The case, Gatto v. United Air Lines, Inc., et al., Case No. 10-cv-1090-ES-SCM (D.N.J. Mar. 25, 2013), involved a personal injury claim by the plaintiff, Frank Gatto, who was allegedly injured while unloading baggage from an aircraft owned and operated by United Airlines.  According to Gatto, the injuries that he sustained “rendered him permanently disabled” and limited his physical and social activities to the extent that he was no longer able to work.  The defendants sought discovery from Gatto, including documents relating to his social media accounts.  The defendants sought these accounts, and the Facebook account in particular, because they believed the accounts contained comments and photographs that contradicted Gatto’s allegations, including his physical and social activities, trips and vacations, and evidence of online business activities. 

Gatto provided defendants with executed authorizations for the release of information from several social networking websites, but not for his Facebook account.  The Court ordered Gatto to execute the necessary authorization, and he changed his Facebook account password and provided it to defendants’ counsel so they could access his account.  After attempts were made to access Gatto’s Facebook account in early December 2011, Gatto was notified of an attempted log-in from an unfamiliar IP address, and agreed to instead download his entire Facebook account and provide it to the defendants.  However, Gatto discovered that his Facebook account had been deactivated on December 16, 2011, and that his entire Facebook account data was permanently lost as a result of his failure to timely cure the deactivation.  After defendants requested that Gatto attempt to reactivate his account, Gatto discovered that Facebook had “automatically deleted” the account fourteen days after its deactivation.

The Court analyzed whether Gatto’s failure to preserve his Facebook account constituted spoliation of evidence.  Spoliation, which consists of the failure to preserve property for another’s use as evidence in pending litigation, can carry sanctions that include dismissal of a claim, adverse inferences, and attorneys’ fees, amongst others.  Of particular concern in Gatto was the adverse inference sanction, which allows a jury to infer that a party’s destruction of a document was done out of fear that its contents would harm him in the litigation.  Four factors must be present before an adverse inference instruction can be awarded: 1) that the evidence was in the party’s control; 2) that there was an actual suppression of the evidence; 3) that the evidence in question was relevant to the claims at issue; and 4) that it was reasonably foreseeable that the evidence would be subject to discovery.

The Court, without difficulty, found that the first, third and fourth factors were satisfied, as Gatto’s Facebook account was clearly within his control, that the pictures and posts on his Facebook page were relevant to the litigation because they would support or dispute any potential damages awarded in Gatto’s favor, and that Gatto was on notice that the defendants sought access to his Facebook account, thus imposing on Gatto a duty to preserve the account.  The only issue, then, was whether Gatto actually suppressed his Facebook account through allowing it to become deactivated and then failing to reactivate it before its deletion.  While it was disputed whether Gatto “actually suppressed” the account by allowing it to become permanently deleted, it was evident that he intentionally deactivated it and purposely failed to reactivate it within the requisite time period.  The defendants were therefore prejudiced by the lost access to evidence speaking to Gatto’s alleged damages.  As a result, the Court determined that all four factors for the finding of a spoliation inference were present, and that the jury at trial would be allowed to make an adverse inference against Gatto for failure to preserve his Facebook account.

While Gatto is a fact-specific ruling, it is clear that litigants must take caution to preserve their social media accounts, including Facebook.  Failure to maintain those accounts, where relevant, discoverable information may reside, or even worse to destroy or delete those accounts, may result in a variety of sanctions against that party, including an adverse inference at trial.

In John Wiley & Sons, Inc. v. Kirtsaeng, 2013 WL 1104736 (Mar. 19, 2013), a Thai citizen studying at Cornell University and the University of Southern California helped pay for his education by reselling college textbooks lawfully manufactured and purchased abroad, at substantially lower cost, in the higher-priced U.S. market.  As discussed in this previous blog piece (September 23, 2011), the Second Circuit held the first sale doctrine did not apply to works manufactured abroad and, as a consequence, the resale of these textbooks infringed the publisher’s exclusive right of distribution.  The Supreme Court reversed, holding the “first sale” doctrine protects the right to resell copyrighted works legally produced abroad in the United States, even by an individual or entity without express permission to do so. 

The first sale doctrine is a statutory exception to a copyright owner’s exclusive right to distribute the copyright-protected work.  Codified in Section 109(a) of the Copyright Act, the doctrine provides that “the owner of a particular copy . . . lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord.”

The lower courts’ disagreement about the application of the doctrine to works manufactured outside the United States resulted largely from ambiguity in the phrase, “lawfully made under this title.”  The Second Circuit, for example, read a geographical restriction into this phrase.  It held that “lawfully made under this title” refers only to works “made in territories in which the Copyright Act is law, and not to foreign-manufactured works.”  In contrast, the Third Circuit, in Sebastian Int’l, Inc. v. Consumer Contacts, Ltd., 847 F.2d 1093 (3d Cir. 1998), held that the “first sale doctrine” included copyrighted works lawfully manufactured abroad. 

The Supreme Court resolved this dispute, holding that “lawfully made under this title,” had no geographical implications.  Instead, the Court held the first sale doctrine applies to works manufactured anywhere in the world “as long as their manufacture met the requirements of American copyright law.”  The Court gave substantial weight to the practical difficulties in enforcing a geographically-based first sale doctrine in an increasingly global marketplace.

The Supreme Court’s opinion in John Wiley & Sons provided much-needed clarity for individuals and entities operating in the secondary market for books, music, fine art, software, and other protectable works.  Those with the most to lose – international publishers and manufacturers who use pricing models based on particular geographic locations – will have to rethink those models to remain competitive in what is now a truly global marketplace.

Dear clients, friends and neighbors,

We realize that in this difficult aftermath of the storm, many of our clients, friends and neighbors are dealing with issues where we may be able to present some relief.

We are very fortunate to have power and Internet in our New Jersey, New York, Delaware and Maryland offices.  For anyone who needs it, we would like to offer you the ability to use our conference rooms to charge your devices, check email or other important areas of your life that you are unable to access.

We very much realize that these are tumultuous times.  It is our utmost hope that we may be able to help alleviate some of the pain and trouble experienced by the people and families we care about.  Please do not hesitate to contact Gayle Englert, Director of Human Resources, at genglert@coleschotz.com or 201-320-2766, if you would like to make use of our facilities.  We will do our very best to accommodate everyone we possibly can.

Also, we hope that you may find the below list of important numbers and services to be helpful.

• The NJ Office of Emergency Management is providing lists of running pharmacies, hotels, restaurants and gas stations
• Federal Emergency Management Agency (FEMA) Assistance for New Jersey
• Federal Emergency Management Agency (FEMA) Assistance for New York
• Federal Emergency Management Agency (FEMA) Assistance for Connecticut
• For FEMA Disaster Assistance, you may also call 1-800-621-3362 (FEMA)
• Bergen County Department of Health Services – Info for Hurricanes and Floods
• New Jersey 211 Hurricane Response and Recovery
• Useful Insurance Tips provided by Anderson Kill & Olick, P.C.
• Small Business Loans and Grants – Physical Disaster Loans - 1-800-621-3362
• DisasterAssistance.gov

Lastly, we realize that many of you may have been trying unsuccessfully to contact us over the previous several days.  We deeply apologize for this as our systems were adversely affected and were not restored until today.

Again, we wish our absolute best to everyone affected.  During these times, we are reminded of the paramount importance of health, safety and family and hope that all are as strong for you as possible.  We hope you know that you are in our thoughts and we hope to help you as we surmount the obstacles ahead of us.

Pop singer Noelia Lorenzo Monge and music mogul Jorge Reynoso were married in a secret ceremony on January 3, 2007.  The couple concealed their marriage to preserve Monge’s image as a single, young, and innocent pop star.  In 2008, Monge’s driver and bodyguard, Oscar Viqueira, found a memory card containing photographs of the wedding and wedding night in the ashtray of Monge’s sport utility vehicle.  Viqueira sold the photographs to Maya Magazine, Inc. (“Maya”).  In February 2009, Maya published the photographs in its TVNotas magazine without the couple’s permission.  The couple sued copyright infringement.  The district court granted Maya’s motion for summary judgment, finding the publication of the photographs constituted fair use under Section 107 of the Copyright Act.

The sole issue on appeal was whether the district court properly applied the fair use doctrine.  The Ninth Circuit’s analysis was guided by the four non-exclusive fair use factors in Section 107 of the Copyright Act: “(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work.”  In addition, “[t]he fact that a work is unpublished shall not itself bar a finding of fair use if such finding is made upon consideration of the above factors.”

The court focused much of its attention on the first fair use element and was guided by three underlying principles: news reporting, transformation, and commercial use.  First, the court noted that while the preamble to Section 107 cites “news reporting” as an example of a fair use, all forms of “news reporting” are not created equal.  Instead, to constitute fair use “news reporting,” the use of the photographs must maintain some “transformative value,” a term used in copyright law to describe a work that comments, criticizes, or otherwise adds something new to the original work.  With this understanding, the court held that Maya’s use of the unedited photographs lacked the necessary transformative value necessary to support a fair use defense.  Moreover, where a derivative work lacks transformative value, the courts will place more emphasis on its commercial nature.  Here, there was no question that Maya’s use of the photographs was entirely commercial, thereby mitigating against Maya’s fair use defense.

In regard to the nature of the work, the court held that the marginal creativity of the photographs, coupled with the unpublished status of the photographs – more specifically, the couple’s right to control the first public appearance of the photographs – weighed heavily against fair use.  As to the amount and substantiality of the photographs, the court held that “Maya’s use was not just substantial, it was total.”  Rather than publishing a single photograph, or some other source, such as the marriage certificate, both of which would have conveyed the necessary information regarding the couple’s nuptials, Maya chose to publish all of the photographs.  As to the final factor, there was little question that after Maya’s publication of the photographs, “the bottom literally dropped out of the market [and] neither Maya nor anybody else [was] likely to purchase these pictures from the couple.”  Given that all factors weighed against Maya’s fair use defense, the court reversed the lower court’s summary judgment holding and remanded the case for further proceedings.

Monge is a reminder that news outlets, celebrity or otherwise, are not immune from claims of copyright infringement simply because they are engaged in some form of “news reporting.”  Monge also serves as an example of how two courts may come to entirely different conclusions as to the viability of a fair use defense in a particular case.  Given the flexibility of the fair use standard, news outlets must be cautious when publishing copyrighted material without the express permission of the copyright owner and be familiar with those underlying factors that the courts will consider when confronted with a fair use defense.  Those that fail to recognize these limitations, or choose to ignore them, may soon have their own date in court.

Except for purely ornamental features separable from the structure, buildings did not enjoy the same protection.   Buildings were considered functional works excluded from protection under the Copyright Act.  In 1990, Congress passed the Architectural Works Copyright Protection Act of 1990 (“AWCPA”), amending the Copyright Act to fill that gap.  The AWCPA explicitly extended copyright protection to “architectural works,” so as to include completed buildings themselves registered with the Copyright Office.

Last week, the Second Circuit Court of Appeals clarified that the pre-existing protection of architectural drawings as “pictorial” works survived enactment of AWCPA.  In Scholz Design, Inc. v. Sard Custom Homes, LLC, Docket No. 11-3298 (2d Cir. August 15, 2012), the court considered a design firm’s claim for infringement of front elevation drawings showing the appearance of the front of three houses, surrounded by lawn, bushes and trees.  There was no dispute the defendants had published exact copies of the drawings.  The lower court had held, however, that these drawings were not protected under the Copyright Act, as amended by AWCPA.  The court interpreted previous decisions as holding that architectural drawings only could be protected if they contained sufficient detail from which a building could be constructed.  That interpretation sought to reconcile the extension of copyright protection to architectural works, through AWCPA, with the long-established principle that copyright law does not protect ideas, only the particular expression of ideas.

The Second Circuit disagreed.  The court held that regardless of whether the drawings were protectable as “architectural works” under AWCPA, they remained protectable as “pictorial” works under pre-existing law. 

Scholz Design confirmed that AWCPA’s extension of copyright protection to buildings did not result in a contraction of protection for the underlying drawings.  Thus, according to the Second Circuit, the unauthorized publication or reproduction of original architectural drawings, even where lacking in detail needed for actual construction, has been and remains unlawful.

In the copyright case, Viacom International, Inc. and others sued Google and its YouTube subsidiaries for infringement based on protected content uploaded by its users.  Since its founding in 2005, YouTube’s primary defense against such claims has been the “safe harbor” provisions of the Digital Millennium Copyright Act of 1998 (“DMCA”).  In Viacom International, Inc. v. YouTube, Inc., 676 F.3d 19 (2d Cir. 2012), however, the Second Circuit Court of Appeals reversed a grant of summary judgment in favor of Google/YouTube, dealing a blow to Google/YouTube’s broad interpretation of the safe harbor defense. 

The court held a jury could conclude that Google/YouTube lost safe harbor protection because it had “knowledge of specific and identifiable infringements.”  The court cited survey results indicating 60% to 80% of the material on YouTube contained copyrighted material and communications among Google/YouTube staff indicating some awareness that its service was being used for infringing activity.  The court also held that liability based on a theory of “willful blindness” or “conscious avoidance” was possible, even though safe harbor protection is generally not contingent on affirmative monitoring by a service provider.  Finally, the court suggested that Google/YouTube might have forfeited safe harbor protection because it had the “right and ability to control the infringing activity and received a financial benefit directly attributable to that activity” or because YouTube was engaged the “manual selection of copyrighted material for licensing to a third party.” 

In the trademark case, Google suffered another potential strike against its business model, this time concerning the sale of trademarks as keywords.  In Rosetta Stone Ltd. v. Google, Incorporated, 676 F.3d 144 (4^th Cir. 2012), Google again had a favorable summary judgment ruling reversed, and the case was remanded for further proceedings as to whether Google infringed Rosetta Stone’s trademark by “selling” the mark as a “keyword” to third parties, resulting in non-Rosetta Stone “sponsored ads” appearing in a search for “Rosetta Stone.”  Rosetta Stone contended it had been flooded with customer complaints about counterfeit software since 2009, when Google relaxed its policy on the sale of company trademarks as keywords to third parties.

Just as the evidence in Viacom indicated that Google had some awareness of copyright infringement, the court of appeals found sufficient evidence to permit a jury to conclude that Google knew its sale of marks as keywords to third parties would cause confusion and that actual confusion had occurred.  The court was not persuaded by Google’s protestations that its policies prohibited the purchases of keywords to advertise non-genuine (i.e., counterfeit) goods. 

The Second Circuit’s decision in Viacom and the Fourth Circuit’s decision in Rosetta Stone have revived the debate over the liability of Internet service providers like Google that provide platforms for intellectual property infringement.  These rulings may have also rattled any sense of blanket security that these service providers enjoyed following the lower courts’ summary judgment rulings.  Instead, both decisions suggest a movement towards fact-sensitive analyses that will help further define the scope and applicability of intellectual property laws to  ever-changing technologies. 

In notable contrast to these recent defeats for Google in the U.S., a French court ruled on May 29, 2012 that Google did not infringe a broadcaster’s copyrights by permitting several television shows to be available on YouTube.  Reviewed in tandem with the U.S. decisions, it is clear that the ongoing struggle at the intersection of intellectual property law and the Internet will continue to evolve on a both a domestic and world-wide basis.

Tetris was developed in the mid-1980’s by Russian computer programmer Alexy Pajitnov.  The game itself is rather simple: the player must create horizontal lines along the bottom of a playing field by fitting together geometric block pieces called tetrominos.  Each time a line is completed, it disappears from the playing field and the player is awarded points.  Tetris gained worldwide popularity following its introduction on the Nintendo Entertainment System gaming platform and its hand-held progeny, the Game Boy.  Since its inception, Tetris has sold 200 million units worldwide on a variety of platforms, including Apple‘s iPhone.

In May 2009, Xio Interactive, Inc. (“Xio”) developed Mino, a multi-player puzzle game that Xio’s owner admits was copied from Tetris.  After learning of Mino, Tetris Holding, the owner of the copyright to Tetris, sent take-down notices to Apple, Inc., which temporarily removed the game from its online App Store (its application marketplace).  Apple later notified Tetris Holding that it would reinstate the game to its App Store unless Tetris Holding filed a copyright infringement lawsuit against Xio, which it did in December 2009.  Both Tetris Holding and Xio moved for summary judgment.

Given Xio’s admission that it “copied Tetris, purposefully and deliberately, in designing Mino,” the question before the court in Tetris Holding, LLC v. Xio Interactive, Inc., 2012 WL 1949851 (D.N.J. May 30, 2012), was “not whether summary judgment [was] appropriate, but rather, which party [was] entitled to summary judgment.”  Xio’s defense was based almost entirely on the proposition that the elements copied from Tetris, such as “the rules, function, and expression essential to the game play,” were not protectable under the Copyright Act.

Video games, like other forms of electronic media, are entitled to limited levels of copyright protection.  That limitation arises from the principle that copyright law does not protect ideas, only expressions of ideas.  While game mechanics and rules (the idea) are generally not protectable, the particular manner in which those mechanics and rules are presented (the expression) may be.  Using the “idea-expression dichotomy” as its guiding principle, the court first recognized that the abstract ideas underlying Tetris, such as the rotation of falling blocks to create horizontal lines, were not protectable.  However, the court found Mino to be identical to Tetris in ways beyond its basic unprotectable ideas. 

For example, the Court found “the style of the pieces [in the two games] nearly indistinguishable, both in their look and in the manner they move, rotate, fall, and behave.  Similar bright colors are used in each program, the pieces are composed of individually delineated bricks, each brick is given an interior border to suggest texture, and shading and gradation of color are used in substantially similar ways to suggest light is being case on the pieces.”  The court went on to discuss additional protectable elements, such as: (1) the dimensions of the playing field; (2) a preview of the next piece to fall; (3) the change in the color of the pieces when they are locked with accumulated pieces; and (4) the automatic filling of the playing field when the game is over.  The court concluded that “[n]one of these elements are part of the idea (or the rules or the functionality) of Tetris, but rather are means of expressing those ideas.”  Because Xio chose to copy these protectable elements despite the “almost unlimited number” of variations that were available to it, the court had little hesitation granting summary judgment in favor of Tetris Holding.

There is no question that clones – games that are based in whole or in part on other popular games – have permeated the video game landscape.  Even a cursory search of the Apple’s App Store reveals countless examples of clones developed to capitalize on the popularity of previously released games.  Given the limited protectability of games, courts have been reluctant to hold that clones infringe on any exclusive rights afforded to game developers.  Although it remains to be seen whether Tetris Holding, LLC will have a major impact on federal courts addressing this issue, or whether the appellate courts will revisit the “idea-expression dichotomy” in the context of video games, the holding reinvigorates the debate over how far a game developer may go when developing a clone.

XMH Corporation (formerly Hartmarx) (“XMH”), and a subsidiary, Simply Blue, filed for bankruptcy under Chapter 11 of the Bankruptcy Code. XMH asked permission of the Bankruptcy Court to sell assets of Simply Blue, which assets included an executory contract between Simply Blue and Western Glove Works (“Western Glove”). The contract with Western Glove was a two part contract which provided that Western Glove provide Simply Blue with a trademark license for a period of time, and once that time period elapses and the license expires, Simply Blue would provide Western Glove with certain support services with respect to the product using the trademark.

Western Glove objected to the assignment by Simply Blue of the contract, arguing that the contract was a trademark license and that, absent its permission, Simply Blue could not assign the contract to a third party.

The Seventh Circuit, in deciding whether the contract was assignable, recognized that Section 365(c)(1) of the Bankruptcy Code prohibits the assignment of an executory contract if “applicable law” authorizes the other party, in this case, Western Glove, to refuse to accept performance from an assignee, in this case, a third party purchaser, whether or not the contract itself prohibits assignment. The court found that “applicable law” means any laws other than bankruptcy law, and for the purposes of this matter, trademark law.

Citing a number of trademark cases, the Court noted that the default rule is that a licensee of a trademark license cannot assign the license unless the license expressly permits assignment. The Court’s reasoning was based on basic trademark policy. The Court explained that a trademark is a shorthand designation of a brand that consumers will use to associate with the particular product. If an unauthorized third party is granted the right to use the trademark (through the assignment of the license) without the owner’s permission, the owner will no longer be able to control the product or the use (or misuse) of the trademark.

Accordingly, because the contract between Simply Blue and Western Glove did not contain a provision expressly allowing assignment by the licensee, the Court barred the assignment absent the express consent of Western Glove.

Ultimately, the Court found that the first portion of the contract, the license portion, had expired, and only the second portion, the service portion, of the contract remained. Thus, because the trademark license was no longer in effect, the agreement was merely a service contract that was freely assignable by the Bankruptcy Court.

Notwithstanding the conclusion of the Court regarding the assignability of the contract, the Court’s holding is important to consider when drafting licenses and the effect such drafting can have during bankruptcy proceedings. To summarize, the Court held that absent an express provision in a trademark license, a licensee in bankruptcy does not have the right to assign the trademark license unless it has the express consent of the licensor.

As a practical matter, this holding emphasizes two important structure concepts. First, it is important how you designate your contract. A service contract, pursuant to this ruling, remains fully assignable in bankruptcy, despite language in the contract providing otherwise. However, a trademark license will not be assignable unless there is a provision in the license expressly permitting assignment. Second, to prevent any ambiguity regarding whether a court, bankruptcy or otherwise, would allow assignment of a trademark license, it is in the best interests of both licensees and licensors that the trademark license expressly address the assignability of the contract.

The patent involved in Celsis In Vitro, Inc. v. Cellzdirect, Inc. concerns mechanisms for the preservation of liver cells through multiple freezing processes, which enables researchers to have increased access to cell samples over time, and a larger population of donors. Celsis brought suit alleging infringement and, following limited discovery and an evidentiary hearing, obtained a preliminary injunction barring the sale of the accused products.

The principal issues on appeal were the correctness of the trial court’s conclusions as to infringement and validity (that the patented method was not obvious in view of the prior art), as well as the determination of irreparable harm. Applying the abuse of discretion standard of review applicable to rulings on preliminary injunctions, the Federal Circuit relied heavily on the district court’s assessment of expert testimony (or lack thereof) in affirming the injunction.

On the infringement issue, the district court heard testimony from the parties’ competing experts and found the patent owner’s expert was “helpful in carefully explaining how [the defendant’s] accused process [met] all the limitations of the asserted claims” whereas the defense’s experts “didn’t offer anything in the way of opinions to address the proper interpretation of the patent’s claims.” Finding the plaintiff’s expert more persuasive, the district court had ruled that the patent owner was likely to succeed on its claim, weighing in favor of the issuance of an injunction. On appeal, the Federal Circuit held that the district court did not abuse its discretion in finding a likelihood of success as to infringement.

Similarly, the Federal Circuit deferred to the district court’s determination that the testimony of the defense’s experts on issues of obviousness were not credible, opining that the district court “has wide discretion to weigh expert credibility” and the Federal Circuit will defer to those determinations.

On the issue of irreparable harm, the district court found that Celsis would suffer irreparable harm in the form of price erosion, loss of goodwill, damage to reputation and loss of business opportunities based on the unrebutted expert testimony of Celsis’ expert. The Federal Circuit held that there was “no error in the district court’s reliance on Celsis’ unrebutted expert testimony” and based on such testimony, found no reason to revise the district court’s fact determinations. Relatedly, on the district court’s conclusions regarding the balance of harms weighing in Celsis’ favor, the Federal Circuit opined: “This preliminary injunction factor is also affected by [the defense’s] decision not to present expert testimony to rebut Celsis’ expert testimony.”

The Celsis case highlights the significance of both the credibility of dueling experts on issues before the court, as well as the determination of whether to present rebuttal expert testimony.

Section 282 of the Patent Act states that a “patent shall be presumed valid” and the “burden of establishing invalidity of a patent . . . shall rest on the party asserting such invalidity.” The Federal Circuit has long read the Patent Act to require a party seeking to overcome a patent’s presumption of validity to prove its case by clear and convincing evidence.

Microsoft’s challenge sought to lower Section 282’s standard to a preponderance of the evidence.  Microsoft argued that the statutory presumption of validity should not apply when an issued patent’s validity is challenged, especially when the challenge is based on prior art that was not disclosed to the PTO during the examination period. The underlying theory for this argument is that the presumption of validity – premised on the notion that a government agency is presumed to perform its function – is faulty where the PTO did not actually consider the allegedly invalidating material in deciding to allow an invention to issue as a patent.

The Supreme Court was unconvinced.  The Court explained that in asserting an invalidity defense, the accused infringer “must contend with the first paragraph of Section 282, which provides that ‘[a] patent shall be presumed valid’ and ‘[t]he burden of establishing invalidity . . . rest[s] on the party asserting such invalidity.’” Congress, in choosing Section 282’s phrase “presumed valid,” used a term with a settled meaning.  According to that meaning, a defendant raising an invalidity defense bears a heavy burden of persuasion, requiring proof of the defense by clear and convincing evidence.  The Court also noted that courts have interpreted Section 282 the same way for decades and that “during this period, Congress has often amended the patent law, but apparently never considered any proposal to lower the standard of proof.” 

Although the Court recognized that courts of appeals have “observed that the presumption of validity is ‘weakened’ or ‘dissipated’ in the circumstance that the evidence in an infringement action was never considered by the PTO,” it rejected the notion that such cases indicated a lowered standard of proof.  Instead the Court interpreted such statements as indicating how newly considered evidence may carry more weight.  Thus, while it may be easier for a patent challenger to meet its burden of proof with newly considered evidence, the height of its burden remains the same.

Had the Court sided with Microsoft, the lower standard of proof could have created uncertainty as to the stability of patent rights and caused a significant shift in patent-infringement litigation.  In the end, the Court preserved the status quo.