In what many analysts consider its most important patent ruling in decades, the Supreme Court established new tests for issuing patents that combine elements of previously issued patents [“High Court Puts Limits on Patents,” by Linda Greenhouse, New York Times, 1 May 2007, and “Rulings Weaken Patents’ Power,” by Robert Barnes and Alan Sipress, Washington Post, 1 May 2007]. As an entrepreneur trying to build corporate value based on intellectual property, any ruling that strengthens or weakens IP protection is of interest to me. The Court’s rulings involved two cases: KSR International v. Teleflex and AT&T v. Microsoft. According to Barnes and Sipress, the KSR International case provided the most impactful ruling.
“The decision sends a clear message that the U.S. Patent and Trademark Office and lower courts must be more open in considering whether inventions are ‘obvious,’ a common ground for denying an application.”
That sounds like a very subjective test, but, writing for the majority, Justice Anthony Kennedy, laid out a couple of tests that can be used to help reach that judgment. The intent of the ruling, the Justice insists, is to promote rather than stifle innovation. Greenhouse reports it this way:
“The Supreme Court … raised the bar for obtaining patents on new products that combine elements of pre-existing inventions. If the combination results from nothing more than ‘ordinary innovation’ and ‘does no more than yield predictable results,’ the court said in a unanimous opinion, it is not entitled to the exclusive rights that patent protection conveys. ‘Were it otherwise,’ Justice Anthony M. Kennedy wrote in the opinion, ‘patents might stifle, rather than promote, the progress of useful arts.’ Because most inventions combine previously known elements, the court’s approach to deciding what sort of combination is so ‘obvious’ as to be ineligible for patent protection will have widespread application. The result will be to make patents harder to obtain and defend. ‘Granting patent protection to advances that would occur in the ordinary course without real innovation retards progress,’ Justice Kennedy said. He added that such patents were also undesirable because they might deprive earlier innovations of ‘their value or utility.’ Patent law experts said the ruling created a common sense standard that could have a broad impact.”
The concern of many patent holders (especially in the pharmaceutical and biotechnology sectors) is that these new tests could be used to request the Patent Office to re-examine patents it has already issued. To receive a patent an idea must be novel, useful, and not obvious to a person of normal skill. The KSR International case focused on the “obvious.” Greenhouse writes:
“At issue was an adjustable gas pedal for use on cars and trucks equipped with electronic engine controls. How could the vehicle’s computer tell the pedal’s position? A Canadian company, KSR International, under contract to General Motors, solved the problem by mounting an electronic sensor at the pedal’s fixed pivot point in order to communicate the necessary information. A rival, Teleflex Inc., demanded royalties, claiming the device infringed its patent on an adjustable gas pedal equipped with an electronic sensor. KSR refused to pay on the ground that Teleflex had combined existing elements in an obvious manner and that its patent was therefore invalid. KSR won in Federal District Court in Detroit, but that decision was overturned in 2005 by the United States Court of Appeals for the Federal Circuit. That court, in Washington, has exclusive jurisdiction over patent appeals. … In granting judgment for KSR on Monday, in KSR International Co. v. Teleflex Inc., No. 04-1350, the Supreme Court listed several specific errors and ‘fundamental misunderstandings’ in how the Federal Circuit had analyzed the case. In looking at the Teleflex patent, Justice Kennedy said, the appeals court made the mistake of considering what ‘a pedal designer writing on a blank slate’ would have done to solve the problem of the pedal and the sensor. But the slate was not blank, he continued, and the Teleflex patent was essentially an upgrade of existing technology. Justice Kennedy said the problem was not necessarily the Federal Circuit’s overall approach, but rather its rigid way of applying a commonly used legal test. The test requires a person challenging a patent as obvious to identify a reason that would have prompted someone to combine two or more previous inventions, such as published articles suggesting such a combination. This has made it difficult to attack a patent as obvious, and has often precluded summary judgment, instead requiring an expensive jury trial.”
The other case, the one involving AT&T and Microsoft, examined whether Microsoft violated AT&T patents when Windows was loaded on computers manufactured and sold overseas. AT&T wanted damages for every Windows-based computer made outside the United States using its technology that compresses speech into computer code. The Supreme Court ruled that software should be treated like exported blueprints and schematics. Barnes and Sipress report:
“The court ruled … that Microsoft did not violate an AT&T patent when its Windows software was installed on computers manufactured overseas. ‘The presumption that United State law governs domestically but does not rule the world applies with particular force in patent law,’ Justice Ruth Bader Ginsburg wrote in the 7 to 1 decision. Justice John Paul Stevens dissented, and Chief Justice John G. Roberts Jr. recused himself from the case.”
In trying to strike a balance between protecting truly innovative ideas and weeding out applications that it considers frivolous, the Supreme Court, through its rulings, has clearly indicated that it believes patent protection has been too strong. How this new judicial test (i.e., combination results that yield nothing more than ‘ordinary innovation’ and ‘predictable results’) is actually applied by lower courts will determine in large measure whether or not these rulings will flood the Patent Office with requests for re-examination of patents. The courts could also be flooded with cases. After the ruling, Vonage immediately tried to retrial in Verizon’s successful patent case against it and the court denied the retrial. Vonage will likely try again. It is important to remember that the Supreme Court was trying to encourage not discourage true innovation. It has problems with “new and improved” versions of old ideas. Those interested in intellectual property rights will want to watch how this unfolds.