In a hotly anticipated decision that could make it easier to challenge patents of questionable quality, the justices called for loosening the current approach set by the nation's dedicated patent appeals court for deciding when a combination of existing elements deserves patent protection.
"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," the court wrote in a majority opinion (PDF) penned by Justice Anthony Kennedy.
The court, which is rooted in an obscure dispute between KSR International and Teleflex over vehicle gas pedal designs.
Technology companies were quick to praise the decision. Several Silicon Valley heavyweights, including Intel and Cisco Systems, had submitted supporting briefs urging the Supreme Court to revise the lower court ruling.
"There will be a better opportunity for examiners to weed out patents or applications that are not worthy of getting patents, and it will go a long way toward re-establishing patent quality," said Emery Simon, counselor to the Business Software Alliance, whose members include Adobe Systems, Cisco Systems and Microsoft.
Others were wary of the decision's broader economic implications on patent holders and voiced concern that the decision will throw the patent system into a state of confusion.
"I think it's very fair to say that it's going to be harder, more costly and more time-consuming for inventors to obtain U.S. patents in all areas of technology, and particularly in areas with predictable art, as we call them, such as mechanical inventions and software and methods of doing business," Robert Greene Sterne, founding director of the patent law firm Sterne Kessler Goldstein & Fox, said in a conference call with reporters. He added that "existing patent portfolios will need to be looked at, and existing relationships will need to be evaluated."
Federal law dictates that an invention cannot be patented if a person of "ordinary skill" in the same field could have come up with it. But because it's easy to claim that an invention is obvious in hindsight, the U.S. Court of Appeals for the Federal Circuit in 1982 concocted a legal test designed to lead to a more objective conclusion.
That standard requires that for an invention to be declared obvious, some "teaching, suggestion or motivation" must exist to show that a person of ordinary skill would have thought to combine certain elements.
Critics have argued that in practice, written evidence is required to pass that test, which has made it harder to overturn allegedly obvious patents and rendered it easier to obtain them from the U.S. Patent and Trademark Office in the first place. Technology companies say that's especially hard for them to prove because of the speedy rate at which they tend to develop new products and ideas.
"It's not written down, it's not published, it's not the subject of scholarly discussion, and that's where the Federal Circuit was basically looking," Ed Black, president of the Computer and Communications Industry Association, whose members include Google, Oracle, Red Hat and Verizon, said in an interview with CNET News.com on Monday.
The justices were sympathetic to those criticisms. "The diversity of inventive pursuits and of modern technology counsels against limiting the analysis in this way," they wrote. "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."
Hardware and software makers have also argued that they're especially threatened by the standard because they would like to be able to rearrange at will the thousands of pre-existing components that compose their products. Some say the lax rules havewho make a living off predicting those incremental changes to existing high-tech inventions, landing patents, and then going after companies for infringement.
Supporters of the Federal Circuit's test had argued that any changes would dilute the value of their patents by erasing the "predictability" they currently expect of the system. A number of large, patent-reliant companies like General Electric, 3M, Johnson & Johnson and Procter & Gamble said they believed the current test has been working well and is critical for protecting and encouraging innovation.
Rather than throwing out the so-called "teaching, suggestion or motivation" test entirely, the justices said they expected a number of other factors to be considered as well, namely "the inferences and creative steps that a person of ordinary skill in the art would employ."
As a result of the ruling, "now I can just say, common sense, and a person who was skilled in the particular area, would have known that you could solve this problem using this technique," said Philip Swain, a patent attorney with the firm Foley Hoag in Boston. "You don't have to have a written suggestion or other evidence to suggest the combination; you can just say the person would have inherently known to use that solution."
But some attorneys watching the case argued that the court failed to give enough direction on how the obviousness test should now be met. Some also suggested that the decision paves the way for the validity of previously issued patents to be called into question, likely leading to more litigation--or at the very least, a lengthy transition period as the Patent Office and the courts try to make sense of the Supreme Court's opinion.
Todd Goldstein, the attorney who argued Teleflex's case before the high court, said the economic consequences of changing the obviousness requirement "run into the trillions of dollars" because of the uncertainty the decision has created. Although there's no doubt the court intended to tighten the standard for issuing and upholding patents, "what we don't know is how far the judges want the decision to go," he said in a conference call with reporters. "We don't know the answer to what the new rule is yet."
It's not the Supreme Court's job to prescribe a detailed new test, and the justices were right to leave that decision with the lower courts, said David Kappos, IBM's assistant general counsel for intellectual property law. He also argued that the patent system will not encounter new chaos and that just the opposite will occur.
"What we have had is an era of extreme uncertainty caused by the issuance of many trivial and marginal patents under the old test," he said in a telephone interview. "What we're going to see now is actually more certainty because those trivial and marginal patents aren't going to get issued."
The ruling marks the latest in a string of patent cases that have prompted the Supreme Court to scale back decisions made by the patent appeals court. By the tech industry's description, the high court has so far behaved in a manner that begins to restore some of the balance to a patent system that critics say has been too often tipped in the favor of patent holders.
In a high-profile case last year involving eBay, the high courtin making it more difficult for patent holders to obtain injunctions against the use of their inventions when infringement has occurred.
Separately on Monday, the justicesinvolving an ongoing patent spat between Microsoft and AT&T. The court ruled 7-1 that Microsoft is not liable for patent infringement that occurs when the "abstract software code" it supplies to foreign manufacturers is subsequently copied onto machines there.
The ruling also comes as Congress has begun. The latest bill attempts to prevent bad patents from being exploited by allowing third parties to submit evidence that a patent is not novel or is obvious, and by setting up a post-grant opposition process in which people could challenge just-issued patents outside of court.
Although technology companies were generally upbeat about the Supreme Court's latest ruling, its immediate effects aren't entirely clear.
"This may make the holders of some lousy patents a little less interested in going the litigation route because it may well be they realize that their chances of winning are lower," said CCIA's Black. "I have to mitigate that comment unfortunately a little bit by saying that an awful lot of litigation goes on here that isn't expected to go to trial; it's for extortion purposes."