Supreme Court to Patent Appeals Court: Drop Dead
The U.S. Supreme Court stopped with the wrist-slaps yesterday, and delivered a right cross to the jaw of the federal patent appeals court. Then the justices cupped their hands astride their mouths and shouted in unison: Fewer patents!
In the latest in a series of rebukes, the Court unanimously told the U.S. Court of Appeals for the Federal Circuit and, by extension, the U.S. Patent and Trademark Office, that each had been approving and enforcing patents for inventions that were just too obvious to merit the honor. The ruling came in KSR International v. Teleflex, a case involving an adjustable truck accelerator pedal. (For details of the case, see earlier post here.) (The Court also handed Microsoft (MSFT) an important victory in a different patent case yesterday, Microsoft v. AT&T (T), which pared back the applicability of U.S. patents to software distributed abroad. Microsoft was the defendant in that case. Microsoft general counsel Brad Smith tells the Wall Street Journal’s Jess Bravin today (click here) that the ruling will lop off about 60% of its exposure in the 45 patent cases pending against it today. For my earlier postings relating to that case, see here and here.)
“Granting patent protection to advances that would occur in the ordinary course without real innovation retards progress,” Justice Anthony Kennedy wrote in the KSR case. And in case the lower court thought it hadn’t heard him correctly, he said it again: “The results of ordinary innovation are not subject of exclusive rights under the patent laws. Were it otherwise, patents might stifle, rather than promote, the progress of useful arts.”
The case involved a common situation: an invention that consists of combining, allegedly in a clever way, two earlier innovations, each of which has already been the subject of a patent. The patent appeals court had developed a test — which Kennedy said they were applying in a “narrow, rigid manner” — that, in practice, made it difficult to deny a patent to such combinations, no matter how obvious they might have seemed. As I read it, the ruling comes close to reversing that presumption, stressing “the need for caution in granting a patent” in those circumstances, because it “withdraws what is already known into the field of its monopoly and diminishes the resources available to skillful men.” The ruling also made clear that if a judge thinks an invention is obvious, he can dismiss the case before trial without having to let a jury make that determination. That significantly decreases the settlement value of a dubious patent. (A patent that is likely to make it all the way to a jury before it’s rejected has greater settlement value — because it will inflict more transaction costs on the defendant — than one that will likely get dismissed before trial on summary judgment.)
Just how significant the ruling was came across yesterday afternoon at an unusual press conference convened by the legal team for Teleflex, which was the losing party in the case. Press conferences by losing parties aren’t that common, and when they occur they are usually occasions for stressing silver linings and arguing that the Court’s ruling is actually much narrower than might appear at first glance. (After all, the lawyers are still representing their client, and that’s what the client will typically need to argue in his next case.)
But there wasn’t much gilding of the lily at this press conference. Robert Sterne, a patent lawyer for 29 years and the founding partner of the intellectual property firm of Sterne, Kessler, Goldstein & Fox, had this to say: The ruling will make it “harder, more costly, and more time consuming for inventors to obtain U.S. patents in all areas of technology, particularly mechanical inventions and software and methods of doing business.” He added that the pharmaceutical industry would probably be impacted, too, since drug companies try to prolong the terms of their strong patents with dubious, supplemental ones that might not measure up under the new standard.
Sterne also said he thought the ruling represented such a departure from existing practice that there would “most likely need to be guidelines issued by US Patent and Trademark Office to explain to the [examiners] what the implications will be from a practical point of view.”
At the same conference, Supreme Court advocate Tom Goldstein of Akin Gump Strauss Hauer & Feld, who had argued the case for Teleflex, wasn’t downplaying the significance of the loss either: “It’s fair to say that the economic consequences of the obviousness doctrine runs to the trillions of dollars. It’s the gateway to getting a patent, and intellectual property is at the heart of the American economic system.”
Fittingly, the ruling came down the same day that The American Lawyer announced that the Washington law firm of Wiley, Rein & Fielding had posted average profits-per-partner of almost $4.5 million, the largest number the magazine has ever recorded. The number catapulted Wiley Rein to first place in the nation in that category from just a 92nd-place showing last year. (For American Lawyer story and listings, see here and here.) The reason: its 61 equity partners were sharing a $245 million contingent fee award the firm received last year as its share of the $612 million settlement its client, NTP, won from Blackberry-manufacturer Research In Motion (RIMM). This was the case in which all Blackberry users in the country were threatened with service disruption after a jury found that RIM had violated patents held by NTP, which is an investment group that produces nothing and is composed largely of still more patent lawyers. NTP’s patents had all been tentatively declared invalid by the PTO upon reexamination at the time of the settlement, but the judge was threatening to issue an injunction anyway. Although the RIM litigation hinged on a slightly different issue — novelty, rather than obviousness — it brought home the extraordinary power of these fabulously valuable, yet puzzlingly evanescent property rights, which seem to vanish and reappear depending on whom has spoken to the PTO last.
I am surprised that the Court (as well as the discussion here) uses the term “innovation” instead of “invention”. These are two enirely different concepts.
The formatting on this web page sucks. Website users should never have to scroll horizontally to read each line. Ugh!
Roger,
I work with machinery - do some designing, some sales, and damned near everything else involved with it. I’m working with technology that less than 50 people in North America understand - and I know know most of them.
Because of my position, I can’t publicly state my name, or where I work
From my point of view everyone lacks understanding of the real issues with patents.
Congress was given authority to award “Innovators” for their innovations. The method used is to give a limited period of monopoly on the innovation, so that they innovator is encouraged to innovate. Copyright and Patent are the methods used.
Copyright makes good sense. Consider J. R. R. Tolkien’s “Lord of the Rings”. Is there anyone who would claim that Tolkien is not entitled to payment for this Magnum Opus?
While it can be argued that copyrights may currently be too long, the copyright system does provide the artist with a payback, if their work is attractive enough that the audience will pay for it.
The Patent System is another issue - and one that non-technologists seem constitutionally incapable of understanding. Consider the following:
1) It is too easy to patent obvious things (like the propane powered lawn mower - propane had only been used as a fuel for automobiles, forklifts, and light construction equipment for 30 years prior to the issuance of these patents.
Patent 05884460
http://patft1.uspto.gov/netacgi/nph-Parser?Sect1=PTO2&Sect2=HITOFF&u=%2Fnetahtml%2FPTO%2Fsearch-adv.htm&r=35&p=1&f=G&l=50&d=PTXT&S1=(propane+AND+mower)&OS=propane+and+mower&RS=(propane+AND+mower)
Patent 05878730
http://patft1.uspto.gov/netacgi/nph-Parser?Sect1=PTO2&Sect2=HITOFF&u=%2Fnetahtml%2FPTO%2Fsearch-adv.htm&r=36&p=1&f=G&l=50&d=PTXT&S1=(propane+AND+mower)&OS=propane+and+mower&RS=(propane+AND+mower)
Patent 05852993
http://patft1.uspto.gov/netacgi/nph-Parser?Sect1=PTO2&Sect2=HITOFF&u=%2Fnetahtml%2FPTO%2Fsearch-adv.htm&r=38&p=1&f=G&l=50&d=PTXT&S1=(propane+AND+mower)&OS=propane+and+mower&RS=(propane+AND+mower)
Patent 05676117
http://patft1.uspto.gov/netacgi/nph-Parser?Sect1=PTO2&Sect2=HITOFF&u=%2Fnetahtml%2FPTO%2Fsearch-adv.htm&r=41&p=1&f=G&l=50&d=PTXT&S1=(propane+AND+mower)&OS=propane+and+mower&RS=(propane+AND+mower)
Patent 05581986
http://patft1.uspto.gov/netacgi/nph-Parser?Sect1=PTO2&Sect2=HITOFF&u=%2Fnetahtml%2FPTO%2Fsearch-adv.htm&r=45&p=1&f=G&l=50&d=PTXT&S1=(propane+AND+mower)&OS=propane+and+mower&RS=(propane+AND+mower)
2) It is too easy to patent impossible machines, such as the Dean Drive, an interstellar radio, etc.
Patent 02886976
http://patimg2.uspto.gov/.piw?Docid=02886976&homeurl=http%3A%2F%2Fpatft1.uspto.gov%2Fnetacgi%2Fnph-Parser%3FSect1%3DPTO2%2526Sect2%3DHITOFF%2526u%3D%25252Fnetahtml%25252FPTO%25252Fsearch-adv.htm%2526r%3D4%2526p%3D1%2526f%3DG%2526l%3D50%2526d%3DPALL%2526S1%3DDean-Norman-L%2526OS%3DDean-Norman-L%2526RS%3DDean-Norman-L&PageNum=&Rtype=&SectionNum=&idkey=NONE&Input=View+first+page
Patent 03182517
http://patimg1.uspto.gov/.piw?docid=US003182517&SectionNum=2&IDKey=447B991D5146&HomeUrl=http://patft1.uspto.gov/netacgi/nph-Parser?Sect1=PTO2%2526Sect2=HITOFF%2526u=%25252Fnetahtml%25252FPTO%25252Fsearch-adv.htm%2526r=3%2526p=1%2526f=G%2526l=50%2526d=PALL%2526S1=Dean-Norman-L%2526OS=Dean-Norman-L%2526RS=Dean-Norman-L
Dean Drive on Wikipedia
http://en.wikipedia.org/wiki/Dean_drive
Jerry Pournelle on the Dean Drive
http://www.jerrypournelle.com/science/dean.html
3) It’s too easy to patent existent items/technologies
http://www.progress.org/patent03.htm
http://www.seedquest.com/News/releases/2004/february/7675.htm
4) It’s too easy to patent an existent idea - for example in the 1930’s E. E. “Doc” Smith wrote about the use of diesel genset engine being used to power some spaceship systems. If a patent application was applied for today, the patent office would not be likely to find this.
What non-technologists don’t understand is that once you’ve developed a technology - for instance polishing a piece of glass so that the sides are not parallel to each other, but curved so that they bend light - then microscopes, telescopes, contact lenses, glasses, fun house mirrors, convex and concave mirrors, magnifying glasses, fluid level indicators, etc., etc., all become instantly obvious to someone skilled in the art. If a technology doesn’t develop for a period of time, such as our friend the propane mower, it is because the technology has no useful purpose at the time (propane mowers are now becoming popular as they are less polluting than diesel mowers.
The large majority of patents in the USPTO.GOV database are junk - less than 1 in 100 are real “innovations”, and it may be less than 1 in 1000.
In simple terms the system is a joke - a damned expensive one. I suspect that more than 5% of the American economy is being wasted on invalid Patents. Just think of what could be done with that money, in the nature of curing heart disease, or updating the interstate system, or making FEMA actually work so that no community suffers what New Orleans went through.
I don’t think this decision went far enough - but then supreme court justices tend to be older, and thus more conservative.
Joe
Speaking as an individual who works in software, I don’t worry about competitors stealing my ideas — while they’re trying to duplicate what I’ve previously created (and understand its implications and limitations), I’m busy working on something new. Further, my entire job as a software developer consists of coming up with ways to efficiently solve problems (and intelligently applying techniques which already exist); it’s not the individual solutions by which I provide value, but rather the process of leveraging them cohesively.
Rather than worrying about a competitor copying one of my more innovative ideas, I worry far more about being legally prevented from using a creation of my own because some component thereof happens (without my knowledge) to have been previously created by someone else — someone who, more litigious and well-funded than myself, went through the process of patenting that component. A complex software product consists of thousands of algorithms working together; making the bar for obviousness artificially high makes a legitimately developed source tree into a minefield, and each algorithm into a potential mine waiting to explode.
Needless to say, I am strongly behind the Supreme Court’s decision in this case, and consider it long overdue.
Some are crying above that it makes it harder for start-up companies and other small businesses, however, if your product is essentially a redesign of someone else’s hard work, then it should be harder. For a drug company to take a pill for one condition and then make it a tablet with a different name for a different condition, that is not sufficient to be able to re-patent the formula to keep it out of generic markets. Or better yet, taking an antibiotic, put it in the same box as another separate medicine and patent it as a “treatment” is really not very innovative (when it was probably used by doctors in that way already).
About the lightbulb thing, the decision says that if you combine several unpatentnable things and the result is novel or unexpected, then the result is patentable. The lightbulb would be patentable because the result, luminesence, is unexpected.
Conversly, if that patent allready existed, then trying to patent the same thing with crystal instead of glass would not be patentable because the result is exactly the same as glass.
Would Edisons light bulb patent hold up? This is a poor test Edisons ‘invention’ was a copy of Swanns light bulb which had been in volume manufacture for two years before Eidson’s ‘invention’. It is telling that Eidson visited Swann’s factory before he made his patent application. Edison claimed to have invente dit earlier but not published in the US but there is strong evidence of forgery with mising notebook pages etc. The last laugh was that Edison could not manufacture the bulb anyway and had to license the manufacturing technology from Swann.
As this example shows dubious and fraudulent patents are not new although as a practicing engineer they do now seem almost ubiquitous. The test for non-obviousness should be non-obvious for a skilled expert in that field which is rightly a high hurdle.
Way past time, IMHO. Patent protection has been given for too many ridiculous “inventions” already. This ruling absolutely kills a good 50% of the software “patents” that consisted of finding some prior art that had not been patented, and claiming it for your own. (A single click takes you to a “cart” with your items in it - that’s some real innovation there - or the Apple suit crying because they stole the Xerox Parc mouse/windows system before MS, so they’ve got “rights” somehow.) Tough on them, I hope it puts the predatory scam artists who’ve preyed on the software industry out of business.
I feel pretty sure that this is going to hurt me. If not for our patents I am sure that bigger companies would have copied our products (recreational products) - or at least the salesman for the big companies and foreign companies would promise my customers that they would provide copies. IP is all we have to hold them off.
This is not going to hurt small business if anything it will help it. Don’t you realize that most patents are probably filed by huge corporations who have the resources and man power to make tons of patents. On the small business inventor side they are going to have to try harder to create truly innovative product.
This ruling is a good start, but there is much more soil to till here. Aside from “obviousness”, next needed is a ruling to defuse the legal IEP (improvised explosive patent) which lies hidden in an attorney’s file cabinet awaiting the maturing of the unwitting infringer’s revenue stream…
As an entrepreneur working to develop and protect a new product, the Supreme Court decision is extremely troubling. The decision will result in entrepreneurs and other businessmen having a much more difficult and expensive process in obtaining meaninful patent protection, if at all.
I believe that this decision will hurt small innovative companies and the economic benefit that they produce.
Re Phil’s comments on Edison, above. Edison did not use a metal filament…it was carbon. That explains the short life, low luminosity, and fragility of the early Edison lamps.
This was completely deserved and very late. One has to only search the patent database to find thousands of patents that do nothing more than to quote prior patents and combine them with some other subderfudge.
However the real problem lies with the patent office that was decimated under Clinton’s first term. They simply are unable to properly examine patent applications and have elected to allow these dubious patents be settled by our court system.
Emily Howard’s comments above hit the nail on the head. Patent Law firms are raking it in and these attorneys are overpaid. Lawyers fresh out of law school at Wash.DC firms are STARTING at 160K/yr!
I’m a junior patent attorney and I am secretly happy about this ruling all the while my more senior colleagues have their panties in a big bunch. I have to prosecute patents that I, in all my immature naivete, believe are totally obvious. Given the Fed Circuit’s rigid rules, this obviousness is hard to show. All the Supreme Court has done is to relax the rule while maintaining the premise behind it. The “trillions” of dollars that Goldstein mentions above refers the legal fees that stay out of law firm coffers and the damages that now will not flow to holders of undeserved patents. Instead, this money will now stay with the “true innovator”, ie those who don’t need to try to prevent others from making obvious products or using obvious methods.
This sounds like it MAY be a good ruling, but the problem is HOW obvious does it have to be? This is a mixed question of law and fact, and should therefore be one that is decided by at least a PANEL of Judges, if not a jury, rather than by a single Judge at summary judgment.
A disaster. European patents are quite worthless as their ‘inventive step’ may be considered a bit higher level of innovation than our ‘obviousness’. As a result, funding to start a new company is laughably hard to attract. There is more VC money on Sand Hill road alone - than most of Western Europe. Start-up companies need the protection patents provide; big companies are popping the champange today. With this ruling, it may now be possible to slow US innovation to the level of the French.
All these ‘intellectual’ rebuts are quite annoying. I think the corporate interests should be able to maintain their status quo and reserve the right to hedge themselves for frivolous litigous behavior. It’s what America is all about.
I can hardly believe it took so long for the courts to realize that patents have gotten out of control. Patents are intended to reward real innovation, not aggressive litigation.
Wow! A good ruling from the Supremes. As opposed to the recent uSoft ruling mentioned in the article, or the ridiculous ruling that allows retroactive increase in the terms of copyrights, making “for limited times” of article 1 section 8 virtually meaningless.
By the way, when in doubt, use “who”, not “whom”. Because when you use “whom” incorrectly, as you have here in the last sentence, it looks pretty stupid.
Indeed. Is a human being not a more ingenuous creation of nature than his component atoms? Although this ruling needs clarification, at first blush, given the phrasing, it seems absurd.
I applaud this ruling. It’s decades overdue. The software industry and many others are littered with bogus patents that create artificial barriers to competition and we all lose as a result.
I fully support the Supreme Court’s decision in this case. Ready access to patents for inventions that truly lack the spark of innovation only create artificial barriers to entry in markets for simple products where opportunities for economic profit should not exist. Should raise the cost of doing business for the scavenging patent trolls as well.
This is a remarkable strange ruling and yet another sign of those foundations that made America great being worn away. Everything that goes into a patent involves combining idea and things that are already known. How can one build the next stage of a pyramid without have the level below it completed.
We should do the light bulb test of this ruling … would Thomas Edison’s patent hold up. The metal filament, the glass and the vacuum seal were all known before he combined them into a light bulb. I’m sure in retrospect the light bulb seemed like an obvious next step. Would the supreme court rule it as innovative?
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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.
Paul Steyermark is correct. Invention is discovery. Innovation is the successful development and commercialization of a product based on invention. invention is the subject of patenting, not innovation.