Tuesday, May 01, 2007

Is there Sarbanes-Oxley fallout from KSR v. Teleflex?

Jon Van of the Chicago Tribune quotes Alan Thiele of San Antonio about a possible consequence of the obviousness determination in KSR v. Teleflex:

"Under the Sarbanes-Oxley law any substantial decline in value must be reported. Companies could be held liable under Sarbanes-Oxley if they fail to look at the record of each patent to determine its vulnerability."

Sure, and if a company reports a lowering in value that would be a party admission that the patents of the company are more likely to be found invalid. Perhaps companies so concerned about Sarbanes-Oxley should submit their patents for a re-examination by the USPTO to get an official evaluation in order to assess patent value in view of the changed standard for obviousness. Rather than try to predict probabilities, have the USPTO vote the patent claims up or down. It might be interesting to see how the USPTO rules on "substantial question of patentability" if someone presented previously used references AND said "the law changed."

Elsewhere in the Tribune article:

Steve Szczepanski, an intellectual-property attorney based in Chicago with Foley & Lardner, said the high court's anti-patent decision "has introduced a lot of uncertainty. There will be a lot of litigation.

"The court has thrown out the existing standard without replacing it. I'm not sure how the patent office will deal with it."

IPBiz is not sure that the Supreme Court "threw out" the existing standard. Justice Kennedy did write: "We begin by rejecting the rigid approach of the Court of Appeals." Kennedy further noted: "Helpful insights, however, need not become rigid and mandatory formulas; and when it so applied, the TSM test is incompatible with our precedents." Thus, to the extent that the TSM test was applied in a RIGID way it's out, but when not applied in a RIGID way it's in. One can see that the Supreme Court did NOT throw out the existing standard when one looks at the Supreme Court's analysis of the "first" error of the CAFC: "any need or problem in the field of endeavor at the time of invention and addressed by the patent can provide a reason for combining." The Supreme Court did NOT say "don't look for a reason for combining." The Supreme Court indicated it was easier to find a reason for combining than the CAFC indicated.

The Tribune also brought up patent quality. "These decisions are a clear victory for promoting patent quality and more equitable damages standards," said Robert Holleyman, chief of the Business Software Alliance trade group. The KSR case addressed the issue of "motivation to combine" in a situation in which several references are used against a patent claim. The decision makes it easier to find the "motivation to combine."

The Los Angeles Times began with the following text:

Patents should not be ironclad protection for inventors because some inventions aren't unique, the Supreme Court ruled Monday.


The Supreme Court has tried to recalibrate the system for the 21st century, largely backing the computer industry's approach in contrast to the more restrictive view of patent-holder rights advocated by pharmaceutical and biotechnology companies.

One of Monday's rulings makes it easier to challenge patents on grounds that they don't protect truly one-of-its-kind innovations.


A Michigan court ruled in 2002 that Teleflex's pedal was just an obvious combination of existing patented components and shouldn't have been granted a patent in the first place. The U.S. Court of Appeals for the Federal Circuit reversed the decision, saying the Michigan court didn't follow its strict test for determining when an innovation was "obvious."

The justices ruled unanimously that the appeals court's test was too "narrow" and "rigid" and tossed the suit.

Each invention sets a higher bar, meaning "the results of ordinary innovation," Justice Anthony Kennedy wrote, should not receive patent protection. [IPBiz: ???]

He added that standards for judging patents should be flexible to accommodate the needs of different industries.

avid Kappos, assistant general counsel at IBM, said the court's decision means, "if you want a patent, you actually have to invent something."

The Supreme Court's recent interest in patent law — it has taken up a half-dozen cases in the past two years, an unusually large number — reflects the greater role patents play in the U.S. economy, as companies earn more revenue from licensing patents. Patent litigation has increased by 50 percent in the last 10 years.

IBM, which regularly tops the annual list of top U.S. patent recipients, receives approximately $900 million in revenue from licensing its patents and other intellectual property to other companies.

IBM's Kappos said that figure is an increase from the "low millions" in the early 1990s.

The Boston Globe (Bloomberg) noted:

Under today's ruling, "the ability to obtain patents in all areas of technology in the US will go down and the cost and time to get them will go up," said Teleflex lawyer Robert Sterne.

See also




Blogger Lawrence B. Ebert said...

Murphy at InformationWeek has some text linking Kappos/open innovation/patent reform, echoing text that appeared in the Wall Street Journal:

And in my own conversation with David Kappos, IBM's lead IP attorney, he noted that the IT industry is different because it doesn't have a well-defined language that provides the basis for discussing new innovations. Other sciences have the language of chemical composition, for example: "You can understand exactly on an atomic level what's being described." Compare that, he says, with the logical constructs of software design—programming layers, objects, macros, etc.—and there's no single, base vocabulary in the IT industry, which makes it much harder for a patent examiner to research a claim and compare prior art.
The Supreme Court is working to update the patent system to changes in how innovation happens—where it's more often crossing lines of scientific disciplines, companies, or national borders. IT is one of the lead examples of that, and therefore is likely to be among those most affected by any changes to the system. "The world is really moving fast toward collaborative innovation in ways people haven't before," Kappos says. "The Internet is the prime motivator for that. The patent system has a long way to go to catch up to that."

LBE had posted on the scotus blog:

A more interesting angle explored by Bravin involved the impact of the KSR decision on open innovation models (for example, see Henry Chesbrough on "open innovation.") Bravin quoted David Kappos of IBM: "What they're starting to put together here is a model for a 21st-century patent system. Closed proprietary innovation remains important, but the court seems to be saying that patent law can also accommodate 21st century models that are more open, more collaborative."

4:12 PM  

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