Companies Differ on How Supreme Court Should Decide Patent Case

Some of the largest companies in the United States are facing off in a Supreme Court case over gas pedals, with one side hoping the justices will put the brakes on an out-of-control patent system.

The court is scheduled to hear arguments Tuesday on what’s obvious when older inventions are combined to create something new. The law says an invention that’s “obvious” isn’t patentable, but the definition isn’t clear despite decades of litigation.

The ambiguity, critics say, has led to an explosion of patents as companies stake claims on everything in sight, from strategies for avoiding taxes to golf ball designs. The result has been extensive and costly legal wrangling as companies of all sizes fight over who’s infringing what. In some cases, small companies acquire patents not to develop new products but to sue for a quick windfall.

Microsoft Corp., Cisco Systems Inc., Intel Corp. and other New Economy companies have filed briefs calling for a change to the system.

But Johnson & Johnson, GE and DuPont, have filed their own brief arguing that major changes to the patent system would jeopardize billions of dollars invested in product innovation. They want to protect pharmaceutical and chemical products from generic manufacturers and counterfeiters, attorneys involved in the case said.

Patent law experts consider KSR International v. Teleflex Inc. one of the most important cases in years.

“It’s extraordinarily likely that the case will be a landmark ruling,” said Thomas Goldstein, a partner at Akin Gump Strauss Hauer & Feld and counsel to Teleflex.

The KSR case — which has attracted an unusually high number of friend-of-the-court filings from corporations, the government and academia — involves a dispute over a brake pedal designed for pickup trucks.

Canada-based KSR manufactures gas pedals for General Motors Corp. It made a pedal that can be adjusted for the height of the driver and uses electronic signals rather than a mechanical cable to accelerate when the pedal is pushed.

Both features were developed separately — the adjustable pedal over 25 years ago — but Teleflex, a manufacturer based in Limerick, Pa., sued KSR in 2002, claiming that KSR’s combination of the two features infringed on a patent it was issued in May 2001.

KSR argued that the patent should be invalidated because the combination of the two features is obvious.

The question of “obviousness” has long been a contentious area of patent law because it is the most subjective, patent experts say. Many inventions can seem obvious in hindsight. For example, 3M Co.’s Post-It Notes “may seem to be obvious, but that is only because they have been nearly ubiquitous in our daily lives for 25 years,” the GE and DuPont brief said. 3M also signed onto that brief, which supports the status quo.

“Upending nearly a quarter-century of jurisprudence at this point would throw into question the validity of millions of issued patents, cause the reassessment of patent licenses worth billions of dollars, make patent litigation more difficult to settle, and inevitably create more litigation for the courts,” the brief said.

Gerald J. Mossinghoff, a former commissioner of the U.S. Patent and Trademark Office, said 85 percent to 90 percent of the office’s work focuses on determining obviousness. Yet the Supreme Court has not ruled on obviousness since 1976, adding to the importance of the case.

The Court of Appeals for the Federal Circuit, which was set up to consider patent cases in 1982, developed the “teaching, suggestion, or motivation” test in an effort to set an objective standard for determining whether an invention is obvious.

The test says that where existing elements are combined to create an invention — such as combining an adjustable brake pedal with an electronic one to create an adjustable, electronic brake pedal — there should be evidence that someone else might have come up with the same combination in order to determine that the invention is obvious and therefore not worthy of a patent.

For example, the evidence could be references in previous patents or written comments in a technical journal.

Critics of the Federal Circuit argue that this has made it too difficult to prove that a claimed invention is obvious and therefore too easy to obtain a patent, because if a potential invention is obvious then technical experts may not have written anything about it.

In addition, Microsoft and Cisco said in their brief that the Federal Circuit’s test lowers patent standards and actually hinders innovation, rather than spurring it, as patents are intended to do.

The companies said the current system has led to “large numbers of obvious patents” that make “inadvertent infringement” more likely, and therefore patent infringement lawsuits more common.

This has spurred companies like Cisco to seek “hundreds of patents for defensive purposes,” the brief said.

Patent litigation is expensive, industry observers say. Emery Simon, counselor to the Business Software Alliance, a trade group, said that patent cases typically cost $2 million to $4 million per year and can take several years to resolve.

These expenses can be passed onto consumers through higher product prices, the companies said.

“A network router, a golf club, a software program, a ribbon bow, a bra all become more expensive as more and more patent holders must be paid royalties, and unnecessarily so where these obvious patents contribute no innovation to the product being sold,” Microsoft and Cisco’s brief said.

But companies that support the Federal Circuit’s test argue that it is effective in countering the problem of “hindsight bias.”

John Duffy, a George Washington University professor who helped prepare KSR’s Supreme Court filings, said that if the Supreme Court overturns the Federal Circuit’s standard, it would make it easier for businesses to defend themselves against patent infringement suits by invalidating questionable patents. That could result in less patent litigation overall, he said.

Most legal experts expect the Supreme Court to modify the Federal Circuit’s standard in some way. Goldstein said the court could even set a new standard for determining what’s obvious.