Article in Cardozo A&E Journal - "Bilcare, KSR, Presumptions of Validity, Preliminary Relief, and Obviousness in Patent Law"
April 2, 2008
In this article, I discuss the nature and strength of the patent law presumption of validity in varying procedural and substantive contexts. To do so, I first discuss (in Part I) the nature of evidentiary presumptions in general and (in Part II) the history of the presumption of patent validity in the United States. (Readers familiar with the theory and history may wish to scan or to pass over these Parts.) Following discussion of these first principles, I focus (in Part III) on the recent decision of the Indian High Court of Delhi in Bilcare Ltd. v. MS The Supreme Industries Ltd., which addressed the presumption of patent validity in regard to preliminary relief. The Bilcare decision upheld the vacatur of ex-parte injunctions, based on traditional preliminary injunction considerations of a prima facie case, balance of convenience, and irreparable loss. I then discuss (in Part IV) the recent United States Supreme Court decision in KSR International Co. v. Teleflex, Inc. The KSR decision addressed the legal standard for determining obviousness – or inventive step – under United States law, and rejected the excessively narrow test for proving obviousness that had been applied for many years by the United States Court of Appeals for the Federal Circuit (Federal Circuit) – which possesses nearly exclusive appellate jurisdiction over patent matters – and consequently the United States Patent and Trademark Office (Patent Office). I conclude (in Part V) by discussing recent studies of patent granting conditions and validity rates that provide reasons to believe that the logical inference of validity from the grant of a patent is weak, as well as policy considerations that provide additional arguments for placing only a minimal burden of persuasion on parties challenging validity. In doing so, I join the United States Federal Trade Commission and a number of legal commentators in calling for a “preponderance of the evidence” burden of persuasion, at least in regard to initial grants of patents.
In reviewing and discussing the Bilcare case, I seek to highlight the importance of providing an opportunity for evidentiary rebuttal of the presumption of validity in all procedural contexts, even at preliminary stages of patent litigation. If a presumption of validity supplies only a rebuttable inference based on evidence, challengers should be allowed to present evidence that would disprove the inference. Even for preliminary relief, there should some opportunity to demonstrate invalidity before being subject to significant consequences, except where extremely strong policies outweigh the goal of finding the truth about validity. For example, preliminary injunctions may dramatically affect the ability of the public to obtain low-cost generic pharmaceuticals. Some opportunity thus should be provided to demonstrate that the asserted patent is invalid before an injunction issues that would bar the production and sale of the generic medication, even if providing the opportunity for proving invalidity might diminish somewhat the incentives provided by the grant of the patent.
In reviewing and discussing the KSR case, I seek to demonstrate that the Supreme Court has adopted various substantive rules of law (triggered by presentation of evidence regarding the nature of the patented invention) that may be used to disprove the inference of non-obviousness that arises from the presumption of validity. These substantive rules shift to the patent holder the burdens of production and persuasion in regard to the validity of the challenged patents, and may limit the evidence that can be used to prove non-obviousness. These substantive rules also should apply to determining validity in the Patent Office. Establishing the proper rules for determining validity is extremely important. Erroneous decisions regarding patent validity may have enormous costs to society, as well as to the parties involved, as decisions to enforce invalid patents may dramatically affect sequential innovation and investment.
Finally, I hope to shed light on and thereby exorcise a persistent specter of confusion that haunts validity analysis when the presumption of validity comes into play. Presumptions of validity, like all presumptions, operate in regard to findings of fact and factual inferences to be drawn. In contrast, validity determinations are legal conclusions, based on the facts that have been found and the factual inferences that they supply. There is an unfortunate and erroneous tendency to confuse both procedurally and substantively questions of fact with legal conclusions regarding validity of the patent (particularly with regard to non-obviousness). As a result, presumption of validity is treated as if it affected the weight to be accorded to the relevant legal factors or to the competing conclusions drawn from the factual inferences. But the presumption of validity is not a direction to bias the legal scale’s measurements. Rather, it is at most (where it supplies heightened burdens of proof) an evidentiary thumb on one side of the scale.
Whether validity questions ultimately should turn solely on factual findings (as to which the presumption of validity has bearing) or also involve legal judgments based on the factual findings (as to which it does not) is at the heart of disputes over the proper legal standard for obviousness. Prior to KSR, the Federal Circuit had stated that its “precedent requires that the party urging obviousness demonstrate a teaching, suggestion, or motivation [TSM] to combine references,” and prescribed the TSM test to avoid uncertainties of legal judgment that may be supplied by hindsight analysis. As the Federal Circuit has acknowledged, however, “[t]he presence or absence of a motivation to combine references in an obviousness determination is a pure question of fact . . . as is the presence or absence of a ‘reasonable expectation of success’ from making such a combination.” The Supreme Court has previously held that it did not need to set aside any findings of fact nor resolve any factual disputes in order to substitute a more exacting legal “standard of invention” than that applied by the lower courts. Obviousness decisions therefore may require not only finding facts, but also the exercise of administrative and judicial policymaking discretion. It would be better if the actual grounds for such legal conclusions were explicitly articulated, although it may be asking too much to expect either complete legislative or judicial specification of the relevant policies and coherent results from their application.