Patent rights weakened by Supreme Court

The US Supreme Court made it easier to invalidate patents, scaling back a legal test that has fuelled an era of protection for new products. In a unanimous ruling, America’s top court said a federal appeals court has gone too far in embracing a standard that addresses one of the most basic issues in patent law: whether a claimed invention is obvious and therefore unworthy of patent protection. The test underlies 160,000 patents issued every year.

But Justice Anthony Kennedy said: “The standard used by the US Court of Appeals for the Federal Circuit provides “useful insights” that must not become “rigid and mandatory formulas.” “Granting patent protection to advances that would occur in the ordinary course without real innovation retards progress and may … deprive prior inventions of their value,” he added.

In the case of KSR International v Teleflex, the Washington-based appeals court supported a patent for adjustable gas pedals. That court handles all appeals in the field of patents. Until now, a challenger seeking to invalidate a patent must be able to show that all parts of a claimed invention were known previously. In addition, the challenger must show that there is a prior “teaching, suggestion or motivation” to combine these prior technologies to produce the invention.
Patent examiners use the same test at the front end of the process when companies are seeking patent protection for their claimed inventions.

In the past two decades, patent applications have more than tripled to more than 440,000 a year. The US Government approves more than half of the patents sought. Robert Greene Sterne, a Teleflex’s lawyer, said obtaining a patent will undoubtedly become harder, cost more to pursue and take more time to reach a final decision following yesterday’s ruling. The legal test at issue in the Teleflex lawsuit has been criticised by the Bush administration as leading to an unwarranted extension of patent protection to claimed inventions that are obvious. Critics of the test say it results in less competition and stifles innovation. Proponents warned that throwing out the standard would upset decades of settled law. “The justices have decided that something is awry and that too many patents are being issued,” said Tom Goldstein, another Telefax attorney said.

The most significant question as a result of the Supreme Court decision, said Goldstein, is what will replace the long-standing test. In 2002, patent-holder Teleflex sued competitor KSR in federal court, alleging infringement. KSR’s gas pedals supplied to General Motors can be adjusted for a driver’s height and when pushed, the pedals send an electronic signal to accelerate.
Teleflex alleges KSR infringed by combining the adjustable gas pedal and the electronically actuated fuel system in a way that Teleflex had patented. KSR said the Teleflex approach to adjustable gas pedal technology was obvious and that the patent should be invalidated. A federal judge threw out the lawsuit that Teleflex filed, but the appeals court reinstated it. The Supreme Court reversed the appeals court and sent the case back to US District Court in Detroit. The Teleflex patent was based on putting the electronic sensor on the vehicle structure of Ford Motor Co. pickup trucks, rather than on the adjustable pedal control as had been done in the past.

At arguments in November, Justice Stephen Breyer crystallised the debate. Is the Teleflexinvention like moving a garage door sensor from the lower hinge to an upper hinge?” he asked. Manylarge companies in the software and computer industry have opposed the appeals court test while much of the biotechnology industry favours it. Big pharmaceutical companies are concerned about being copied and not being able to charge premium prices to recoup their research and development expenses. It costs about $800 million and can take a decade or more to bring a new drug to market, the pharmaceutical industry says. In contrast is the position of major software companies. A single laptop computer can be based on 200 patents. The major companies prefer not to have to pay royalties to small innovative companies on patents which the large companies use in their products.

The Supreme Court ruling is an opportunity to “weed out” unworthy patent applications and move toward re-establishing patent quality, Emery Simon, an adviser to the Business Software Alliance, said. A Federal Trade Commission report in 2003 urged Congress to make it easier to challenge patents at the U.S. Patent and Trademark Office and to allow courts to find patents invalid based on a preponderance of the evidence rather than clear and convincing evidence.

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