The April 30 U.S. Supreme Court Decisions on Patent Issues
Last Monday, the United States Supreme Court handed down two decisions on patent matters:
KSR v. Teleflex relating to the standards to be used in judging whether a claimed invention is obvious and so unpatentable; and Microsoft v. AT&T relating to the circumstances under which “input” from the United States can make something produced abroad an infringement of a United States patent.
In KSR v. Teleflex, the Supreme Court reaffirmed its view expressed many years ago that patents should not be granted for inventions that had too low a level of inventivity. As Justice Kennedy in a unanimous decision of the Supreme Court wrote:
… as progress … is expected in the normal course [of events], the results of ordinary innovation are not the subject of exclusive rights under the patent laws. Were it otherwise, patents might stifle rather than promote the progress of the useful arts.
The invention was a position-adjustable pedal assembly with an electronic pedal position sensor for use in vehicles with computer-controlled engines arranged on a support member of the pedal assembly. By attaching the sensor to the support the sensor remained in a fixed position while the driver adjusts the pedal. The prior art showed that
adjustable pedals had been developed in the 1970’s to deal with height variations in drivers in vehicles with deep foot wells (e.g. Asano patent and Redding patent). In the 1990’s: computer controlled engines started to become common. The Smith patent of 1990 taught one that to avoid chafing of wires connecting a sensor to a computer one should put sensor on fixed part of pedal assembly and the Rixon patent of 1995 taught an adjustable pedal assembly with sensor in footpad.
During prosecution of the application giving rise to the patent in suit, the PTO had rejected a claim that was similar to that in suit but did not require the sensor to be in a fixed position over a combination of Smith and Redding but had allowed the narrower claim requiring the sensor to be in a fixed position.
The district court had found the claim in suit invalid as being obvious. The Court of Appeals for the Federal Circuit had reversed on the basis that the district court had carried out an incomplete analysis of the issues involved before deciding that the prior art provided a teaching, motivation or suggestion to produce the claimed combination and in particular, the district court had ignored the fact that the Asano patent on which it relied had aimed at solving a different problem from that solved by Teleflex. Asano was concerned with maintenance of maintenance of a constant force to the vehicle operation system irrespective of the position of the adjustable pedal. The problem solved by the patent in suit was, according to the Federal Circuit, to design a smaller, less complex, and less expensive electronic pedal assembly.
The Supreme Court unanimously held that Federal Circuit had wrongly reversed district court’s decision that claim was obvious because the Federal Circuit in adopting a rigid teaching, suggestion, motivation (TSM) test had “addressed the question of obviousness in a manner contrary to S 103 and our precedent”.
The Supreme Court summarized its earlier decisions in U.S. v. Adams (1966), Anderson Black Rock v Permanent Salvage (1969) and Sakraida v. AG Pro (1976) as follows:
- If a person of ordinary skill can implement a predictable variation S 103 likely bars its patentability
- A court must ask whether the improvement is more than the predictable use of prior art elements according to their established functions.
The Supreme Court noted that
Following these principles may be more difficult in other cases than it is here because the claimed subject matter may involve more than the simple substitution of one known element for another or the mere application of a known technique to a piece of prior art ready for the improvement. Often, it will be necessary for a court to look to interrelated teachings of multiple patents; the effects of demands known to the design community or present in the marketplace; and the background knowledge possessed by a person having ordinary skill in the art, all in order to determine whether there was an apparent reason to combine the known elements in the fashion claimed by the patent at issue. To facilitate review, this analysis should be made explicit.
The Supreme Court noted that, the Court of Customs and Patent Appeals (the predecessor to the Court of Appeal for the Federal Circuit had had a useful insight in In re Bergel (1961) where it had said that in considering obviousness a teaching suggestion or motivation to combine known elements was relevant to determining obviousness. However the Federal Circuit had wrongly converted that helpful insight into a rigid rule.
However, the Federal Circuit Court of Appeals had made three errors in reaching its decision in the present case:
- Failure to recognize that the problem motivating the patentee may be only one of many addressed by the patent’s subject matter. … any need or problem known in a field of endeavor at the time of the invention and addressed by the patent can provide reason for combining elements in the manner claimed.
- Assuming that a person of ordinary skill attempting to solve a problem will be led ONLY to those elements of those elements of prior art designed to solve the same problem; The court noted that “[i]t is common sense … that familiar items may have obvious uses beyond their primary purposes and in many cases a person of ordinary skill will be able to fit the teachings of multiple patents together like pieces of a puzzle.” (Emphasis added)
- Improperly dismissing the possibility that if something was obvious to try this could lead to a conclusion of obviousness under 35 USC § 103. The Supreme Court noted, “[w]hen there is a design need or market pressure to solve a problem and there are a finite number of identified predictable solutions, a person of ordinary skill in the art has good reason to pursue known options within his or her technical grasp. If this leads to the anticipated success, it is likely the product [is] not of innovation but of ordinary skill and common sense. In that instance the fact that a combination was obvious to try might show that it was obvious under S 103.”
Having set out the law to be applied, the Supreme Court held that one skilled in the art would have combined the teaching of the Ansano patent with a pedal position sensor to produce a structure falling with the scope of the claim in suit.
The Supreme Court noted that recent Federal Circuit decisions such as DyStar Textilfarben v. C. H. Patrick Co. (2006) and Alza Corp v. Mylan Labs (2006) had accepted that the TSM test needed to be applied flexibly and that general knowledge and common sense should be taken into account and that teachings could be implicit rather than explicit. The Supreme Court commented: “The extent to which they may describe an analysis more consistent with our earlier precedents and our decision here is a matter for the Court of Appeals to consider in future cases.”
The Supreme Court has therefore left it to the Federal Circuit to set out new rules for determining whether a claimed invention is obvious. It seems clear, however, that the Supreme Court believes that the current level of ingenuity required to justify the grant of a patent is too low and needs to be raised. Additionally in some cases at least if something is obvious to try it may be unpatentable even without a reasonable expectation of success as is required by the current law.
In the meantime, the Deputy Commissioner for patent Operation in the United States Patent and Trademark Office has issued a memorandum noting that examiners must continue to identify reasons as to why a person of skill in the art would have combined prior art elements in the manner claimed in order to reject a claimed invention as being obvious.
The second of Monday’s decisions, Microsoft v. AT&T, dealt with a much narrower issue.
In 1972, the Supreme Court held that shipment of components of a shrimp deveining apparatus which was patented in US did not infringe even though the claimed apparatus was to be assembled abroad. (Deep South v. Laitram). In response to this decision, Congress amended 35 USC § 271 (f) to provide that the law relating to contributory and induced infringement should apply not only to components supplied in the U.S. but also to components supplied “from” the U.S.
In Microsoft v. AT&T, the issue was whether AT&T was entitled to damages for computers produced and sold abroad incorporating a version of Windows® that included speech processing software that was an element in an AT&T patent for a computer capable of digitally encoding and compressing recorded speech. That AT&T was entitled to damages for similar computers produced in the United States was not disputed. The software was exported by Microsoft on a single “golden” disk. Copies were made abroad and these copies installed on the computers sold.
AT&T argued that the software installed on the computers was a “component” of the patented computer and so had been exported from the U.S. and fell within the provisions of 35 USC § 271(f).
The majority of the Supreme Court analyzed the case as posing two questions:
- When or in what form does software qualify as a component under 35 USC § 271(f).
- Were “components” of foreign-made computers “supplied by” Microsoft “from the United States.”
On the first, Justice Ginsburg writing for the majority, concluded:
Until it is expressed as a computer-readable ‘copy’ (e.g. on a CD-ROM), Windows® software … remains uncombinable. It cannot be inserted into a CD-ROM drive or downloaded from the Internet; it cannot be installed or executed on a computer. … as such it does not match 271(f)’s categorization: components amenable to combination.
She noted that:
because it is so easy to encode software … onto a medium …, AT&T intimates that the extra step should not play a decisive role under 271(f). But the extra step is what renders the software a useable combinable part of a computer.
Hence software in the abstract did not constitute a “component” of the patented computer at least for the purposes of 35 USC § 271(f).
So far as the second question was concerned she held:
Section 271(f) prohibits the supply of components ‘from the United States’ … in such manner as to actively induce the combination of ‘such components’.
Here … the copies of Windows® actually installed on foreign computers were not themselves supplied from the United States …those copies did not exist until they were generated by third parties outside the United States.
Finally she noted:
Any doubt that Microsoft’s conduct falls outside 271(f)’s compass would be resolved by the presumption against extraterritoriality … The presumption that United States law governs domestically but does not rule the world applies with particular force in patent law.
She noted that foreign law may embody different policy judgments about the relative rights of inventors, competitors, and the public in patented inventions. Therefore:
Applied to this case, the presumption tugs strongly against construction of §271(f) to encompass as a “component” not only a physical copy of software but also software’s intangible code, and to render “supplie[d] … from the United States not only exported copies of software, but also duplicates made abroad.
Hence AT&T was not entitled to damages for the computers produced abroad.
Justices Alito, Thomas and Breyer JJ reached a similar result by different reasoning. In their concurring opinion, they noted that nothing physical bearing the software is retained in the foreign-made computers, the disk on which the software was present being thrown away after installation. Therefore no component is incorporated into the computer.
The lone dissent was by Justice Stevens in whose view finding Microsoft liable as infringers would be more faithful to the intent of Congress in enacting 35 USC § 271(f).
In 2005 as part of a proposal for comprehensive revision of the patent laws it was initially proposed to amend 35 USC § 271(f) to exclude acts of supply to parties outside the United Sates form the definitions of contributory and induced infringement. This was not enacted. No such provision is in the legislation introduced into congress in 2007. The senate has, however, held hearings on the issue and it is possible that Congress may take up the issue again now that the Supreme court has given its decision.