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Year of the Tech Patent Lawsuit, Part 1

By Erika Morphy
Dec 20, 2006 4:00 AM PT

What is shaping up to be a landmark technology patent lawsuit, KSR v. Teleflex, is pending before the U.S. Supreme Court right now. At its most basic, the decision could redefine the standard of "obviousness" that is used when deciding whether a patent should be granted for a particular invention or development.

Year of the Tech Patent Lawsuit, Part 1

Under KSR, for instance, 3M's ubiquitous and much beloved Post-it notes might have been harder to patent, because the invention -- sticky glue on the back of paper -- seems obvious in hindsight.

Functional Definitions, Please

While there are many shades of gray to this issue -- and just as many opinions on what defines an obvious development versus a patentable invention -- at least one fact is clear: This case is the first substantive patent legislation before the U.S. Supreme Court in 30 years.

"Other cases that have gone before the Supreme Court have been around procedural issues, not a substantive definition," Tom Goldstein, a KSR v. Teleflexpartner with Akin Gump who argued the KSR v. Teleflex case before the Supreme Court, told the E-Commerce Times.

The Supreme Court is still out on the issue, but the expectation is strong that its reassessment of the standards of what constitutes obviousness is likely to be stunning.

"We hope the decision sets a helpful, usable test -- not something off the wall like 'synergism,' 'flash of genius,' or the like, as past Courts have set forth," John R. Crossan, an IP partner at Chapman and Cutler, told the E-Commerce Times.

The Drama Quotient

It is fitting that 2006 is coming to an end with such a major technology patent case before the highest court in the U.S. 2006 was the year that "patent troll" entered the general public's collective vocabulary.

It was also the year that millions of Research In Motion (RIM) customers had to face down the real possibility that they might lose their beloved BlackBerry handheld devices over a patent dispute.

During the past twelve months, in short, there has been a seeming whirlwind of patent cases, with each apparently more significant than the last. In truth, if one were to add up the cases this year and compare them to previous years' tallies, the totals wouldn't vary by much.

"I think the difference between 2006 and earlier years is that a lot of these cases have been very public," Raymond Van Dyke, a partner with Nixon Peabody, told the E-Commerce Times.

"Although 2007 promises excitement in the patent arena, 2006 showed a lot of drama with industrial titans wrestling to a draw."

Underlying Issues

However, even more important developments -- largely still unnoticed by the general public -- are poised to reshape the patent landscape, Van Dyke added.

"The most important aspect of 2006 from a patent attorney's perspective is the growing tension in Congress, the Patent Office and in the Supreme Court about the reach and limits on patents and patent enforcement," he said.

"This year presages potential upheavals for 2007. The internecine struggle between the IT and life sciences industries over the last few years for reinterpretation of various basic patent tenets in Congress and the Patent Office will reach some conclusion in 2007, perhaps resulting from imminent decisions by the Supreme Court," predicted Van Dyke.

That said, it is useful to take a look at the cases that have primed the stage for 2007. In this three-part series, the E-Commerce Times will review some of the most significant patent cases of the year.

eBay v. MercExchange

Of the four patent cases decided by the Supreme Court in 2006, eBay v. MercExchange is perhaps the highest-profile. The case initially focused on the technology behind eBay's "Buy It Now" feature, which lets buyers short-circuit the auction process to complete a fixed-price sale.

A lower court ruling barred eBay from using the technology; in that same 2003 decision, MercExchange won a US$25 million jury verdict. Then, MercExchange asked the U.S. Court of Appeals to enjoin eBay from using the technology, which it did, thus launching the next phase of the seemingly endless eBay-MercExchange saga. eBay appealed that decision to the Supreme Court, which set aside the injunction.

"The Supreme Court held that permanent injunctions should not automatically be awarded in patent cases," Michael Shuster, a partner in Fenwick & West's intellectual property group and co-chair of the firm's life science practice, told the E-Commerce Times.

"Rather, the same factors considered for their award in non-patent cases should apply," he explained.

"This decision weakens the threat posed by so-called 'patent trolls' who assert patents but don't have products associated with them," Shuster continued. "It also will likely encourage life science companies to take additional risks in developing new drugs that might infringe on third-party patents."

Injunctions: Murky Waters

Van Dyke noted that eBay v. MercExchange -- although just a clarification of the law -- has realigned patent enforcement by analyzing the economics of the situation. Was the case about competitors battling or a gold digger taking unfair advantage?

"The full ramifications of the eBay decision are still being determined," Van Dyke pointed out. "In short, victorious patentees are not necessarily guaranteed an injunction against a defendant, and courts must first evaluate the overall circumstances. Patentees that do not practice the invention may not receive an injunction, and instead may receive only damages."

Richard Zembek, a partner with Fulbright & Jaworski, commented on how the Court addressed the injunction issue in another case, Finisar v. DirecTV:

  1. It denied issuance of an injunction against a defendant found to have willfully infringed the patent at issue.
  2. It effectively granted a compulsory license that permitted the defendant to practice the patented invention at a royalty rate set by the court.

"Post eBay," Zembek told the E-Commerce Times, "there appears to be an increase in ITC (International Trade Commission) filings, which only provides an injunction against the importation of infringing products, rather than monetary damages, as relief to a patentee."

Year of the Tech Patent Lawsuit, Part 2

Year of the Tech Patent Lawsuit, Part 3


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