KSR v. Teleflex: The real deal in patent showdowns
Have you ever railed about how absurd it is that Amazon.com could get a patent on "one-click" online shopping? Or that Smuckers could get one on a crustless peanut-butter-and-jelly sandwich with the edges smushed together? If you've ever trash-talked about the U.S. patent system--and who hasn't?--you should be following closely today's U.S. Supreme Court argument in KSR v. Teleflex. It could generate the most important patent ruling in decades. [See post-argument update at end of posting.]

Most of the complaints one hears about patents revolve around the concept of "obviousness"--just how ingenious an idea must be to be patentable. Legally, to be patentable an idea must be (1) novel, (2) nonobvious, and (3) useful. In practice, though, "nonobviousness" is usually the pivotal bone of contention, because mere "novelty" is easily established and "usefulness" can usually be assumed, since otherwise people wouldn't be litigating over the invention in the first place.

In KSR, the Court must decide what standard judges should use when deciding whether a particular combination of preexisting technologies, each of which had already been in common use, can be considered sufficiently nonobvious to be patentable. Teleflex, which makes accelerators for trucks and automobiles, patented a type of gas pedal that is adjustable (so that both tall and short drivers can use it comfortably) and that uses an electronic rather than mechanical sensor, suitable for most modern-day engines. There is no dispute that both aspects of the invention (adjustability and the use of an electronic sensor) were widely used before the Teleflex patent, but Teleflex claims to have invented the manner in which it melded the two earlier advances into one device. KSR, which also makes gas pedals, protests that the way to combine the two elements would have been obvious to any ordinary mechanic. Teleflex responds that the combination only seems obvious in hindsight, the way all inventions do.

The district court threw the case out before trial, agreeing with KSR. But the U.S. Court of Appeals for the Federal Circuit--the special court created in 1984 to hear all patent appeals--reversed, finding that KSR couldn't meet the demanding test that court requires before it will invalidate a patent due to obviousness. That test requires KSR to show "teachings, suggestions, or motivations" in the prior technical literature foreshadowing how to make the combination in question. The U.S. Supreme Court will now decide--probably before the end of the term in June 2007--whether that is the proper test to use and, if so, whether the Federal Circuit is interpreted it too rigidly.

Because obviousness is such a fundamental concept in patent law, and because patents and other intellectual property are increasingly the most valuable assets American companies possess, the case has attracted enormous interest, with more than 40 amicus briefs having been submitted from companies, inventors, universities, trade groups, and intellectual property practitioners, professors, economists, historians.

Companies are generally dividing along the same lines we saw last year when the Court heard another momentous patent case, eBay v. MercExchange, which posed the question of whether there were ever extenuating circumstances that warranted denying a injunction to a patentee that had proven infringement. There eBay argued that the Federal Circuit court was using a rigid rule that made injunctions virtually automatic upon proof of infringement, inappropriately maximizing the leverage that patent-holders wield over accused infringers. In May, the Court unanimously reversed the Federal Circuit and restored a more flexible rule, but also suggested that this flexible approach wouldn't lead to different outcomes in most cases.

As in eBay, the sector of the economy most strongly advocating change is the technology industry, particularly those companies that make products composed of numerous smaller inventions. Amicus briefs favoring KSR's position were submitted, for instance, by Cisco, Intel, the Computer and Telecommunications Industry Association, the Business Software Alliance, and the Electronic Frontier Foundation. (The last organization has particular concerns about the way the current rule could disadvantage free and open source software developers in the event of patent litigation.) KSR also got support from the GM, Ford, Chrysler, Viacom and TimeWarner (which owns CNNMoney and Fortune), and, most importantly, from the Solicitor General of the United States, representing the views of both the Justice Department and the Federal Trade Commission.

Arrayed on Teleflex's side, urging adherence to the current rules, were the pharmaceutical and biotech industry trade groups, plus Proctor & Gamble, Johnson & Johnson, 3M, DuPont, several prominent research universities (including the universities of California, Texas, and Wisconsin), the ABA's Section on Intellectual Property, and the American Intellectual Property Law Association, among others.

Interestingly, the American Association of Retired Persons (AARP) filed a brief supporting KSR, in hopes that a ruling that makes it harder to get patents will ultimately benefit generic drug makers, lowering the price of prescription drugs.

Arguing the case for KSR will be James Dabney of Fried Frank Harris Shriver & Jacobson in New York. Teleflex's advocate will be Thomas Goldstein of Akin Gump Strauss Hauer & Feld in Washington, D.C. I'll see if I can reach somebody this afternoon to see how they thought the argument went.

Which side are people rooting for?

UPDATE: COURT QUESTIONING IS HOSTILE TO EXISTING OBVIOUSNESS TEST

I just spoke to Frank Porcelli, a patent litigator with Fish & Richardson, who was present at the argument. He says that the Court might be poised to reject the Federal Circuit's existing "obviousness" test and rule for KSR. If the Court were to junk that standard, its ruling would likely make patents harder to obtain and easier to invalidate--a win for many big tech companies and a blow to the pharmaceutical industry.

Porcelli--who does not represent any party or amicus in the case--says he personally hopes the test will be retained, because, as a practitioner, he believes it provides useful objectivity. He fears it won't be, however, in light of the tenor of the questioning. Chief Justice John Roberts, Justice Antonin Scalia, and Justice Stephen Breyer all appeared hostile to the so-called "teaching-suggestion-motivation" test, he says. "I think those are the powerbrokers, and if they're all going in the same direction it's hard not to have a majority. Particularly when I didn't sense any justice being vocal on the other side."

Jim Dabney, KSR's counsel, read the Court the same way: "Many of the Justices voiced great skepticism with respect to the 'teaching-suggestion-motivation test' that the Federal Circuit currently applies to limit courts' authority to declare claimed subject matter unpatentable," he writes in an e-mail. "I did not detect any support for the Federal Circuit's approach."

Porcelli says the justices suggested that the test added nothing useful, and Justice Scalia mocked it, calling it "the three imponderables." Porcelli also remembers Breyer saying words to the effect that "too many patents are granted," that it's "unfortunate for the economy," and that there's "too much protectionism."

I have not yet been able to reach Tom Goldstein, Teleflex's lawyer, for comment.
Posted by Roger Parloff 12:11 PM 1 Comments comment | Add a Comment

"... the combination only seems obvious in hindsight, the way all inventions do."

Well this is highly debatable. Was it 'obvious in hindsight' to use a tungsten filament with a low pressure inert gas to create a durable light bulb? Was the chemical composition of Aspirin 'obvious in hindsight'? Did these inventions perhaps require a little more work than five minutes mix-and-matching between existing devices?

Seems to me entirely reasonable to expect something more from a patent than the obvious - whether in hindsight or not. Teleflex deserve to lose the case for making a bonehead argument that devalues real inventions.
Posted By stringph, Heidelberg, BW : 6:44 AM  

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This blog is about legal issues that matter to business people, and it's geared for nonlawyers and lawyers alike. Roger Parloff is Fortune magazine's senior editor (legal affairs). He practiced law for five years in Manhattan before becoming a full-time journalist. To join in the discussion or suggest topics, please email rparloff@fortunemail.com.

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.