High-Court “Common Sense” Decision Portends Big Changes for High-Tech Patenting; Many Existing Patents at Risk

7/9/07

High-tech patent holders take note: legal experts are calling the recent U.S. Supreme Court decision in KSR v. Teleflex the most important patent ruling in decades, throwing into question the validity of many existing patents, especially in the e-commerce and biotech fields. Some IP watchers, like Audrey Millemann, a patent attorney at Sacramento-based firm of Weintraub, Genshlea, and Chediak, go so far as to argue that the Supreme Court’s verdict has already “completely changed the patent landscape.”

In its unanimous verdict on April 30, 2007, the Supreme Court essentially called for common sense in patenting, signaling its view that too many obvious patents have been granted for inventions that reflect no real innovation. The decision, which calls for an “expansive and flexible approach” to determining when something is too obvious to be patented, will almost certainly make patents more difficult to obtain and easier to invalidate. The latter prospect is the one raising the most significant outstanding question: just how many existing patents will now wither in the face of legal challenges that they are too obvious to have been granted in the first place?

The good news is that the Supreme Court ruling may ultimately help stem the flow of so-called “junk patents”—such as claims on obvious software subroutines or biotech applications often garnered brazenly by opportunistic patent squatters—that have long been the bane of many high-tech fields. In the meantime, though, the verdict leaves a great deal of uncertainty in its wake for patent holders.

The case in question, KSR v. Teleflex, centered on a dispute over the design of an automotive gas pedal. KSR International of Canada was supplying General Motors’ SUVs with adjustable gas pedals governed by an electronic sensor. Limerick, PA-based Teleflex demanded royalties from KSR, citing its 2001 patent on a similar device used in trucks made by Ford. But KSR refused to pay, claiming that Teleflex’s patent—which simply paired an existing electronic sensor with an existing gas pedal design—was too obvious to be valid.

In 2003, the federal district court ruled in KSR’s favor, but the U.S. Court of Appeals overturned the verdict to uphold Teleflex’s patent in 2005. The battle ultimately landed before the U.S. Supreme Court, hinging on a deceptively simple question: what kind of standard should the courts (and by inference the U.S. Patent Office) use to determine whether something is too obvious to be patentable?

Traditionally speaking, at least since the U.S. Patent Act of 1952, patents are supposed to be granted only for inventions that are novel, useful, and “nonobvious,” but that last criterion has always been a tricky one, especially once a patent lawsuit gets under way. To determine obviousness, the courts have, for many years, relied on an arcane test that only a patent lawyer could love. To win in court, a plaintiff had to produce and document what the lawyers called a particular “suggestion, teaching, or motivation” that would have led “a person of ordinary skill” to create the invention himself. Absent that legalistic “smoking gun” evidence of obviousness, the patent would stand. In its recent decision, however, the Supreme Court ruled that the long-accepted test was “too rigid” and confusing, holding that a more flexible, common-sense definition of obviousness must apply.

It might not sound like much to get excited about until you start to realize how widely applicable a ruling it is, potentially affecting every existing and pending patent on the books. Because of its universal application to patents, some attorneys are predicting that KSR v. Teleflex, is likely to become the most widely cited legal precedent in patent law. In fact, after just a few months, the ruling has already been invoked in several appeals court decisions to invalidate patents on the basis of obviousness. One of these high-profile cases involved a dispute between Fisher Price and Leapfrog Enterprises over a touch-screen design for an electronic children’s toy. Citing the KSR v. Teleflex case just nine days after the Supreme Court decision, the appeals court ruled on May 9 that Leapfrog’s patent on the technology was simply too obvious to enforce.

In a separate case on July 2 involving the manufacture of an aluminum trailer hitch (Andersen Mfg. v. Diversi-Tech Corp.), a federal judge even denied a motion for a preliminary injunction against the alleged patent infringer, ruling that it was unlikely the patent in question would meet the new obviousness hurdle laid down by the Supreme Court in KSR v. Teleflex.

Little wonder that many in the legal community realized just how high the stakes were as soon as the Supreme Court decided to hear the case, filing an astonishing 36 separate amicus (or “friend of the court” advisory) briefs on behalf of everyone from General Electric to high-tech industry associations and public interest groups. Commenting after the verdict, Teleflex attorney Thomas Goldstein, of the firm Akin Gump Strauss Hauer & Feld, said that the stakes of the case “couldn’t possibly be higher” because they ultimately affect literally “trillions of dollars” worth of intellectual property. As Goldstein put it, “It’s clear that the Justices wanted to make it harder to get a patent. What’s not clear immediately is how far they want to go. That’s the next big fight.”

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