This isn't a huge surprise, but in the Microsoft v. i4i case over what the standard for invalidating a patent should be (either the super high bar of "clear and convincing evidence" or the slightly lower bar of "the preponderance of the evidence,") the Supreme Court has now decided that the higher bar is what Congress intended (pdf). This means that it's that much more difficult to invalidate bad patents. The Court's ruling is basically that the common law presumption of validity mostly (but not entirely) used this standard, and when Congress passed the 1952 Patent Act (really written by patent lawyers), it simply meant to codify what the common law had said on that issue. It was an 8-0 ruling (with Chief Justice Roberts not taking part due to Microsoft investments, I believe), though Justice Thomas had some reservations about the thinking, but not the final judgment. The opinion was written by Justice Sotomayor, who got a bit snarky at points:

"Squint as we may, we fail to see the qualifications that Microsoft purports to identify in our cases."

I recognize the general reasoning of the Court in the case. Basically, it looks like, historically, a higher standard was frequently used, and since Congress didn't specify a different standard, it seems to suggest they were fine with the standard. But I think to some extent that ignores reality. First of all, the 1952 Act was written by patent lawyers and it's not clear Congress even understood all of it, so it seems a bit rich to suggest that it purposely was trying to codify that standard. On top of that, the use of the patent system has changed dramatically over the past few decades, and the entire presumption of validity is increasingly in question given the massive number of ridiculously bad patents approved by the Patent Office. As it currently stands, USPTO examiners rush through applications, spending an average of about 18 hours on each application. To grant patents with so little review and then presume they're valid with a ridiculously high barrier to challenging that presumption seems economically stupid.

In what world does it make sense to grant innovation-limiting monopolies for nearly two decades based on 18 hours of review?

But, in the end, this is really Congress' problem to fix -- which means they won't. Congress could fix this quite easily by clarifying a lower standard to invalidate patents. This makes tremendous sense. The only patents it would impact are bad patents. And no one -- even patent supporters -- should want bad patents. But you know who does like bad patents? Those who have them and those who profit from them -- and those people are really loud in their support of not messing with the system that gives them so much in monopoly rents. So it seems highly unlikely that Congress will even bother to look at making this simple change to the patent system.

Law professor Doug Lichtman has an op-ed in the NY Times, timed to the Supreme Court's hearing on the Microsoft/i4i case. As we've discussed, the focus is on what the standard should be for reviewing patents in the courts. We were disappointed that the US government supported keeping patents difficult to invalidate. Lichtman's op-ed does a nice job explaining why this makes no sense:

Patent examiners give most applications only a quick look, spending on average 16 hours to 17 hours per application — nowhere near the time needed to assess whether an invention is truly new and not obvious. Worse, those hours are typically spread over two to three years, and they are interspersed with work on hundreds of other open files.

These problems could in theory be fixed with more money. But resources aren’t the only issue. The extent and quality of Patent Office review is also limited by the fact that the process is not adversarial. Indeed, the only parties involved in Patent Office review are the applicant and the applicant’s lawyers — people with an obvious incentive to see the application move forward. Contrast that with litigation, where patent plaintiffs have to square off against very motivated patent defendants.

Those two issues cover exactly why it's a screwed up system where patents are automatically considered valid. The lack of time given to reviewing patents is often talked about, but the lack of an adversarial hearing is important as well. Obviously, defenders of the system today will point out that's what the court system is for. They argue that it's better for the courts to sort it out than to burden the Patent Office even further. But, if that's the case, then we should make it so the court system actually can invalidate bad patents more easily. Instead, the system works on an assumption of validity, with a very high bar ("clear and convincing," rather than the lower "preponderance of the evidence."). I still can't figure out how anyone defends this aspect of the current system. Moving the bar lower will only serve to get rid of bad patents. So the only argument I can see for defending the current system is that these people somehow believe that bad patents are important as well. And I'm left scratching my head as to who, outside of those who hold or profit from bad patents, could think that.

Anyway, the Supreme Court has, thankfully, released the transcript (pdf and embedded below) of today's hearing, and in typical Supreme Court fashion, it doesn't give away too much, but is still interesting. It seems like most of the Justices are pretty focused on the procedural issues and the specifics of Congress' intent, prior rulings, and whether or not the specific "preponderance of the evidence" standard is any more reasonable than "clear and convincing evidence." The one Justice who seems to grasp the deeper issues (again, not surprisingly if you're aware of his past), is Justice Breyer, who repeatedly brings up issues about bad patents and the harm they do. He seems to be fully aware of what's really at stake here, beyond a standard used by courts. Of course, none of that gives any indication how the case will eventually turn out. Also, Microsoft is at a bit of a disadvantage here, in that Chief Justice Roberts recused himself from this case, since he owns Microsoft stock. If the result comes out as a 4 to 4 tie, then i4i wins, and we're left with a bad standard, unless Congress finally makes its intent clear (unlikely).

With the Supreme Court agreeing to hear the i4i vs. Microsoft patent case, we're starting to see the amici briefs, and the US government has decided to support those against innovation, by siding with i4i. This is a pretty sad statement about the US government's understanding of patents. If you don't recall, the lawsuit focuses on a single key issue:

In court, parties have to prove their case by some "standard of proof." In almost all civil cases, the standard is "preponderance of the evidence" -- meaning it is more likely than not that the facts are true. When the question is invalidating a patent, however, the U.S. Court of Appeals for the Federal Circuit decided that a defendant trying to prove a patent invalid must do so by a higher standard than normal civil cases, that of "clear and convincing" evidence. "Clear and convincing" means that the facts are "highly probable," which is a much more difficult standard to meet when trying to invalidate a patent than just a preponderance.

That's it. It's pretty simple. The bar for invalidating bad patents should be "the preponderance of the evidence." Anyone who has any experience in actually bringing innovative products to market, and facing a bunch of threats and lawsuits from patent holders who have obviously bad patents would agree that this makes sense (or, rather, would agree that moving in this direction makes sense). In fact, that's why tons and tons of successful companies supported Microsoft in getting the Supreme Court to hear the case.

So pardon me for finding it laughable when i4i's chairman, Loudon Owen, claims that switching the standard would mean innovative organizations can't survive:

"As you can see from the amicus briefs, and from a letter previously sent to the Attorney General by over 260 signatories, this is an absolutely pivotal case that threatens the ability of inventors and innovative organizations to survive,"

Let's be 100% clear here, because Owen is lying. If you have a legitimate patent, you have nothing to fear from this requested change. Even if you have a bad patent, it's unlikely that this change would mean much for you. It's only if you have a ridiculously bad patent that this change would have any impact. And that certainly is not about the ability of inventors or innovative organizations to survive. Oh, by the way, take a guess at the level of quality that i4i has with its patents? Yeah...

In the meantime, if you look at the list of folks who filed amicus briefs supporting i4i, you'll notice that it's basically a bunch of companies who rely on patent licensing, rather than products to get by. There's also a funny one about "leading venture capital firms," which doesn't list any actual "leading" VC firms. No Accel. No Sequoia. No Kleiner Perkins. No Union Square Ventures. Those are the firms that people get excited about. Those are the firms that everyone wants to raise money from. They're all absent. The rest of the list is a mix of "IP" organizations and pharmaceutical companies -- who are hanging onto patents as their last gasp effort to stay alive, since they're failing to actually innovate.

As for the brief from the US government itself, which is embedded below, it's pretty weak if you're familiar with the problem of bad patents. But it basically says the law (which, it should be reminded, was written by a former patent lawyer, and was done before the recent burst of massively bad patents), says we should use the higher standard, so we should. It's also laughable, in that it assumes that the US Patent Office actually does its job in making sure that patents are valid before allowing them.

Finally, we should note that, yes, there's tremendous irony in Microsoft trying to lower the standard for ditching bad patents, at the same time it appears to be relying on ridiculously bad patents in lawsuits itself.

We've been following the Microsoft/i4i patent case for a while. If you don't remember, i4i came up with a basic system for editing XML documents and patented it. Microsoft included similar technology in Word and got sued. A court, stunningly, decided that this rarely used feature was somehow worth $98, which seemed pretty extreme for a minor (and relatively easy to implement) feature. But, such is life in a world with software patents. The CAFC (appeals court) upheld the ruling, and Microsoft appealed to the Supreme Court. At the time, I didn't think there was much of a chance of review, as I didn't realize there was a bigger legal point that Microsoft was attacking here. However, it later came out that the focus of the appeal was the standard used in patent cases. As the EFF summarized in discussing the case:

In court, parties have to prove their case by some "standard of proof." In almost all civil cases, the standard is "preponderance of the evidence" -- meaning it is more likely than not that the facts are true. When the question is invalidating a patent, however, the U.S. Court of Appeals for the Federal Circuit decided that a defendant trying to prove a patent invalid must do so by a higher standard than normal civil cases, that of "clear and convincing" evidence. "Clear and convincing" means that the facts are "highly probable," which is a much more difficult standard to meet when trying to invalidate a patent than just a preponderance.

That question apparently was intriguing enough to at least four Supreme Court Justices, as this is one case they have agreed to hear. For the past decade or so, the Supreme Court has been smacking CAFC around on a variety of patent issues, and if it was comfortable with how CAFC ruled here, it could have declined to hear the case. So just taking the case indicates concern among at least a core group of the Justices. This could mean that the standard for invalidating a patent could be lowered -- which would be a pretty big win for those of us who worry about how often bad or obvious patents are allowed to remain standing in various innovation-hindering lawsuits.

It seems that every few years the entertainment industry thinks that if it can just create a better new form of DRM, all its business model problems will be solved. Usually, it talks about how DRM will somehow enable new business models, when all it really does is remove value from content, shrinking a market, annoying legitimate customers -- all while doing absolutely nothing to slow down unauthorized downloading. It's a huge waste of time, money and energy, but the entertainment industry still doesn't realize it. Because here we go again. The movie industry is working on yet another DRM standard, which it insists will be much better than everything before, because it will be more open and interoperable. But, the problem is that it will never be as open or interoperable as no DRM. Until the industry recognizes that, it will continue to throw away more money and more time when it could actually be focusing on improving its business.