New Limits on Patents

Surreal. I looked for related articles, and I found:

Court cases threaten weaker patents and could hinder technological innovation, http://www.thejournalnews.com/apps/pbcs.dll/article?AID=/20070501/BUSINESS01/705010325/1066/BUSINESS01

Supreme Court ruling could squeeze Big Pharma, http://money.cnn.com/2007/05/01/news/companies/patent/?postversion=2007050209

Supreme Court Patent Ruling Won’t Affect Us, [patent holder] DataTreasury Says, http://www.digitaltransactions.net/newsstory.cfm?newsid=1343

I'd say that anything that is that vague and imprecise is a net loss for us. It empowers lawyers to find creative interpretations, and thus, it helps big cos.

Basically, an inventor needs an expected value return of X to have the incentive to invent, where X is the amount that invention costs (including opportunity costs). X is billions of dollars in pharma and only a few thousand in software.

Look which companies line up on different sides of any patent debate. It's informative.

For those who are too lz to click the link.

///// May 1, 2007 High Court Puts Limits on Patents By LINDA GREENHOUSE

WASHINGTON, April 30 — The Supreme Court, in its most important patent ruling in years, on Monday raised the bar for obtaining patents on new products that combine elements of pre-existing inventions.

If the combination results from nothing more than “ordinary innovation” and “does no more than yield predictable results,” the court said in a unanimous opinion, it is not entitled to the exclusive rights that patent protection conveys. “Were it otherwise,” Justice Anthony M. Kennedy wrote in the opinion, “patents might stifle, rather than promote, the progress of useful arts.”

Because most inventions combine previously known elements, the court’s approach to deciding what sort of combination is so “obvious” as to be ineligible for patent protection will have widespread application. The result will be to make patents harder to obtain and defend.

“Granting patent protection to advances that would occur in the ordinary course without real innovation retards progress,” Justice Kennedy said. He added that such patents were also undesirable because they might deprive earlier innovations of “their value or utility.”

Patent law experts said the ruling created a common sense standard that could have a broad impact.

“Nearly every patent that contains a combination of prior ideas is at risk because the court has dramatically broadened the standard of obviousness,” said Cynthia Kernick, an intellectual property lawyer at Reed Smith in Pittsburgh.

Judges will have more leeway to dismiss patent infringement lawsuits without requiring a jury trial, and patent examiners, who generally grant patent applications unless they find prior references to the same invention, will now feel freer to deny claims, said Matthew Kreeger, an intellectual property lawyer at Morrison and Foerster in San Francisco.

“And we could see thousands of cases asking the Patent Office to re-examine patents it has already granted,” said Mr. Kreeger, who was one of the lawyers who had prepared a brief filed by the Biotechnology Industry Organization in support of the patent. “It doesn’t take a lot of resources to ask for a re-examination.” To be eligible for a patent, an invention must be novel, useful and not “obvious” to a person of “ordinary skill” in the field. The Supreme Court case concerned a fairly typical dispute over whether a combination of old elements in a new way was new or simply “obvious” to any expert.

At issue was an adjustable gas pedal for use on cars and trucks equipped with electronic engine controls. How could the vehicle’s computer tell the pedal’s position? A Canadian company, KSR International, under contract to General Motors, solved the problem by mounting an electronic sensor at the pedal’s fixed pivot point in order to communicate the necessary information.

A rival, Teleflex Inc., demanded royalties, claiming the device infringed its patent on an adjustable gas pedal equipped with an electronic sensor. KSR refused to pay on the ground that Teleflex had combined existing elements in an obvious manner and that its patent was therefore invalid. KSR won in Federal District Court in Detroit, but that decision was overturned in 2005 by the United States Court of Appeals for the Federal Circuit.

That court, in Washington, has exclusive jurisdiction over patent appeals. After years of permitting its judgments to stand unreviewed, the Supreme Court has begun to take an active interest in the Federal Circuit’s cases and has overturned several, including a second case the justices decided on Monday in favor of Microsoft in a dispute with AT&T.

In granting judgment for KSR on Monday, in KSR International Co. v. Teleflex Inc., No. 04-1350, the Supreme Court listed several specific errors and “fundamental misunderstandings” in how the Federal Circuit had analyzed the case. In looking at the Teleflex patent, Justice Kennedy said, the appeals court made the mistake of considering what “a pedal designer writing on a blank slate” would have done to solve the problem of the pedal and the sensor. But the slate was not blank, he continued, and the Teleflex patent was essentially an upgrade of existing technology.

Justice Kennedy said the problem was not necessarily the Federal Circuit’s overall approach, but rather its rigid way of applying a commonly used legal test. The test requires a person challenging a patent as obvious to identify a reason that would have prompted someone to combine two or more previous inventions, such as published articles suggesting such a combination. This has made it difficult to attack a patent as obvious, and has often precluded summary judgment, instead requiring an expensive jury trial.

Justice Kennedy said that this test, in the Federal Circuit’s hands, had led to a “constricted analysis” that paid too much attention to an inventor’s motivation and too little to a simpler inquiry: whether “there existed at the time of invention a known problem for which there was an obvious solution.” The Teleflex patent fit that description, he said.

The federal government, which had sided with KSR, argued that the Federal Circuit’s approach had led to the granting of too many patents to obvious inventions. Pharmaceutical and biotechnology industry groups, entering the case for Teleflex, argued that innovation would suffer if patents became too hard to defend.

In a sense, the case presented a moving target. While the KSR appeal was pending, the Federal Circuit issued several decisions reflecting openness to challenges to patents as unworthy because of obviousness. “Those decisions, of course, are not before us now,” Justice Kennedy said.

Court Sides With Microsoft

WASHINGTON, April 30 (AP) — The Supreme Court sided with the Microsoft Corporation on Monday, finding that patent law does not apply to software sent to foreign countries.

In a 7-1 decision, the court rejected AT&T’s position that it was entitled to damages for every Windows-based computer made outside the United States using technology that compresses speech into computer code.

AT&T had said computers running the Windows operating system infringed on its technology for a digital speech coder system.

The decision could affect other lawsuits against Microsoft and save it billions because of the global scope of its operations.

The Supreme Court said software should be treated like exported blueprints and schematics.