U.S. Supreme Court Must Reverse Federal Circuit Ruling that Undermines USPTO and Lower Courts, says i4i's Chairman

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Loudon Owen questions CAFC's ruling in Soverain Software v. Newegg, characterizes decision as devastating attack on U.S. Patent System.

If the CAFC’s ruling stands, there will be severe, long-term consequences. It will discourage innovation, thereby harming the public interest, by weakening patent rights and creating great uncertainty as to whether patents can be enforced.

The validity of the entire U.S. patent system has come under attack as a result of a recent ruling by the U.S. Court of Appeals for the Federal Circuit (CAFC), says Loudon Owen, chairman of Toronto-based global technology company i4i.

i4i filed an amicus curiae in support of fellow technology company Soverain Software's petition to the United States Supreme Court in the patent infringement case against Newegg, Inc.

"The Federal Circuit made a profound error in its September ruling, in contrast with two lower courts and the USPTO, to find Soverain's patents invalid due to obviousness," says Owen. "The Court substituted its own facts for determinations of the USPTO during initial examination, for those of the USPTO during reexamination, for those appropriately made by the district court at trial, and for those in the jury verdict in co-pending district court case on the same patent."

Adds Owen, "All four of these tribunals, each charged with finding fact and applying that fact, held that Soverain’s patents were not invalid."

"If the CAFC’s ruling stands, there will be severe, long-term consequences. It will discourage innovation, thereby harming the public interest, by weakening patent rights and creating great uncertainty as to whether patents can be enforced. It will unfairly upset the settled expectations not only of inventors but also of investors, licensees, and others who have played by the existing rules for decades. And it will marginalize the USPTO, to which Congress long ago gave primary authority over issues of patentability and which has the expertise to establish facts and award patents."

"This attack on patent-holders and the adverse implications from the changes proposed by Newegg are unprecedented, and would deal a devastating blow to any U.S. patent-holder, large or small," says Owen. "The proposed change would alter the law and effectively eviscerate the patent system."

i4i's brief argues that it is not the purview of the Federal Circuit to find facts, and that it should recognize the importance of the decision in Microsoft v. i4i, in which the U.S. Supreme Court reaffirmed that a challenger defending a claim of invalidity has the burden of proof, stating: "We consider whether §282 requires an invalidity defense to be proved by clear and compelling evidence. We hold that it does."

In September, the CAFC confirmed its January reversal of earlier rulings that Newegg had infringed three patents of Soverain Software relating to the Internet commerce technology , holding that Soverain's patents were unenforceable due to obviousness. According to i4i's Owen, the CAFC’s ruling in Soverain v. Newegg undermines the Supreme Court’s decision in Microsoft v. i4i.

"In making its ruling, the CAFC declared for itself the right to decide facts in a case on appeal," says Owen. "But finding fact is not the role of the CAFC."

Under the Patent Act, patents issued by the USPTO are "presumed valid" (35 U.S.C. §282). "The USPTO protects the rights of American innovators, granting them a license to reap just rewards from their inventions," says Owen. "It is ironic that the CAFC—the very court purposely established by Congress in 1982 to support and enforce the protections for patents enshrined in the U.S. Constitution—has made this wrong decision."

Information about Soverain v Newegg (case summary and court/USPTO documents) can be found at http://www.soverain.com. Soverain v Newegg is case number 07-CV-0511, Judge Leonard Davis, in the U.S. District Court for the Eastern District of Texas, Tyler Division. Microsoft v i4i is case number (564 U. S. ____ (2011) at the Supreme Court of the United States.

i4i is a global technology company headquartered in Toronto.

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