U.S. Supreme Court Eases Obviousness Standard for Patents

In a major patent law development, the Supreme Court on April 30 adopted a new, flexible standard that will make it easier for patents to be denied or challenged on the grounds that the invention at issue is too obvious to deserve patent protection.

The unanimous ruling in KSR International Co. v. Teleflex Inc. could also subject existing patent-holders to fresh litigation over obviousness ' a threshold issue that is part of every patent determination.

'This leaves patent litigation in a state of total disarray,' says Kenneth Bass III of Sterne, Kessler, Goldstein & Fox, part of the legal team representing Teleflex, a Pennsylvania company whose patent for an automobile gas pedal assembly was challenged by KSR, a Canadian firm. Teleflex held onto its patent under a more restrictive standard for finding obviousness used by the U.S. Court of Appeals for the Federal Circuit. But the high court, in relaxing the standard, ruled against Teleflex and returned the case to the Federal Circuit.

'Judges are now permitted to use their own common sense rather than objective evidence or testimony,' Bass says.

Justice Anthony Kennedy, writing for the Court, rejected the Federal Circuit's 'rigid approach' embodied in the so-called teaching, suggestion, or motivation test, in part because it depends on scientific literature and other forms of evidence that may not keep pace with fast-developing technologies.

'Granting patent protection to advances that would occur in the ordinary course without real innovation retards progress and may, in the case of patents combining previously known elements, deprive prior inventions of their value or utility,' Kennedy wrote. 'The results of ordinary innovation are not the subject of exclusive rights under the patent laws. Were it otherwise patents might stifle, rather than promote, the progress of useful arts.'

The ruling was yet another rebuke for the Federal Circuit, which celebrated its 25th birthday in early April. The court was created in 1982 to handle patent appeals, but has been criticized in recent years for favoring patent-holders to the detriment of others seeking to innovate and expand on existing patents.

The Supreme Court has overturned Federal Circuit rulings five times in the last two years, and it did so twice on Monday; KSR and Microsoft v. AT&T, in which the Court sided with Microsoft in a patent dispute with AT&T.

But the Court's rejection of the circuit in the KSR case was not as harsh as might have been expected from the oral arguments last November. Justice Antonin Scalia then dismissed the Federal Circuit's test as 'gobbledygook,' and Chief Justice John Roberts Jr. called it 'worse than meaningless.'

The criticism at oral argument was so pointed in November that Federal Circuit Chief Judge Paul Michel defended his court publicly in comments to Patent Strategy & Management's ALM affiliate Legal Times.

But Kennedy's unanimous ruling was more cordial, describing the Federal Circuit's test as a 'helpful insight' that could still be part of a broader test for obviousness.

On Monday, following the ruling, Michel declined to discuss its substance but did say, 'It is extremely helpful to have a single opinion [from the Court.] I'm very happy to have that; it will make it very much easier to apply.' Michel added that under his reading of the opinion, the teaching, suggestion, or motivation test remains part of the calculation of obviousness, 'but it gives us forceful instruction on the manner in which the test is to be applied.'

Steve Maebius of Foley & Lardner said the wording of the decision suggests the high court 'wanted to avoid a radical upsetting of the apple cart.' But the decision will have a 'really broad impact,' because in the trade-off between flexibility and predictability, 'the Court chose flexibility.'

The new case-by-case approach 'could increase litigation and the cost of obtaining a patent in the first place,' Maebius says, because patent examiners will now feel freer to reject patent applications on obviousness grounds.

Rachel Krevans of Morrison & Foerster said in a statement, 'The new test for obviousness, which will apply to challenges to patent validity regardless of whether the patent was issued before or after the KSR decision, may also impair the value of previously issued U.S. patents, because it makes it easier to challenge them in litigation, and to ask the patent office to reconsider the decision to issue the patent.'

In the second patent case decided Monday, AT&T claimed that Microsoft had infringed on its patent for software used by computers to digitally encode and compress recorded speech. The litigation focused on Microsoft's installation of software including the disputed program in computers manufactured overseas.

Normally there is no infringement of U.S. patents in products made and sold in another country, but AT&T cited an exception to patent law that allows for in infringement claim if a product's components are supplied from the United States.

The Federal Circuit sided with AT&T, but the Supreme Court reversed in a 7-1 decision. Justice Ruth Bader Ginsburg, writing for the majority, ruled that Microsoft is not liable for infringement in part because abstract software code does not qualify as a component.

The Business Software Alliance applauded both decisions in a statement Monday. 'The ruling in the KSR case will improve patent quality by enabling examiners and the courts to deny patents to questionable applications. And the decision in the Microsoft case will re-establish incentives for software companies to conduct research and development in the U.S.'

In a major patent law development, the Supreme Court on April 30 adopted a new, flexible standard that will make it easier for patents to be denied or challenged on the grounds that the invention at issue is too obvious to deserve patent protection.

The unanimous ruling in KSR International Co. v. Teleflex Inc. could also subject existing patent-holders to fresh litigation over obviousness ' a threshold issue that is part of every patent determination.

'This leaves patent litigation in a state of total disarray,' says Kenneth Bass III of Sterne, Kessler, Goldstein & Fox, part of the legal team representing Teleflex, a Pennsylvania company whose patent for an automobile gas pedal assembly was challenged by KSR, a Canadian firm. Teleflex held onto its patent under a more restrictive standard for finding obviousness used by the U.S. Court of Appeals for the Federal Circuit. But the high court, in relaxing the standard, ruled against Teleflex and returned the case to the Federal Circuit.

'Judges are now permitted to use their own common sense rather than objective evidence or testimony,' Bass says.

Justice Anthony Kennedy, writing for the Court, rejected the Federal Circuit's 'rigid approach' embodied in the so-called teaching, suggestion, or motivation test, in part because it depends on scientific literature and other forms of evidence that may not keep pace with fast-developing technologies.

'Granting patent protection to advances that would occur in the ordinary course without real innovation retards progress and may, in the case of patents combining previously known elements, deprive prior inventions of their value or utility,' Kennedy wrote. 'The results of ordinary innovation are not the subject of exclusive rights under the patent laws. Were it otherwise patents might stifle, rather than promote, the progress of useful arts.'

The ruling was yet another rebuke for the Federal Circuit, which celebrated its 25th birthday in early April. The court was created in 1982 to handle patent appeals, but has been criticized in recent years for favoring patent-holders to the detriment of others seeking to innovate and expand on existing patents.

The Supreme Court has overturned Federal Circuit rulings five times in the last two years, and it did so twice on Monday; KSR and Microsoft v. AT&T, in which the Court sided with Microsoft in a patent dispute with AT&T.

But the Court's rejection of the circuit in the KSR case was not as harsh as might have been expected from the oral arguments last November. Justice Antonin Scalia then dismissed the Federal Circuit's test as 'gobbledygook,' and Chief Justice John Roberts Jr. called it 'worse than meaningless.'

The criticism at oral argument was so pointed in November that Federal Circuit Chief Judge Paul Michel defended his court publicly in comments to Patent Strategy & Management's ALM affiliate Legal Times.

But Kennedy's unanimous ruling was more cordial, describing the Federal Circuit's test as a 'helpful insight' that could still be part of a broader test for obviousness.

On Monday, following the ruling, Michel declined to discuss its substance but did say, 'It is extremely helpful to have a single opinion [from the Court.] I'm very happy to have that; it will make it very much easier to apply.' Michel added that under his reading of the opinion, the teaching, suggestion, or motivation test remains part of the calculation of obviousness, 'but it gives us forceful instruction on the manner in which the test is to be applied.'

Steve Maebius of Foley & Lardner said the wording of the decision suggests the high court 'wanted to avoid a radical upsetting of the apple cart.' But the decision will have a 'really broad impact,' because in the trade-off between flexibility and predictability, 'the Court chose flexibility.'

The new case-by-case approach 'could increase litigation and the cost of obtaining a patent in the first place,' Maebius says, because patent examiners will now feel freer to reject patent applications on obviousness grounds.

Rachel Krevans of Morrison & Foerster said in a statement, 'The new test for obviousness, which will apply to challenges to patent validity regardless of whether the patent was issued before or after the KSR decision, may also impair the value of previously issued U.S. patents, because it makes it easier to challenge them in litigation, and to ask the patent office to reconsider the decision to issue the patent.'

In the second patent case decided Monday, AT&T claimed that Microsoft had infringed on its patent for software used by computers to digitally encode and compress recorded speech. The litigation focused on Microsoft's installation of software including the disputed program in computers manufactured overseas.

Normally there is no infringement of U.S. patents in products made and sold in another country, but AT&T cited an exception to patent law that allows for in infringement claim if a product's components are supplied from the United States.

The Federal Circuit sided with AT&T, but the Supreme Court reversed in a 7-1 decision. Justice Ruth Bader Ginsburg, writing for the majority, ruled that Microsoft is not liable for infringement in part because abstract software code does not qualify as a component.

The Business Software Alliance applauded both decisions in a statement Monday. 'The ruling in the KSR case will improve patent quality by enabling examiners and the courts to deny patents to questionable applications. And the decision in the Microsoft case will re-establish incentives for software companies to conduct research and development in the U.S.'