Patent owners enforcing their rights who seek to exclude testimony about a pending administrative challenge to the patent-in-suit may face a Hobson’s choice – at least in Nevada. Particularly, the price for excluding evidence of pending administrative challenges to a patent may be a loss of the presumption of the patent’s validity in a district court trial.

In federal courts, judges may preclude evidence from being presented to a jury, particularly where the evidence has the potential to cause unfair prejudice. Such an opportunity is provided by Rule 403 of the Federal Rules of Evidence, which states that a court may exclude relevant evidence if its probative value is substantially outweighed by a danger of unfair prejudice, confusing the issues, misleading the jury, undue delay, wasting time, and/or needlessly presenting cumulative evidence.

Judges may use Rule 403 in patent infringement cases, particularly in cases where the patent in question is part of a concurrent reexamination proceeding in the Patent Office. In a recent ruling on a motion to preclude evidence concerning a concurrent reexamination of a patent, the District Court of Nevada held, consistent with precedent, that the evidence would be prejudicial, and therefore was inadmissible at trial. Server Technology, Inc. vs. American Power Conversion Corporation (3:06-CV-00698-LRH-VPC (D. Nev.)).

Particularly, District Court Judge Larry Hicks stated that the reexamination of the patent in question was not final, and that a final decision would not occur until long after the trial. Judge Hicks reasoned that the prejudicial effect of notifying the jury about the reexamination proceeding would influence the jury’s determination of the issues of infringement and invalidity. In addition, allowing the evidence would only confuse a jury because both the standard of proof and the applied claim construction by the Patent Office would be different from the standards to be applied at trial. Such differences, in addition to causing jury confusion, would also waste time and resources because it would be necessary to explain the differences to the jury.

However, as a counterbalance to excluding testimony about the pending administrative challenge, Judge Hicks also appeared to have stripped away the “presumption of validity” generally afforded to plaintiffs in infringement suits. Such a presumption of validity is codified in 35 U.S.C. §282(a), which states:

A patent shall be presumed valid. Each claim of a patent (whether in independent, dependent, or multiple dependent form) shall be presumed valid independently of the validity of other claims; dependent or multiple dependent claims shall be presumed valid even though dependent upon an invalid claim. The burden of establishing invalidity of a patent or any claim thereof shall rest on the party asserting such invalidity.

Judge Hicks held “…that it would be prejudicial to [the accused infringer] to allow argument and instruction on [the patent’s] presumption of validity because of the ‘rationale underlying the presumption of validity is much diminished where the evidence before the factfinder was not before the PTO during the examination process’” citing Oracle America, Inc. v. Google, Inc. 2012 U.S. Dist. LEXIS 688, *11-12 (N.D. Cal. 2012).

In contrast, the court in Oracle denied Oracle’s motion to exclude information on three reexamination proceedings, relying on the Supreme Court’s decision in Microsoft v. i4i, 131 S.Ct. 2238 (2011) and KSR v. Teleflex, 550 US 398 (2007). The three reexamination proceedings had “gone to the end of their process,” where the claims of two patents-in-suit were rejected in a final rejection and the claims of a third patent-in-suit were allowed. Because the rejections in the reexaminations of the two patents-in-suit were based on prior art not previously considered by the PTO, the Oracle court allowed a jury instruction on the presumption of patent validity, stating that “…it would be misleading to instruct the jury on the presumption of validity while concealing from the jury the fact that the rationale for the presumption – PTO examiner expertise – has been drawn into question by more recent examiner rejections based in part on prior art previously not disclosed to the PTO.” Notably, at the time of the district court’s ruling in Oracle, no final decision had been issued in the two reexaminations where the PTO finally rejected the claims over new prior art.

Judge Hicks’ decision to preclude jury instructions on the presumption of validity appears to be based on new prior art evidence submitted during the reexamination, albeit the decision does not specifically discuss it. The recent trend limiting the presumption of validity for issued patents where new prior art is concurrently being scrutinized by the PTO would seemingly apply to any administrative patent review proceeding that is concurrent with a federal district court trial, including reexaminations, inter partes review proceedings, and the other new mechanisms for administratively challenging patents under the America Invents Act.