C.A.G. Insights

The Battle Continues: Supreme Court v. Federal Circuit

The U.S. Supreme Court has reversed all nine patent cases decided on appeal from the Federal Circuit since 2002.  In two cases handed down in April, the Court continues its trend of reversing the Federal Circuit.  In a much anticipated decision, the Court in KSR v. Teleflex unanimously rejected the Federal Circuit’s rigid approach to determining whether a patent is non-obvious in view of the prior art.  Although not as far reaching as KSR, a second case, Microsoft v. AT&T, may hamper owners of software patents in their ability to prevent copying of software outside the United States.

KSR v. Teleflex

A patent applicant is entitled to a patent only for inventions that are useful, novel, and non-obvious.  Because almost all inventions are combinations of elements that are already known, the non-obvious requirement is usually the highest hurdle.

The Supreme Court established the framework for determining obviousness in the 1966 Graham v. John Deere decision.  In that case, the Court held that the obviousness of an invention must be decided by determining the scope and content of the prior art, ascertaining the differences between the prior art and the claimed invention, and resolving the level of ordinary skill in the pertinent art.

To provide uniformity and to prevent the use of hindsight in deciding the obviousness question, the Court of Customs and Patent Appeals established the requirement of a “teaching, suggestion, or motivation” (TSM) to combine known elements to show that a combination is obvious.  Over the years, the TSM test has been refined by the Federal Circuit to require that “some motivation or suggestion to combine the prior art teachings” exist in the prior art, the nature of the problem, or the knowledge of a person having ordinary skill in the art.

In KSR, Teleflex argued that there was no teaching, suggestion, or motivation in the prior art to make the combination of an adjustable accelerator pedal and an electronic sensor claimed by the patent at issue.  The Supreme Court reversed the Federal Circuit’s decision that upheld the validity of the patent.  The Court reasoned that Graham provides an expansive and flexible view to the obviousness question that is inconsistent with the narrow, rigid manner in which the Federal Circuit applied the TSM test.  The Court found convincing KSR’s evidence that combining the inventions of two prior patents was a design step that was well within the grasp of a person of ordinary skill in the relevant art.  Thus, the claimed combination of two previously known components was obvious.  The Court found that although the TSM test provides a helpful insight, “[t]he obviousness analysis cannot be confined by a formalistic conception of the words teaching, suggestion, and motivation, or by overemphasis on the importance of published articles and the explicit content of issued patents.”

The KSR decision does not result in a radical change to patent law, but simply reinforces prior Supreme Court precedent.  However, the effects of the rejection of the TSM test as a bright line rule could prove significant, affecting both prosecution of patent applications and litigation of patent infringement disputes.  Patent applicants and litigants alike can minimize the effects of KSR by taking a proactive approach during prosecution and litigation.

The difference between the Federal Circuit’s application of the TSM test and the approach outlined by the Court in KSR is that the TSM test is now only a factor in the obviousness analysis rather than an absolute requirement.  The KSR Court favored a less rigid approach to determining the scope and content of the prior art.  This approach recognizes a long established corollary that “the combination of familiar elements according to known methods is likely to be obvious when it does no more than yield predictable results.”

A court must now consider whether inventions available both inside and outside the field of endeavor might be predictably modified in response to “design incentives and other market forces.”  In rejecting the Federal Circuit’s holding that courts and patent examiners should look only to the problem the patentee was trying to solve, the Court stated,  “Common sense teaches, however, that familiar items may have obvious uses beyond their primary purposes, and in many cases a person of ordinary skill will be able to fit teachings of multiple patents together like pieces of a puzzle.”

For similar reasons, KSR rejected the Federal Circuit’s holding that a patent claim cannot be proved obvious by a showing that the combination of elements was “obvious to try.”  The Court reasoned that “[w]hen there is a design need or market pressure to solve a problem and there are a finite number of identified, predictable solutions, a person of ordinary skill has good reason to pursue the known options within his or her technical grasp.”

Only time will tell the full extent of the KSR decision.  The U.S. Patent & Trademark Office could reject more patent applications citing KSR.  The flexibility allowed by the Supreme Court could make it easier for examiners to establish a prima facie case of obviousness based on “common sense” while placing the burden on applicants to present evidence of non-obviousness.  The Director of the Patent Office has acknowledged that “[t]he decision gives our examiners more flexibility to use their considerable technical skills to reject obvious changes to existing technology.”  Nevertheless, examiners must still provide an explicit non-conclusory analysis for the basis of any obviousness rejection.

To help avoid obviousness rejections based on “common sense,” applicants should identify any improvements, unexpected results, and other evidence that the invention is not obvious.  Applicants should also avoid identifying problems in the prior art in a way that would lead the examiner to believe that the solution proposed by applicant is predictable.

The KSR decision casts doubt on the validity of many existing patents, possibly affecting the licensing value and litigation value of certain combination patents.  For example, the Federal Circuit quickly followed the KSR decision with the Leapfrog v. Fisher-Price decision, deciding on facts similar to the KSR case that the conversion of a known mechanical toy into an electronic version of the same toy was obvious.  The court relied on the fact that the plaintiff failed to present any evidence that the claimed combination was outside the technical grasp of a person of ordinary skill in the art.

While it is clear that the Supreme Court is attempting to curtail patent protection, this does not mean that patent holders should dismiss all their suits or forego filing suits.  Rather, the patentee should focus greater efforts on proving how a patented invention is non-obvious.  This can be done, for example, by providing expert evidence that the claimed combination resulted in something more than a predictable use of prior art elements.  When appropriately handled, litigation of patents will likely result in a patent being found invalid only in the most unmistakable cases.  As for defendants, KSR is an added bonus in some cases, but will not always be a silver bullet.  Defendants must likewise present expert evidence of the obviousness of a claimed combination in the absence of explicit teachings in the prior art.

Microsoft v. AT&T

A U.S. patent allows its owner to exclude others from making the invention in the United States.  But what if the components of the invention are built in the U.S. and assembled overseas?  In Microsoft v. AT&T, the Court was faced with interpreting a patent statute providing that where components of a patented invention are shipped out of the United States prior to assembly, whoever causes those components to be supplied for the purpose of assembly is liable for patent infringement.

The application of the statute is relatively easy when faced with a patent that claims a machine or an apparatus.  However, because of the difficulty of defining “components,” the application of the statute is complicated where the components at issue include intangibles such as software.

Microsoft argued that software in the abstract is not a component, and therefore, Windows software sent on a master disk or through electronic transmission from the United States did not constitute infringement of the AT&T patent.  The Supreme Court agreed, reversing the Federal Circuit and holding that only software in a tangible medium could qualify as a component.  Because the Windows software was copied onto a tangible medium outside the United States, the Court held that Microsoft was not liable for patent infringement for computers assembled outside the United States.  The Court found it inconsequential that the copying of the master disk was easy, opining that “the extra step is what renders the software a usable, combinable part of the computer.”

In conclusion, the KSR and Microsoft decisions evidence the Court’s efforts to curtail the perceived proliferation of patent protection, a trend which will likely continue in the years to come.

Vincent Allen is a shareholder at Carstens, Allen & Gourley, LLP. He focuses on the litigation of intellectual property disputes and the prosecution of patent and trademark applications.

This blog is maintained by Carstens, Allen & Gourley, LLP to inform readers of recent developments in intellectual property. Solely informational in nature, this blog is not intended to create an attorney-client relationship or to be used as a substitute for legal advice or opinions.