KSR's Impact on the Validity of Issued Patents and Patent Thickets
By: Thomas P. Krzeminski, Esq.

If the Supreme Court changed the way patent validity was determined, how would the decision affect the 2 million U.S. patents granted over the last twenty years? After the Supreme Court’s recent decision in KSR International Co. v. Teleflex Inc., No. 04-1350 (decided April 30, 2007), that question is no longer a hypothetical.

Indeed, multiple Justices of the Supreme Court asked this very question during oral argument in KSR, but they never received a direct answer. Nor did the Supreme Court resolve the question in its opinion in KSR. So, the question still stands: What is the status of the U.S. patent system after KSR? Before answering, a brief summary of U.S. patent law and the KSR case is in order.

A. The Presumption of Patent Validity

A patent is presumed valid under 35 U.S.C. § 282. Courts have interpreted the presumption of patent validity to mean that a party challenging a patent’s validity must carry a higher burden of proof, namely “clear and convincing evidence,” than that which is typically required in most civil actions.

The presumption of patent validity and the corresponding requirement of clear and convincing proof of invalidity are rooted, at least in part, on the presumption of administrative correctness. Federal agencies are presumed to have done their jobs correctly, and, as a result, judicial deference is owed to official decisions of the agencies. The U.S. Patent and Trademark Office (PTO) is a federal agency within the Department of Commerce. The PTO employs knowledgeable and experienced patent examiners who inspect proposed patents to determine, inter alia, whether they are directed to patentable subject matter. Courts presume that the PTO is only issuing patents that protect patentable subject matter, and, to honor this presumption, they extend deference to decisions of the PTO on issues of patentability.

B. Obvious Inventions Are Not Patentable

To obtain a patent, one must convince the PTO that its invention is useful, novel and not obvious in view of the prior products or processes known in the field (i.e., the “prior art”). KSR focuses on the third criteria of patentability, namely, that the invention not be obvious in light of prior work.

What makes something “obvious”? According to Section 103 of the Patent Act, a product or process is obvious when “the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art.” In assessing obviousness, courts evaluate the scope and content of the prior art; differences between the prior art and the alleged invention; and the level of ordinary skill in the art. Against this backdrop, the obviousness of the purported invention is determined. Secondary considerations such as the commercial success associated with products embodying the patented technology, are also relevant to the inquiry.

The test for obviousness is objective, but often difficult to apply. In or around 1985, the Court of Appeals for the Federal Circuit, which has exclusive jurisdiction over patent appeals from the district courts, added the requirement that, in order for a patent to be obvious, the prior art must “teach, suggest or motivate” one of ordinary skill in the art to combine the prior art (also known as the TSM test). Since 1985, the PTO and courts employed the TSM test when determining the obviousness of purported inventions.

C. The KSR Decision and Its Impact on Patents and “Patent Thickets”

The Petitioner in KSR challenged the TSM test, arguing that its application was contrary to the plain meaning of the Patent Act and Supreme Court precedent. On April 30, 2007, the Supreme Court agreed, and, in an unanimous opinion, rejected the Federal Circuit’s application of the TSM test as overly rigid and setting the bar too low for patentability. In doing so, the Court opted for a more flexible approach to assessing obviousness, one in which courts could take into account more subtle reasons for combining the prior art in such a manner as to render the purported invention obvious. These reasons include those used in the TSM test, but also include inferences and creative steps that a person of ordinary skill in the art would likely employ in view of the prior art as a whole. The Court, while stopping short of an outright dismissal of the TSM test, diluted the test beyond recognition or repair. As a result, the test for determining obviousness has changed.

From 1985 to 2007—the unofficial lifespan of the TSM test—the PTO has granted over 2 million patents. Notwithstanding the Court’s dilution of the TSM test, these patents are still presumed valid by statute. However, because the PTO did not apply the proper obviousness test when examining patents over the past two decades, the argument can be made that, after KSR, no deference is owed to the PTO’s prior determinations of obviousness.

During its consideration of the KSR case, the Supreme Court was clearly concerned about how a rejection of the TSM test would impact the millions of patents that have already issued under that legal standard. During oral argument in KSR, Justice Souter acknowledged that the TSM test has been applied for more than 20 years, and to overturn it now could “produce chaos” and result in “100,000 cases filed tomorrow morning.” Justice Scalia worried that the Court’s rejection of the TSM test could decay the presumption of patent validity. Further, in the KSR opinion, the Court stated in dictum, “We nevertheless think it is appropriate to note that the rationale underlying the presumption—that the PTO, in its expertise, has approved the claim—seems much diminished here.” Now, while the Court appears to have made this remark in the context of the diminished deference owed to the PTO when material prior art that was not before the PTO forms the basis of the obviousness attack, the quotation may also foreshadow a trend towards reduced deference to the PTO’s prior determinations of obviousness using the now-supplanted TSM test.

It remains to be seen how KSR changes the way the PTO examines new patent applications and how we litigate patents that have already been granted. The PTO will likely be more apt to reject patent applications, in view of the higher bar for patentability set in KSR. Further, when litigating the validity of patents previously granted by the PTO under the TSM test for obviousness, it will now likely be easier for accused infringers to invalidate patents for obviousness, in view of the higher standard for patentability and the lack of deference owed to the PTO’s prior determination regarding obviousness.

Patents that present more minor advances over the prior art will likely begin to fade into the sunset, caused by some combination of the following: wary patent owners choosing not to assert weaker patents; courts invalidating such patents during litigation; and devaluation of the patents by competitors during license negotiations. Conversely, those patents that represent significant, pioneering advances in their respective fields will become even more valuable than they once were, due to their inherent strength when challenged and the more difficult time competitors will have trying to license the patent at issue. This latter point will be particularly true where “patent thickets” were once employed.

A “patent thicket” is created when a competitor or competitors develop vast patent portfolios consisting of patents directed to minor, yet often essential, components of products that would feature the technology of the pioneering patent. The thicket, when used successfully, suffocates the pioneering patent, by blocking commercialization of the pioneer’s products unless it agrees to cross-license the patent thicket from the competitors. If patents are more difficult to obtain due to a higher threshold for patentability, patent thickets will be much more difficult to grow and maintain, leaving the holder of the pioneering patent more free to commercialize its product without being forced to cross-license the competitors’ blocking patents. The result is that pioneering patents become more valuable than ever, leaving competitors with a fundamental choice: innovation or extinction.

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Partner, Knobbe, Martens, Olson & Bear LLP, 2040 Main Street, Irvine, California, 92620.  The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, Knobbe Martens or its clients.