Revolution from Above: The Supreme Court Changes Fundamental Principles of Patent Law
The United States Supreme Court recently reversed the Court of Appeals for the Federal Circuit in two ground-breaking patent cases, KSR International Co. v. Teleflex Inc., 127 S. Ct. 1727 (2007), and Microsoft Corp. v. AT&T Corp., 127 S. Ct. 1746 (2007).
KSR International Co. v. Teleflex Inc.
In KSR, a unanimous Supreme Court made it more difficult for those seeking to obtain patents and made it easier for those seeking to invalidate patents.
KSR had created an adjustable gas pedal for cars. Teleflex sued, alleging that KSR’s invention infringed Teleflex’s patent for a pedal system. KSR defended by claiming that Teleflex’s patent was invalid under Section 103 of the Patent Act. Section 103 states that a patent shall not be issued “if the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains.” (Emphasis added.)
In analyzing obviousness, the Court of Appeals for the Federal Circuit traditionally has used the so-called “teaching, suggestion, or motivation” (“TSM”) test, “under which a patent claim is only proved obvious” - and thus unpatentable - “if some motivation or suggestion to combine the prior art teachings can be found in the prior art, the nature of the problem, or the knowledge of a person having ordinary skill in the art.” Using the TSM test, the district court granted summary judgment to KSR. The Court of Appeals reversed, ruling that the district court had not applied the TSM test strictly enough. KSR asked the Supreme Court to review the Court of Appeals’ application of the TSM test.
The Supreme Court wrote: “We begin by rejecting the rigid approach of the Court of Appeals. Throughout this Court’s engagement with the question of obviousness, our cases have set forth an expansive and flexible approach inconsistent with the way the Court of Appeals applied its TSM test here.” According to the Supreme Court, the analysis of obviousness should be a “broad inquiry,” and, when appropriate, courts should “look at any secondary considerations.” While the Court did not reject the TSM test outright, the Court did hold that “when a court transforms the general principle [of the TSM test] into a rigid rule that limits the obviousness inquiry…it errs.” Instead, “a court must ask whether the improvement is more than the predictable use of prior art elements according to their established functions.” Moreover, the court should explicitly analyze whether there was an apparent reason to combine the known elements in the fashion claimed by the patent at issue by looking at factors such as the interrelated teachings of multiple patents, the effects of demands known to the design community or present in the marketplace, and the background knowledge possessed by a person having ordinary skill in the art.
Microsoft Corp. v. AT&T Corp.
In Microsoft, released the same day as KSR, the Supreme Court limited the ability of United States patent holders to recover damages for infringements that occur abroad.
In Microsoft, AT&T held a patent on a computer used to encode digitally and compress recorded speech. Microsoft’s Windows potentially infringed AT&T’s patent because Windows contained code that allowed the processing of speech in a similar fashion. At issue was Microsoft’s practice of sending Windows to foreign manufacturers via encrypted transmission or on a master disk for installation on computers manufactured and sold outside of the United States. Under the Patent Act, there usually is no infringement liability for activity that occurs outside of the United States. However, Section 271(f) of the Patent Act creates liability when the “components” of a patented product are “supplied” from the United States for combination abroad. AT&T claimed that Microsoft was liable under Section 271(f) because Microsoft was supplying the components of AT&T’s computer from the United States. Microsoft raised two defenses: (1) that its software could not be considered a “component” of a patented invention under Section 271(f); and (2) that the copies of Windows actually installed by the foreign manufacturers could not be considered “supplie[d]… from the United States.”
The Supreme Court rejected Microsoft’s first defense, holding that “a copy of Windows, not Windows in the abstract, qualifies as a ‘component’ under Section 271(f).” However, the Court agreed with Microsoft’s second defense, holding that the copies of Windows - which did not even exist until the copies were generated outside the United States - were not “supplied” from the United States.
Both KSR and Microsoft fundamentally change key aspects of patent prosecution and litigation. Patent applicants and owners should obtain legal advice concerning whether and how these important new cases might affect existing or anticipated patent disputes.