a situation where the patent examiner could not have independently obtained the prior art despite the presumption of administrative correctness.  Further, in this Scenario #3 the patent applicant was in control of the prior art and was in the best position to cite it.  Scenario #3 is more harmonious with the presumption of administrative correctness than Scenario #1, and it offers fewer incentives for citation of cumulative prior art than Scenarios #1 and #2.

In this Scenario #3, reexamination practice is probably much less affected than in Scenario #1.  And it more closely resembles the fact pattern found in Microsoft v. i4i than the other scenarios.

Final Comment 

While it is true that Scenarios #2 and #3 represent less sweeping changes than Scenario #1, they have one interesting side effect:  nonpracticing entities (NPE’s) may have an advantage over practicing entities because they will be more likely to not have offer of sale prior art for patents they generated.  So are these scenarios effectively providing NPE’s an advantage in patent litigation because they will not suffer the consequences of the reduced burden of proof for evidence that they will not likely generate or possess?

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