On September 6, 2012, the Modernist published an article in which he intimated that the "the only recent Supreme Court decision relating to software patent law" supports Google's (NASDAQ:GOOG) defense in its upcoming trial with Vringo (NASDAQ:VRNG). This is an utterly tortured interpretation of the law. I write to debunk the Modernist's legal interpretations and conclusions and present a more accurate and fulsome interpretation of potentially relevant Supreme Court precedent.
The Supreme Court case referenced by the Modernist is Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289, 1291, 182 L. Ed. 2d 321 (2012). From the outset, the Modernist is incorrect to characterize the Mayo decision as relating to software patent law. It does not. The Mayo case involved "diagnostic tests that embody the processes the patents describe." Id. In addition, the Modernists fails to acknowledge that the Mayo decision did not involve the defense of "prior art" but dealt with the legal proposition that laws of nature, natural phenomena, and abstract ideas are not patentable subject matter under § 101 of the Patent Act. Id. These two facts alone reveal the error in the Modernist's article.
In Mayo, the Supreme Court held that a medical testing patent was invalid under § 101 of the Patent Act. The claims of the patents at issue involved three steps: (1) administering a drug to a patient; (2) measuring a metabolite created by the body; (3) informing the doctor that metabolite concentrations are too high or too low so the doctor can evaluate whether the drug dose was effective. In Mayo, the drug was already known as was the fact that it produced a metabolite and that the metabolite could be used to determine appropriate drug dosage. The only thing that was not known was the correlations between the metabolite levels and the efficacy of the drug. The Court found that these correlations were not patentable stating "the relation itself exists in principle apart from any human action. The relation is a consequence of the ways in which thiopurine compounds are metabolized by the body-entirely natural processes. And so a patent that simply describes that relation sets forth a natural law." Id. Because "a law of nature is not patentable, then neither is a process reciting a law of nature." Id.
After reading the above-described background and holding of Mayo, does anyone think that search algorithms are similar to laws of nature or that the issues that will be presented in the Vringo v. Google trial are at all related to the facts as described by the Supreme Court in Mayo? I do not.
The Supreme Court case that is actually relevant to the Vringo v. Google trial is Microsoft Corp. v. i4i Ltd. P'ship, 131 S. Ct. 2238, 180 L. Ed. 2d 131 (2011), in which i4i held a patent claiming an improved method for editing computer documents. Sound more relevant to the Vringo v. Google dispute than a drug metabolite diagnostic test?
i4i sued Microsoft (NASDAQ:MSFT) for willful infringement of its patent, and Microsoft counterclaimed and sought a declaration that the patent was invalid. Microsoft's defense centered on "prior art" as can be seen in its briefing to the Supreme Court. Microsoft objected to i4i's proposed jury instruction that the invalidity defense must be proved by clear and convincing evidence.
Microsoft argued that because certain information about the prior art was never presented to the PTO at the time i4i's patent was issued, Microsoft only needed to show by a preponderance of the evidence that i4i's patent was invalid. The Supreme Court rejected Microsoft's argument holding:
Under § 282 of the Patent Act of 1952, "[a] patent shall be presumed valid" and "[t]he burden of establishing in-validity of a patent or any claim thereof shall rest on the party asserting such invalidity." 35 U.S.C. § 282. We consider whether § 282 requires an invalidity defense to be proved by clear and convincing evidence. We hold that it does
That will be Google's burden at trial if the Court even allows them to present their belatedly raised prior art defenses. Google must show by clear and convincing evidence that the Vringo patents should not have been issued because of alleged prior art. That is a high burden. In the Microsoft case, the prior art was never presented to the PTO and the jury still found that Microsoft willfully infringed i4i's patent and that Microsoft was required to prove the invalidity of i4i's patents by clear and convincing evidence.
Here, the prior art was not hidden from the PTO, but instead disclosed on page 1, which puts Vringo in an even stronger position than i4i's position in its litigation against Microsoft.
Therefore, based on the law as it exists, and not as expressed by the Modernist, I believe that Google's prior art defense, even if permitted, is most likely dead on arrival based on the presumption of validity of a patent. That leaves only the question of whether Google is infringing Vringo's patents.
That is the multi-billion dollar question.
Disclosure: I am long VRNG. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.