Supreme Court Patent Decision Trickles Down Into Precedent

Lynne Kiesling

Remember in the spring, when the Supreme Court decided in KSR v. Teleflex that courts should use more flexibility in determining whether new ideas are “obvious” and therefore not patentable?

Today’s Wall Street Journal has an article discussing the ramifications of that decision (sub. required):

“The Supreme Court has made it clear what it thinks,” the judge said at a hearing in the case. “Patents are being issued on obvious inventions, and it tightened the reins.” A lawyer for Friskit says the company is reviewing its options for appeal and was confident it could prevail.

The KSR decision turned on the notion of “obviousness,” one of the bedrock doctrines of patent law. The Supreme Court laid out the obviousness doctrine in 1851, saying that a patent requires more “skill and ingenuity” than that of “an ordinary mechanic acquainted with the business.” Since virtually every litigated patent case includes an assertion of obviousness, and since the U.S. patent office examines patent applications for obviousness, many legal commentators have called KSR the most important patent case in decades.

“Patentees have long had the upper hand in patent litigation but the KSR case has shifted that balance of power back to defendants,” said Dennis Crouch, a law professor at the University of Missouri.

In KSR, the Supreme Court rejected a “rigid” application of existing tests for obviousness in favor of a more “expansive and flexible approach” that would give judges more discretion. If a person of ordinary skill in the relevant subject area would “be able to fit the teaching of multiple patents together like pieces of a puzzle” then the patent is obvious, the Supreme Court ruled.

One ruling to arise out of this new precedent is last week’s dismissal of a patent infringement case against RealNetworks, which the San Francisco Circuit had previously allowed.

On one hand this ruling reduces transaction costs and provides some transparency with respect to the property right delimited in the patent, so that’s a good thing. But on the other hand it gives the court flexibility in determining obviousness, which may introduce transaction costs in another way:

Some experts in law and economics think affording judges discretion in analyzing an obviousness defense is not a good thing. “Flexibility has an Achilles’ heel, which is that people with the biggest lobbying and litigation budgets, and the best public relations, win,” said Scott Kieff, a law professor at Washington University in St. Louis, who has argued for predictable rules in the patent system. “Flexibility really means that the company that can fight the hardest and shout the loudest wins the attention of the person with the flexibility to use his own discretion.”

Is there a way to have a predictable, clear, dare-I-say objective definition of obviousness? That would get around Scott’s concern, and still achieve the transaction cost reduction of the KSR ruling. It seems to me that, in a typical common-law way, the definition of obviousness will emerge from the decisions the Patent & Trademark Office makes in light of this ruling. How much can lobbying and PR affect that emergent concept? I don’t think it can as much as Scott does.