Saturday, February 14, 2009

Changes in Patent Situation After Some Major Recent Decisions

The American Bar Association Midyear Meeting has been held February 11-17 in Boston. On Saturday, February 14 2009, afternoon panels led by Phil Swain and Marc Temin of Foley Hoag addressed new developments in the ways that patents can be invalidated. This represents an emerging critical dysfunction in the patent and litigation system. One speaker, Jerry Riedinger, likened recent developments re summary judgement in the case KSR International Co. v. Teleflex Inc. to the explosion of Mt. St. Helen. It was common knowledge that something was brewing, and then the mountain blew, creating a large, ugly hole. (Image from http://www.olywa.net/radu/valerie/StHelens.html.) The material addressed by this panel is critically important for green-ness because the shift to the new ways will require an immense amount of innovation. It is well known that a lot of the breakthrough innovation comes out of university research and small business. In the best world this grows into large companies or is merged with larger companies, leading to large scale commercialization. For this process to work successfully, it is critical that patent protection be effective. If the patent and courts systems are broken, there will not be a proper incentive for innovators, commercializers, or investors to proceed. Instead the coupon clippers will prevail.

As Randall Davis, MIT computer scientist put it during the first panel, "there is a lot of intellectual thrashing going on. There is a lot to computer software law that the court may not understand. It is time to expand the concept of computers and algorithms, which should not be tied to a physical machine." As Scott Alter put it, the Supreme Court has reached some novel decisions, and the "Circuit Court is reasoning too literally from out of date Supreme Court decisions simply to avoid being overturned." These are not decisions that necessarily have fundamental meaning in the long term. However, that does not mean that real decisions don't have real impacts on the parties involved in patent litigation.

In the following, much of the material is taken from the presentation of Jerry Riedinger of Perkins Cole. Keep in mind that although I have paid a lot of attention to legal matters since about 1984, I am not myself a lawyer, so any mistakes or misrepresentations are probably mine. If you are going to bet part or all of the farm, you should first consult a qualified lawyer.

This material is important because, to the extent that bad patents are reasonably invalidated, the entire system of intellectual property is strengthened, and innovation is encouraged. Further, to the extent that reasonable patents are invalidated using the increasingly strong tools to do so, much of the incentive to innovate for profit is eliminated.

One issue is combination patents in which a number of items of earlier art are assembled into a larger object or process for which the patent is sought. The watershed case in this domain is the Great Atlantic and Pacific Tea Company v. Supermarket Equipment Corp in 1950. The Court imposed the new idea that combinations are patentable "only when the whole in some way exceeds the sum of its parts." Related, "A patent for a combination which only unites old elements with no change in their respective functions ... obviously withdraws what is already known into the field of its monopoly." Now to the lay person, this makes a lot of sense, but it caused havoc in the legal system.

Thus, arguably, Congress passed the 1952 Patent Act, which in part tried to correct this Supreme Court decision. In a succession of additional decisions handed down Congress was essentially overruled by the court system, so that the A&P case continues to hold in modified version to this day. In Graham v. John Deere the courts found that "the revision was not intended by Congress to change the general level of patentable invention." In Anderson's-Black Rock the decision was that "A combination of elements may result in an effect greater than the sum of the several effects taken separately." In Sakraida the courts again found obviousness, because the invention "simply arranges old elements with each performing the same function it had been known to perform." Part of the problem here is that there is great ambiguity in the courts as to what constitutes an innovation that is sufficiently novel to produce this greater effect.

The political issue that leads to decisions tearing down issued patents is this. When a survey was performed to determine people's satisfaction with issued patents, the response was that 51% of those surveyed rated U.S. patent quality as "poor" or "less than satisfactory." (Of course the glass is also half full, but that is apparently not telling for the courts: 48.8% reported that issued patents were "satisfactory or "more than satisfactory." -- Interestingly, 0% reported that such patents were "outstanding." What does that say?)

My own questions about this would be the following. So what is surprising about half the people thinking that patents are OK and the other half thinking they are not? Half of the concerned people are patent holders, while the other half are in the position of needing a license. Why should what amounts to a perhaps biased interpretation of what is at best an informal survey (grousing and complaints as they are noticed) about an inherently political question lead the courts to tear down patents? Since when should the courts be run by complaints?

The history of cases yields a set of tools for invalidating patents. "Predictability" became a key test for determining whether a combination patent should be patentable. In KSR, "The combination of familiar elements according to known methods is likely to be obvious when it does no more than yield predictable results." Further, "If a person of ordinary skill can implement a predictable variation, section 103 likely bars its patentability."

Second, summary judgement which has historically been forbidden in patent litigation, has become accepted. In KSR again, "Where ... the content of the prior art, the scope of the patent claim, and the level of ordinary skill in the art are not in material dispute, and the obviousness of the claim is apparent in light of these factors, summary judgement is appropriate." This shockingly also places into the hands of a judge, who may have no technical skills and who may act alone, whether a patent involves obviousness.

As summarized by Jerry Riedinger of Perkins Cole, there appear to be four points in predicting obviousness:

  • Is the invention understandable to lay people?

  • Is the invention visually similar to prior art?

  • Does a written explanation in the prior art seem to describe the invention?

  • Do two out of three experts say the invention was predictable?
If the answers to these questions are yes for a lot of patent applications, then there will be a lot thrown out as being obvious.

More may be coming.

1 comment:

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