1. 1 1 AIPLA Firm Logo American Intellectual Property Law Association The Presumption of Patent Validity in the U.S. Tom Engellenner AIPLA Presentation to the Japanese Patent Office (JPO) Tokyo April 7, 2014

2. 2 2 AIPLA Firm Logo Presumption of Patent Validity - Overview  Origins of the Presumption The 1952 Patent Act codified this presumption Since at least 1984, the CAFC has followed this rule  Supreme Court Affirmation of this Standard The Microsoft v. i4i case ( Sup. Ct. 2007) Are there any exceptions?  Real World Impact of this Presumption in the U.S.  Counterbalance: AIA post-grant procedures?  Conclusions 2

3. 3 3 AIPLA Firm Logo Early US cases and the 1952 act  Early U.S. patent cases in which patent validity was challenged mentioned a “heightened burden of proof” but were unclear as to nature of this burden. 3  The 1952 Act – Section 282(a): A patent shall be presumed valid.... The burden of establishing invalidity of a patent or any claim thereof shall rest on the party asserting such invalidity.

4. 4 4 AIPLA Firm Logo Creation of the CAFC  Even after the passage of the 1952 act, questions remained as to the nature of the presumption of validity. Many district courts (and circuit courts of appeals) read the wording of §282 differently. 4  Establishment of the Court of Appeals for the Federal Circuit in 1982 provided a forum for resolution of divergent views.

5. 5 5 AIPLA Firm Logo CAFC rules: Clear and Convincing Evidence 5... § 282 creates a presumption that a patent is valid and imposes the burden of proving invalidity on the attacker. That burden is constant and never changes and is to convince the court of invalidity by clear evidence. American Hoist & Derrick Co. v. Sowa & Sons, Inc., 725 F.2d 1350, 1360 (Fed. Cir. 1984) “[I]t must be by clear and convincing evidence or its equivalent, by whatever form of words it may be expressed.” Ibid The CAFC resolved the dispute between circuits in 1984

6. 6 6 AIPLA Firm Logo CAFC Decisions (continued) 6 “Clear and convincing” evidence is evidence that produces in the mind of the trier of fact an abiding conviction that the truth of the factual contentions are highly probable. Buildex, Inc. v. Kason Indus., Inc., 849 F. 2d 1461, 1463 (Fed. Cir. 1988). More likely than not Highly Probable Beyond reasonable doubt

7. 7 7 AIPLA Firm Logo Supreme Court affirms the presumption 7 Microsoft Corp. v. i4i LP, 564 U.S. (2011):  Microsoft challenged the presumption of validity, particularly as it applied to a “prior use” defense never considered by the USPTO.  Supreme Court Held: (A) defendant has the burden of both production and persuasion, (B) the standard of clear and convincing evidence is what Congress intended and is consistent with the Supreme Court’s pre-1952 case law, and (C) the same standard must apply even when the evidence before the judge or jury was not considered during PTO examination.

8. 8 8 AIPLA Firm Logo Impact in Patent Infringement Cases 8 Overall Plaintiff success rates 1990 - 2003 Overall Plaintiff success rates 2006 - 2011 Bench (52%) Jury (76%)Bench (59%) Jury (65%)

9. 9 9 AIPLA Firm Logo 9 Beyond the Legal Standard Source: Persuasion Strategies, National Jury Survey, 2008, 2011 N=900 If the USPTO issues an inventor a patent, it means the invention is innovative and unique

10. 10 AIPLA Firm Logo 10 The America Invents Act (AIA)  The America Invents Act (AIA) established several new mechanisms for challenging issued U.S. Patents:  Inter partes review  Post grant review  Cover business method review  Derivation proceedings  All of these new proceedings are conducted before a new “Patent Trial and Appeal Board (PTAB).”  NO PRESUMPTION OF VALIDITY AT THE PTAB

11. 11 AIPLA Firm Logo Inter Partes Review 11 On September 16, 2012, inter partes reexamination was replaced by inter partes review (IPR) Inter PartesReview Grounds102/103 patents and publications Standard of review Reasonable likelihood of success ParticipationFull Estoppel?Yes Decision Maker 3 patent judges of New “Patent Trial and Appeal Board” Inter PartesReexamination Grounds102/103 patents and publications Standard of review Substantial new question of patentability ParticipationLimited Estoppel?Yes Decision MakerAn examiner in the Central Reexam Unit

12. 12 AIPLA Firm Logo IPR Statistics 12 483 IPR Petitions filed in the first year (Over 1000 Petitions have now been filed) 403 of the 483 petitions (83%) were related to pending patent litigation between the same parties

13. 13 AIPLA Firm Logo Impact of IPRs on District Court cases The 403 Petitioners involved in related Federal Court litigation has filed for stays 159 times But Petitioners are very unlikely to get a stay at the ITC

14. 14 AIPLA Firm Logo IPR final decisions 14 22 Final judgments in IPRs have issued so far Comparison with Inter Partes Reexams 1999-2012

15. 15 AIPLA Firm Logo IPR final decisions 15 The 22 Final judgments adjudicated 266 claims

16. 16 AIPLA Firm Logo Conclusions 16  The presumption of validity is firmly entrenched in U.S. civil litigation (both in district courts & ITC).  The presumption is particularly advantageous for the patent owner in district court jury trials.  Defendants are increasingly turning to the PTAB to raise invalidity arguments.  Many district courts are willing to stay patent cases pending the outcome of PTAB proceedings – but not the ITC.  So far, the PTAB has been very tough on patent owners.

17. 17 AIPLA Firm Logo Thank you -- ありがとうございます Tom Engellenner Pepper Hamilton, LLP 125 High Street Boston, MA 02110 617-204-5189 17