On Monday, the U.S. Supreme Court issued an opinion on an arcane but important topic. What types of innovations are so "obvious" they do not deserve a federal monopoly? This decision, which will make it harder to obtain and enforce patents, is a rebuke to the easy patent policies of the U.S. Patent and Trademark Office (USPTO) and the 25 year old United States Court of Appeals for the Federal Circuit (the CAFC).
The CAFC was created in 1982 as a specialized court, and was given jurisdiction over patent law. Driven by CAFC judges who were true believers in patents as a instrument for innovation, U.S. patent policy has dramatically changed during this 25 year period, to the point where today patents are easy (too easy) to obtain on any subject matter. There is a growing sense that the patent system is broken, and built upon outdated ideas regarding innovation policy, a criticism that was once mostly advanced by a handful of academics, NGOs and open source activists, but more recently, embraced by a growing number of corporate players, who find their core businesses at risk from patent litigation.
The romantic and idealized notion of the independent inventor being rewarded for a spark of genius still has enormous influence over patent policy. But today more people are seeing the innovation process as highly collaborative and incremental, and the problems posed by the grant of strong government enforced exclusive rights to inventions as enormous. Many new products and services require the cooperation of hundreds if not thousand of persons, and the investment of millions of dollars.
It is often fairly easy to predict where a technological platform is going, and clever patent lawyers are able to obtain patents on all sorts of things that can eventually be used to shut down competitors or extort payments from successful businesses. Ask the makers of the Blackberry. Ask Vonage. Ask Microsoft, Toyota, Direct TV, and many other firms that have recently been on the losing side of patent litigation.
In the past two years, the U.S. Supreme Court has been taking on new patent cases at a historic clip, and changing the direction of patent policy. Last years decision eBay Inc v. MercExchange, L.L.C. essentially eliminated the notion that a valid patent was an automatic monopoly, by giving a District Court broad discretion to grant a compulsory license to use a patent, for a royalty, rather than enforce an injunction preventing someone from using the patent without permission.
On Monday, the Supreme Court gave two opinions on patent cases. In KSR International, the court overturned the CAFC, in order to make it more difficult to obtain and enforce a patent, when the innovation was something that should have been obvious to a person of ordinary skills. By raising the standard for the inventive step needed for patents, the Supreme Court is seeking to eliminate many of the worst abuses of the current patent system.
I have provided some excerpts from the opinion below, but I will also tell one simple story to illustrate the problem. Three years ago we examined the patents on an AIDS drug called ritonavir, which was invented by Abbott on a government grant, and is subject to royalty free licensing by the federal government. (A right never used by the government.) Because of the funding, the U.S. government had rights in some patents, but not others. One patent the government did not have rights in was for the use of gel tabs to deliver the medicine. I asked a patent lawyer, did Abbott invent the gel tab? I see that all the time in drug stores. I was told, no, but Abbott "invented" the idea of using gel tabs for ritonavir. This is the type of bogus claim the KSR opinion was designed to address.
Another typical problem addressed by the KSR opinion concerns fields, like software, where knowledge is not carefully documented in journals and other formal literature.
The U.S. Congress is beginning an important debate over patent policy. It needs to look not only at the new U.S. Supreme Court decisions, but to really consider the larger framework for supporting innovation. The Congress might look at the recent European Patent Office (EPO) scenario planning exercise, which looked down the road at alternative futures. This was presented at a high level meeting attended by Dr. Angela Merkel, the physicist who is the Chancellor of Germany, and included proposals such as this:
KSR INTERNATIONAL CO. v. TELEFLEX INC. ET AL. No. 04-1350. Argued November 28, 2006--Decided April 30, 2007. The slip opinion is available here.
Some excepts from the Supreme Court opinion follow:
The obviousness analysis cannot be confined by a formalistic conception of the words teaching, suggestion, and motivation, or by over emphasis on the importance of published articles and the explicit content of issued patents. The diversity of inventive pursuits and of modern technology counsels against limiting the analysis in this way. In many fields it may be that there is little discussion of obvious techniques or combinations, and it often may be the case that market demand, rather than scientific literature, will drive design trends. Granting patent protection to advances that would occur in the ordinary course without real innovation retards progress and may, in the case of patents combining previously known elements, deprive prior inventions of their value or utility.
[page 15]
The second error of the Court of Appeals lay in its assumption that a person of ordinary skill attempting to solve a problem will be led only to those elements of prior art designed to solve the same problem. [page 16]
Common sense teaches . . . 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 the teachings of multiple patents together like pieces of a puzzle. [page 16-17]
A person of ordinary skill is also a person of ordinary creativity, not an automaton. [page 17]
The same constricted analysis led the Court of Appeals to conclude, in error, that a patent claim cannot be proved obvious merely by showing that the combination of elements was "obvious to try." Id., at 289 (internal quotation marks omitted). When 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. If this leads to the anticipated success, it is likely the product not of innovation but of ordinary skill and common sense. In that instance the fact that a combination was obvious to try might show that it was obvious under §103. [page 17]
The Court of Appeals, finally, drew the wrong conclusion from the risk of courts and patent examiners falling prey to hindsight bias. A fact finder should be aware, of course, of the distortion caused by hindsight bias and must be cautious of arguments reliant upon ex post reasoning. See Graham, 383 U. S., at 36 (warning against a "temptation to read into the prior art the teachings of the invention in issue" and instructing courts to "'guard against slipping into the use of hindsight'" (quoting Monroe Auto Equipment Co. v. Heckethorn Mfg. & Supply Co., 332 F. 2d 406, 412 (CA6 1964))). Rigid preventative rules that deny fact finders recourse to common sense, however, are neither necessary under our case law nor consistent with it. [page17]
We build and create by bringing to the tangible and palpable reality around us new works based on instinct, simple logic, ordinary inferences, extraordinary ideas, and sometimes even genius. These advances, once part of our shared knowledge, define a new threshold from which innovation starts once more. And as progress beginning from higher levels of achievement is expected in the normal course, the results of ordinary innovation are not the subject of exclusive rights under the patent laws. Were it otherwise patents might stifle, rather than promote, the progress of useful arts. See U. S. Const., Art. I, §8, cl. 8. These premises led to the bar on patents claiming obvious subject matter established in Hotchkiss and codified in §103. Application of the bar must not be confined within a test or formulation too constrained to serve its purpose. [page 23-24]