Intellect Wireless, Inc. v. HTC Corp., No. 09 C 2945, Slip Op. (N.D. Ill. Sep. 6, 2012) (Hart, Sen. J.).
Judge Hart entered findings of fact and conclusions of law after a patent bench trial related to cell phones with caller ID, text messaging, pictures or video. The Court dismissed with prejudice plaintiff Intellect Wireless’s patents because they were unenforceable due to inequitable conduct. Of particular interest, the Court held the following:
- Several declarations submitted to the PTO during prosecution of the patents in suit contained false statements regarding inventions, reduction to practice and diligence.
- The declarations were necessary to procure the patents in suit.
- None of the false statements were withdrawn, corrected or identified to the patent examiner.
- The clear and convincing evidence “strongly support[ed]” that the false statements were made with an intent to deceive, not just by mistake.
Tellabs Ops., Inc. v. Fujitsu Ltd., No. 08 C 3379 & 09 C 4530, Slip Op. (N.D. Ill. Aug. 29, 2012) (Cole, Mag. J.).
Judge Cole, after an evidentiary hearing, ordered Fujitsu to produce all documents related to an extensive inspection of plaintiff Tellabs’ optical scanner in this patent case. Fujitsu claimed that certain reports related to the inspection were privileged, but Fujitsu’s expert report stated that the expert had reviewed those report. Fujitsu and its expert argued that the expert’s statements about reviewing the reports were erroneous. While the expert had received the reports, he thought they were other documents and put them in a pile without ever reading them. Regardless of whether the expert and counsel remembered the facts correctly, the story was improbable. The Court did not believe that an “eminent” professor who was acutely aware of the need for accuracy could mistakenly misstate what he had reviewed twice. Because the Court held that the expert had considered the reports, any privilege that may have attached to them was waived.
This post is re-posted from my Retail Patent Litigation Blog — where I write about patent litigation issues specific to retailers and their supply chains — with minor revisions.
Last year, the patent defense bar was disappointed when the Supreme Court refused to lower the standard for invalidating patents based upon prior art that was not considered by the Patent Office. According to Professor David Schwartz from Chicago-Kent College of Law and Christopher Seaman from Washington and Lee University School of Law, the apparent loss may have actually been a win. In Microsoft v. i4i Ltd. Partnership, 131 S. Ct. 2238 (2011), Microsoft argued that prior art not considered by the Patent Office should face the lesser preponderance of the evidence standard. The Supreme Court held that invalidity must be proved by clear and convincing evidence - the higher standard - whether or not the Patent Office had considered the prior art at issue. But the Supreme Court allowed that when the prior art had not been considered by the Patent Office, the jury should be instructed that “it has heard evidence that the PTO had no opportunity to evaluate before granting the patent” and to “consider that fact when determining whether an invalidity defense has been proved by clear and convincing evidence.” Id. at 2251. The decision was largely considered to have maintained the status quo.
Schwartz and Seaman recently released a paper empirically testing what impact the two standards of proof would have versus the Supreme Court’s extra instruction - Standards of Proof in Civil Litigation: An Experiment from Patent Law, Harvard Journal of Law & Technology (Forthcoming 2013). Schwartz and Seaman provided subjects with a fact pattern and a summary of the parties’ arguments. Then the subjects were randomly given one of three jury instructions: 1) clear and convincing evidence; 2) clear and convincing evidence with an i4i-type instruction regarding evidence not considered by the Patent Office; and 3) preponderance of the evidence.
The results were surprisingly good for retailers, and patent defendants generally. Schwartz and Seaman expected what I would have - that the clear and convincing standard with the extra instruction would act as an intermediate instruction between clear and convincing and preponderance of the evidence. Here is what the study found:
- Subjects receiving the preponderance of the evidence instruction invalidated patents more than subjects receiving clear and convincing instructions.
- Subjects receiving the clear and convincing instructions with an i4i-type instruction invalidated patents at the same rate as subjects with preponderance of the evidence instructions.
Schwartz’s and Seaman’s study suggests that defendants won the i4i case despite losing the preponderance of the evidence argument. And for those that are inclined to question the validity of Schwartz’s and Seaman’s methodology, they provide extensive grounding for and analysis of the methodology. Additionally, Schwartz, in particular, has developed a reputation for high-end empirical analysis of patent issues.
What can retailers take away from the study?
- Your invalidity jury instruction is critical. Do not let your jury instructions be an after thought.
- Getting an i4i-type instruction significantly increases your chances of invalidating a patent before a jury.
- Of course, it is less clear that a judge’s analysis will change upon summary judgment. Although Schwartz and Seaman did not test this, my expectation is that summary judgment invalidity rates will not change based upon i4i.
- There is significant value in asserting prior art that was not considered by the Patent Office.
- The desire for prior art not considered by the Patent Office puts a premium on non-patent prior art searches, like those offered by Article One, among others.
Finally, here is the i4i instruction used by Schwartz and Seaman:
Clear and convincing evidence is evidence that shows it is highly probable that the patent was obvious. This is a higher standard of proof than a preponderance of the evidence, which means more probable than not. However, clear and convincing evidence is lower than the beyond a reasonable doubt standard used in criminal cases.
The burden of proving obviousness is more easily satisfied when, as in this case, the prior art on which the claim of obviousness is based was not considered by the Examiner.