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In the U.S. Supreme Court, on Nov. 28, 2006, oral arguments provided the forum for challenging the nation’s patent system. Is there too much protectionism for patents and insufficient competition (as asked by Justice Stephen G. Breyer)? This challenge emerges as a battle between two giant forces behind the American economic engine. KSR International Co. v. Teleflex Inc. and Technology Holding Co., No. 04-1350. The case concerns an invention that includes a combination of previously known elements in the art. Are these types of inventions deserving of a patent? The legal question is whether the invention would have been obvious to a person of ordinary skill in the art at the time the invention was created. Historically, the courts determined the criteria for obviousness, and subsequently the U.S. Congress codified the standard in the 1952 Patent Act. The Supreme Court issued its obviousness analysis in the landmark case of Graham v. John Deere Co., 383 U.S. 1 (1966). However, as technologies evolved, the case law necessarily evolved to keep pace. As a result, the U.S. Court of Appeals for the Federal Circuit, an intermediate appellate court with exclusive patent jurisdiction, established an obviousness test criteria for evaluating potential new and issued patents. This test has now been in place for about the past 20 years. The Supreme Court justices, during oral arguments, declared that the test is “gobbledygook” (Justice Antonin Scalia), “worse than meaningless” and “Federal Circuit jargon” (Chief Justice John G. Roberts Jr.). If such terms are any indication that the obviousness test will be significantly changed, it may result in hundreds of thousands of issued patents being challenged and possibly invalidated. Such a turmoil in the intellectual property landscape may affect the patent portfolio of many corporations, and hence their financial positions and stability. Further, a change in the obviousness test criteria may have substantial differential effects on diverse technologies, and hence the case has precipitated camps pro and con to protect their respective interests. The two camps On one side is KSR International Co. and its camp, comprising high-caliber, large software, information technology, and electronic companies and accompanied by the solicitor general of the United States. On the other side is Teleflex Inc. and Technology Holding Co. and their camp, comprising the biotechnology, chemical and pharmaceutical industries and supported by the American Bar Association and major intellectual property associations. Even though neither KSR nor Teleflex is specifically a member of its supportive camp, each has assumed its respective de facto role to bring forth this bout onto the Supreme Court stage. Advocates for KSR’s position represent sectors of the economy that are generally in a strong position to flex their muscles in the market. They include companies from various facets of the software, communications and electronics industries-such as Microsoft Corp., Intel Corp. and Cisco Systems Inc.-and even the auto industry, such as Ford Motor Co. Teleflex represents the landscape of highly patent-sensitive chemical, biotechnology and pharmaceutical industries where market-share control is up for grabs in specific scientific ventures. Advances in biotechnology, computer technology (as applied to biomedical research) and clinical medicine have led this sector to become more competitive and economically driven. The current picture of pharmaceutical culture depicts the explosion of innovative companies that have preserved their pre-entrepreneurial academic philosophy while relying heavily on their intellectual capital and enforcement thereof. These include single-product start-up companies as well as large, multibillion-dollar pharmaceutical corporations. A case about accelerator pedals The facts in the KSR case are relatively simple. On May 29, 2001, the U.S. Patent and Trademark Office (PTO) issued to Teleflex a patent for an adjustable accelerator pedal assembly with electronic throttle control for motor vehicles. Previous throttle controls consisted of mechanical linkages and allowed drivers of varying statures to comfortably position themselves in relation to both the accelerator and the steering wheel. The Teleflex patent combined mechanical and electronic elements, with both type of elements previously known in the art, to form the new invention. However, the mechanical link from the pedal to the throttle in the Teleflex patent is electronically sensor-controlled and eliminates the need for cables and associated difficulties. Teleflex, after noting KSR’s sale of a product similar, if not identical, to that described in its patent, filed an infringement action. The debate places a central patent law theme at issue. What sort of modifications or combinations of prior art elements are worthy of a new patent monopoly, and what are the monetary effects of an error in granting the patent monopoly? Further, is a new combination of simple electromechanical devices known in the industry or modifications to known computer-driven software functions worthy of the same patent protection as a simple modification of a chemical moiety, such as when one molecular component, is substituted with another (e.g. a methyl group is replaced by a benzyl group)? To what extent can patentability standards be the same across these widely divergent technologies? In the pharmaceutical industry, a small modification to the structure of an active moiety can cause drastic changes in the function, safety, effectiveness and, hence, profitability. Therefore, the combination of known prior elements to form a new invention under the present standard works well. However, in software development, mechanical arts and electronic circuitry, the possible combinations of prior known elements achieving the same result seems to be numerous. Therefore, a higher standard of patentability in these types of industries may be desirable. The U.S. Constitution allows Congress “to promote the progress of science and useful arts, by securing for limited times to artists and inventors the exclusive right to their respective writings and discoveries.” Art 1., � 8, cl. 8. The challenge facing the court in this case is to choose from two fundamentally different views of how best to achieve this constitutional objective. Standards of patentability The KSR camp argues for a higher standard of patentability based on an underlying premise that greater intellectual freedom and creativity is achieved by limiting the opportunity for a patent monopoly, and that the fewer number of patents issued would be of higher quality and thus provide greater economic competitiveness. This philosophy is deeply embedded in the industry, as reflected in the increasing drive toward open-source software development. The Teleflex camp, on the other hand, essentially argues for maintaining the present standard of patentability, on the underlying premise that the incentive of patent monopoly drives development. This philosophy is deeply embedded in the pharmaceutical industry, as reflected in the explosion of start-up and incubator companies built around very narrow chemical and biological moieties which are protected by patents. The Supreme Court initially addressed the issue of obviousness in Hotchkiss v. Greenwood, 52 U.S. 248 (1850), and Congress codified the issue of obviousness under the 1952 Patent Act as 35 U.S.C. 103. The Supreme Court articulated a four-factor obviousness analysis in Graham v. John Deere Co. The analysis consists of the scope and content of the prior art; the differences between the claims and the prior art; the level of ordinary skill in the pertinent art; and secondary considerations, if any, of nonobviousness. However, the application of these factors did not address the issue of hindsight. Determining what was obvious at “the time of invention” has caused much difficulty in the patent-procurement and validation process. This retrospective analysis is inherently subject to human hindsight prejudice. Simply stated, hindsight is always 20/20. The Federal Circuit developed its “motivation to combine standard” in large part to protect against this hindsight analysis. The Federal Circuit, in a series of cases, attempted to establish an objective approach to assessing the first three factors of Graham. This led to the Federal Circuit’s articulated “teaching, suggestion, motivation” (TSM) test for obviousness, which has recently been defended by the Federal Circuit in DyStar Textilfarben GmbH & Co. Deutschland KG v. C.H. Patrick Co., 464 F.3d 1356 (Fed. Cir. 2006). This test provides that if there is no teaching, suggestion or motivation in the prior art to combine the particular elements, then the invention may be considered nonobvious. The KSR camp characterized this standard as inflexible, difficult to satisfy, disconnected from common sense and, more importantly, a departure from the Supreme Court’s precedent in Graham. Further, this standard encourages the issuance of poor-quality or invalid patents. The Teleflex camp disputes KSR’s claim that the current standard leads to the issuance of invalid patents. Indeed, there has been no economic indicator suggesting a substantial degree of harm caused by invalidation of patents based on the current obviousness standard. The Teleflex camp attributes the issuance of bad patents to the examiners’ misinterpretation and misapplication of the current standard during the patent examination phase. It argues that the TSM test is a road map for addressing the first three factors in the Graham analysis. Accordingly, it should be viewed as an evidentiary requirement and within the confinements of the Graham factors . Oral argument comments During lively oral arguments, the rather strongly opinionated justices were emphatically dismissive of the meaning of the TSM test. Breyer expressed his frustration with the TSM test, noting that he understood the teaching and suggestion part, but not the motivation aspect, stating “I’ve read it about 15 or 20 times now, . . . I just don’t understand what is meant by the term ‘motivation.’ ” Scalia seconded the sentiment, saying, “ I-like Justice Breyer-I don’t understand what the motivation-motivation element is.” Under questioning from Justice Anthony M. Kennedy, the solicitor general’s representative admitted that the TSM test is valid but not as an exclusive test. He stated, “We agree that teaching[,] suggestion and motivation are valid means of proving obviousness, valid considerations for the Court. And this Court’s precedents are entirely consistent with that . . . .The problem with the Federal Circuit’s test is it makes that the exclusive test and precludes obviousness determinations in the absence of satisfaction of that test which this Court’s precedents are clearly not consistent with.” Justice David H. Souter asked whether there are going to be 100,000 cases filed tomorrow morning if the TSM test is overturned. The solicitor general’s representative replied that the TSM test involved patent claims in outer boundaries of patentability and that such cases could be resolved by summary judgment by a court, that is, simply as a matter of law without a jury trial. Teleflex argued that the Federal Circuit TSM test is an inclusive rather than an exclusive test, whereupon Scalia chimed in that “I would say its test is meaningless.” Roberts added: “It adds a layer of Federal Circuit jargon that lawyers can then bandy back and forth, but if it’s-particularly if it’s nonexclusive, . . . it seems to me that it’s worse than meaningless because it complicates the inquiry rather than focusing on the statute.” Scalia further stated, “It is misleading to say that the whole world is embraced within these three nouns, teaching, suggestion, or motivation, and then you define teaching, suggestion, or motivation to mean anything that renders it nonobvious. This is gobbledygook. It really is, it’s irrational.” Teleflex further argued that the Federal Circuit in deciding recent cases has emphasized the flexible nature of the TSM test and its rulings have reflected this aspect. Scalia’s response was that the Federal Circuit had decades to think about the test, and now suddenly decided to polish the test after certiorari was granted. Federal Circuit defends its test No doubt aware of the stakes, and interested in protecting its own precedent, the Federal Circuit defended its “motivation to combine” standard in the recent Dystar case. The Federal Circuit reasoned that its “motivation to combine” standard is consistent with Supreme Court precedent because it is an evidentiary requirement for the fact-finder to follow within the four corners of the Graham analysis. Essentially, it is a road map as to how to address the first three factors in the Graham analysis. Unquestionably, the “motivation to combine” standard has elevated the hurdle for rejecting patent claims on the ground of obviousness, but it also has simplified the characterization of an invention in more complex technical fields, such as the pharmaceutical industry. This standard provides an objective measurement for evaluating a realistic versus an unrealistic combination or improvement in the art. It is questionable whether the court can cure the obviousness analysis from the chronic symptom of hindsight. The U.S. economic engine has steamed ahead quite effectively under the present standard of obviousness. Given the economic consequences at stake it hardly seems the time for a radical departure from at least 20 years of well-developed precedent. Even though the technical question seems to be uncomplicated for the court to reach a final decision, the economic stakes are as high as they have ever been. The court’s challenge will be to develop an objective standard for obviousness that can be used across divergent technologies while not unduly upsetting the U.S. economic engine. This is something like navigating between Scylla and Charybdis. Gerard P. Norton is chairman of the intellectual property practice group in the Lawrenceville, N.J., office of Philadelphia-based Fox Rothschild. Gerard Bilotto is a partner in the firm’s New York office, and Shahnam Sharareh is an associate in the Lawrenceville office. Jonathan R. Lagarenne, a partner in the Lawrenceville office, contributed to the article.

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