Thursday, June 9, 2011

Will Microsoft v i4i Influence Canadian Law?

In its decision in Microsoft v i4i, released today, the USSC affirmed a strong presumption of patent validity, holding that an invalidity defence must be proven by “clear and convincing evidence.” The Canadian courts are very receptive to considering case-law from other jurisdictions as persuasive authority, but as Phelan J noted in 2010 FC 1011 “this must be done mindfully.” I suggest that the i4i decision is unlikely to be influential in Canadian law, for three reasons: the statute is different, the precedent is different, and the USSC expressly did not consider policy arguments.

In i4i the USSC noted that the US statute “includes no express articulation of the standard of proof,” so its holding did not turn on the text of the statute. The Court also refused to consider the policy arguments, on the basis that the case-law was too well established: “We find ourselves in no position to judge the comparative force of these policy arguments. For nearly 30 years, the Federal Circuit has interpreted §282 as we do today.” Thus the decision of the USSC in i4i was based entirely on affirmation of a consistent line of precedent in US law, which first as a matter of common law, and subsequently as a matter of interpretation of the statutory provision, which was understood as codifying the common law, has always required clear and convincing evidence to hold a patent invalid.

Compare this with the Canadian situation. The leading case is the decision of the FCA in Diversified Products Corp v Tye-Sil Corp (1991) 35 CPR(3d) 350 (FCA) in which the Court of Appeal held that the statutory presumption is only a prima facie presumption, which is to say that it will govern in the absence of any evidence, “but it can have no weight capable of being put in the balance against opposing evidence which is believed” (quoting Fox). Consequently, a challenge to the validity of a patent need only satisfy “the usual standard of balance of probabilities.” Prior to that decision, as the Court of Appeal explained, the preponderance of the cases applied, or at least articulated, a higher standard, but the cases were not consistent and the matter had been the subject of controversy. The standard set out in Tye-Sil has since been consistently followed in Canada. The only caveat is that in Wellcome / AZT 2002 SCC 77 at [43]-[44] the Supreme Court held that the appropriate “standard of review” of a granted patent on a question of mixed fact and law, such as validity challenge based on utility, is “reasonableness simpliciter.” This was a short discussion - two paragraphs - which had not been briefed by the parties; the Court failed to even cite Tye-Sil, the leading case. Since then, the Federal Court has refused to follow the Supreme Court on that point, with Gauthier J delivering a forceful explanation of where the Supreme Court went wrong. Of course a statement by the Supreme Court, even in passing, is strong authority in its own right. But the point is that there is not any consistent history of applying a high standard. The Supreme Court’s statement stands on its own merits, and not as affirmation of a consistent body of prior case-law. The decision of the USSC in i4i is entirely different in that respect.

The Canadian Act is also different from the US statute. The Canadian Act now provides that a granted patent shall be valid “in the absence of any evidence to the contrary.” Prior to the 1985 revisions it has similarly provided for “prima facie” validity. Both of these are consistent with a weak presumption. The US Act says simply that a patent “shall be presumed valid.” Even if the i4i decision turned on the statute, which it did not, these statutory differences are significant enough to reduce the significance of US law.

Further, while the USSC did not expressly consider policy issues, it indirectly acknowledged the force of the argument in favour of a weak presumption, at least in the context where the evidence before the court was not before the examiner. The USSC held it was bound by precedent to apply the same presumption of validity even in that context, but the Court went on to say “if the PTO did not have all material facts before it, its considered judgment may lose significant force. And, concomitantly, the challenger’s burden to persuade the jury of its invalidity defense.” It is evidently illogical to grant deference to an examiner who did not have all the facts. As Gonthier J explained, this is why the Supreme Court was wrong to consider a validity attack on a challenged patent as if it were an application for judicial review of an administrative body that had heard a full argument on the facts. This is a very strong point, and despite the US precedent, it persuaded the USSC to create a loophole in the nominally strong presumption in such a case.

Finally, it might be said that the fact of a consistent body of case-law in the US should be persuasive in itself, as reflecting the cumulative wisdom of the US courts. But against that, we should look to the cumulative wisdom of the English courts, where the standard of review is the same as that articulated in Tye-Sil.

While the strength of the presumption of validity in Canada is currently something of an open question in consequence of the SCC’s two paragraphs in the AZT decision, but I suggest that despite the high authority of the USSC, the basis for its decision in i4i decision means that that case should not and will not affect the resolution of this issue in Canadian law.

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