Supreme smack-down over patents?

On April 30, 2007, the US Supreme Court reversed the Court of Appeals for the Federal Circuit in two potentially far-reaching patent cases. 

In Microsoft v. AT&T, the high court narrowly interpreted the exported components language of 35 USC 271(f) as allowing the export from the United States to a foreign manufacturer of Microsoft's "golden master" Windows software, which when assembled into a computer-readable copy admittedly would violate AT&T's speech processor patent.  Justice Ginsberg's majority opinion likened the software master to the "notes of Beethoven's Ninth Symphony," distinguishing the master from installable/executable copies thereof as "[s]heet music for Beethoven's Ninth."  The analogy seems inapposite to this blogger, considering that the master included not only executable software copy build instructions but also every needed piece (component) of executable code.  Indeed, as Justice Stevens' lone dissent points out, "the master disk is the functional equivalent of a warehouse of components... ."

Thus, the huge jury award in favor of AT&T and against Microsoft is likely to be reduced by the amount attributable to such foreign shipment or electronic dissemination of the otherwise infringing master software contents.

The Microsoft v. AT&T case by any reading reinforces the importance of strategic foreign patent protection to buttress domestic patent portfolios.

In KSR v. Teleflex, the high court tackled the non-obviousness requirement for patentability found at 35 USC 103.  In a unanimous opinion, Justice Kennedy wrote that the Federal Circuit's so-called TSM (teaching-suggestion-motivation) test for obviousness was too rigidly enforced, and ruled that Teleflex's adjustable brake pedal and electronic throttle control patent was invalid under the "expansive and flexible" approach established in Graham v. John Deere.  The opinion agreed the TSM test is helpful, but held that undue reliance thereon gave short shrift to other factors, such as the level of ordinary skill in the art, and whether the combination of prior art elements was inspired by market demand instead of entrepreneurial effort deserving of 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."  Page 15 of the Opinion.

The upshot of KSR v. Teleflex?  Doomsayers predict that the decision may have cut in half the value of US patent holdings, or that patents of combination will be much more difficult to obtain and enforce.  Others say that fewer, stronger patents are a good thing and that ridding the world of dubious exclusions actually increases the economic value of true innovation.

This blogger believes that the rules remain substantially unchanged, and that, while patent application drafting and prosecution tactics might change some, deserving entrepreneurs should be undeterred by yesterday's Supreme Court rulings.