Amicus Curiae Brief — KSR Intern. Co. v. Teleflex Inc.

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I"Sipreme Coun US.

FILEO {

! AUG 2 2 2006

|_OFFICE OF THE CLERK |

No. 04-1350

Jn the Supreme Court of the United States

KSR INTERNATIONAL Co.,

Petitioner,

Vv.

TELEFLEX INC., ET AL.,

Respondents.

On Writ of Certiorari to

the United States Court of Appeals

for the Federal Circuit

BRIEF OF THE BUSINESS SOFTWARE ALLIANCE AS

AMICUS CURIAE IN SUPPORT OF PETITIONER

ANDREW J. PINCUS

Counsel of Record

MIRIAM R. NEMETZ

EVAN P. SCHULTZ

KEVIN S. RANLETT

Mayer, Brown, Rowe & Maw LLP

1909 K Street, NW

Washington, DC 20006

(202) 263-3000

Counsel for Amicus Curiae

ne

WILSON-EPES PRINTING CO., INC. — (202) 789-0096 — WASHINGTON, D.C. 20001

QUESTION PRESENTED

Whether an alleged innovation is obvious under 35

U.S.C. § 103—and therefore not patentable—only when prior

art contains objective documentation of a “suggestion, teach-

ing, Or motivation” that would lead a person having ordinary

skill in the art to combine the elements in the same manner as

the claimed invention.

(1)

TABLE OF CONTENTS

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BARRE OE FLT TRIO Ci Do ccscccencesssrcescccsssensesennsstecenees

INTRODUCTION AND SUMMARY OF

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STE sitentissisedeesbuibitcibaniniicipamiibitiibiditaitanistinteeiiebians

1. THE PRACTICAL EFFECTS ON

TECHNOLOGY INDUSTRIES OF THE

FEDERAL CIRCUIT’S “TEACHING,

SUGGESTION, OR MOTIVATION” RULE

DEMONSTRATE THE STANDARD’S FLAWS

AS A TEST FOR OBVIOUSNESS ..............c:cccec000

A. The Federal Circuit’s Test Makes It Difficult

To Establish Obviousness At The Summary-

Judgment Stage. Making Infringement Claims

More Expensive To Litigate And Riskier to

TERRESTRES Ree SOE Ay fC

B. The Availability Of Patents For Obvious

Combinations Of Prior Art Imposes

Substantial Costs On Technology Companies ...

C. The Often-Incomplete Prior-Art Record For

Hardware and Software Magnifies The

Negative Effect Of The Federal Circuit's

ERED ORT: NO ERE TO

itt

TABLE OF CONTENTS -— continued

Page

ll. THIS COURT SHOULD REAFFIRM THE

BROAD SCOPE OF THE OBVIOUSNESS

INQUIRY AND MAKE CLEAR THAT PROOF

OF A SPECIFIC “SUGGESTION, TEACHING,

OR MOTIVATION” IS NOT ESSENTIAL TO A

FINDING OF OBVIOUSNESS 0.0.00... ecsessessestereeeeeees 16

A. The Federal Circuit’s “Teaching, Suggestion,

Or Motivation” Test Improperly Disregards

Other Methods Of Demonstrating That A

Claimed Invention Is Obvious To A Person

Having Ordinary Skill In The Art ............ccceeseeneees 17

B. The Federal Circuit Places Inordinate Weight

On “Secondary” Circumstantial Evidence Of

COD VERUIIIODD,. .cccsessicccssnccscinsinnieseiumenepseniedieiniamaia 25

COINLTIIII IN cosccccrccccoscscccccesccssionsosoonsnnsncscosinenananeienennanenin: 29

iV

TABLE OF AUTHORITIES

Page(s)

CASES

AT&T v. Excel Communications, Inc.,

Pe ae Ce Cs I Be ccccccccnscscccscsnetensesconsovensens 15

Adams v. Bellaire Stamping Co., 141 U.S. 539

EL a ee 20

Alco Standard Corp. v. Tenn. Valley Auth. , 808

Sena 26

Anderson’s-Black Rock, Inc. v. Pavement Sal-

TE CA, FIO OB. SF (IGG cccccccccccccsccccsccscosesecccsces 23, 26

Atl. Works v. Brady, 107 U.S. 192 (1883) .....cccccccccccccceeeeceees 18

Bonito Boats, Inc. v. Thunder Craft Boats, Inc.,

i eel 19

C.R. Bard, Inc. v. M3 Sys., Inc., 157 F.3d 1340

EEE es ee 25

Dann v. Johnston, 425 U.S. 219 (1976) ..ccccccccccccccceccecceveevene 20

Dir. Office of Workers’ Comp. Programs, Dep't

of Labor v. Newport News Shipbuilding &

Dry Dock Co., 514 U.S. 122 (1995) ..cccccccccscccsecsceeeeeeeee 23

eBay Inc. v. MerExchange, L.L.C., 126 8. Ct.

Ee ee 11, 16, 17,24

Eli Lilly & Co. v. Barr Labs., Inc., 251 F.3d 955

EET eo 8

Emerson Elec. Co. v. Spartan Tool, LLC, 223 F.

Supp. 2d 856 (N.D. Ohi0 2002) ...........cccccsesescececsseeeceeseees 8

Graham v. John Deere Co., 383 U.S. 1 (1966)............. passim

Great Atl. & Pac. Tea Co. v. Supermarket

Equip. Corp., 340 U.S. 147 (1950) ooocccccccccccccceeeees 20, 26

Vv

TABLE OF AUTHORITIES — continued

Page(s)

Hailes v. Van Wormer, 87 U.S. 353 (1873) .......ccccccceeceeeeeees 20

Hotchkiss v. Greenwood, 52 U.S. (11 How.) 248

Ee EN Se Oe oe ee eee IT 19, 20

Hybritech Inc. v. Monoclonal Antibodies, Inc.,

ae fo, . fs |) ee 25

In re Dembiczak, 175 F.3d 994 (Fed. Cir. 1999)......21, 23, 24

In re Huston, 308 F.3d 1267 (Fed. Cir. 2002)............cccceee 21

In re Kahn, 441 F.3d 977 (Fed. Cir. 2006)............ccccccceeeeeees 24

In re Lee, 277 F.3d 1338 (Fed. Cir. 2002)............ 3, 10, 21, 24

In re Piasecki, 745 F.2d 1468 (Fed. Cir. 1984).................... 26

In re Zurko, 258 F.3d 1379 (Fed. Cir. 2001).................. 22, 24

Lincoln Eng'g Co. of Ill. v. Stewart-Warner

ee ee 20

Panduit Corp. v. Dennison Mfg. Co., 810 F.2d

fe 8 26

Pro-Mold & Tool Co. v. Great Lakes Plastics,

Inc., 75 F.3d 1568 (Fed. Cir. 1996) 0.0.0.0... ccceceeeeeenees 9,27

Reckendorfer v. Faber, 92 U.S. 347 (1875) .....cccccccccceeereeeees 20

Remcor Prods. Co. v. Scotsman Group, Inc.,

860 F. Supp. 568 (N.D. TID. 1994)... cc ecccseeeeeeenenneenees 9

Rockwell Int'l Corp. v. United States, 147 F.3d

er 8

Sakraida v. Ag Pro, Inc., 425 U.S. 273 (1976) ........ 20, 23, 26

Simmons Fastener Corp. v. Ill. Tool Works, Inc.,

739 F.2d 1573 (Fed. Cir. 1984) ...............cccccesesesseeees 26, 27

vi

TABLE OF AUTHORITIES - continued

Page(s)

State Street Bank & Trust Co. v. Signature Fin.

Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998) ..0000..0.. 15

Stratoflex, Inc. v. Aeroquip Corp., 713 F.2d

1530 (Fed. Cir. 1983)........ ensevsessesseseesessscsesensessnsencosenceees 26

Tec Air, Inc. v. Denso Mfg. Mich. Inc., 192 F.3d

Ee ee aE 25

Toledo Pressed Steel Co. v. Standard Parts,

Rg ETS a RE 20

Turbocare Div. of Demag Delaval Turbo-

Machinery Corp. v. Gen. Elec. Co., 214 F.

Fe 8 ee 8

United States v. Adams, 383 U.S. 39 (1966) ........0cc00000. 19, 20

CONSTITUTIONAL PROVISIONS AND STATUTES

ee ees MI Uy UR, hs i cicinintiesietciieresindenidentantimesiisenieianiindes 18

Se IS Ue ailtiiclstinienisintiiidabbialic Maite da .. passim

ERE Se © Lee NA ae

tt ENS tI PCE ete ne EEE, a .. 16

MISCELLANEOUS

Am. Intellectual Prop. Law Ass’n, REPORT OF

THE ECONOMIC SURVEY (2003) .00.......cccccccccssceeceeeeceeeceeceee 7

John H. Barton, Non-Obviousness,

EEE SN 5, 16

Julie E. Cohen & Mark A. Lemley, Patent

Scope and Innovation in the Software Indus-

try, 89 CAL. L. REV. 1 (2001) ....c cece ecceeeeeee 12, 14, 15

vil

TABLE OF AUTHORITIES -— continued

Page(s)

John Duffy, Address to Am. Enter. Inst. For

Pub. Policy Research: The Patent System &

the New Economy (Mar. 10, 2005), at

COE estennnstistsinemgmnneeesenneesemets 13

European Patent Convention, 1065 U.N.T.S.

aN cisiitesienpiacthienteteinpsedtaibietinenniidiniintapniagpmmimainamneantie 22

Federal Trade Commission Report, To PRo-

MOTE INNOVATION: THE PROPER BALANCE

OF COMPETITION AND PATENT LAW AND

Ps A ticncrcnscntsinnstnicieninttinammmcenanniess passim

Alan Greenspan, Remarks Before the Economic

Club of New York, NY: Technology and the

Economy (Jan. 13, 2000), ar

I eentcrcmnnsretccntateemiemmenen l

Richard S. Gruner, Everything Old is New

Again: Obviousness Limitations on Patent-

ing Computer Updates of Old Designs, 9

a 14

Bronwyn H. Hall & Rosemarie Ham Ziedonis,

The Patent Paradox Revisited: An Empirical

Study of Patenting in the U.S. Semiconduc-

tor Industry, 1979-1995, 32 R»ND J. ECON.

Be IO ccectsineninctnntapeencitinmnnenntetiennnmnanistebees 10, 15

Matt Hines, Graphics Patent Suit Targets Dell,

Others, CNET News.com, Apr. 23, 2004, at

ITS cccnecenescerenenseinnnestenenerninenenes 12

vill

TABLE OF AUTHORITIES -— continued

Page(s)

Internet Patent News Service & Source Translation

and Optimization Co., Patent/Copyright In-

fringement Lawsuits/Licensing Awards, at

http://www. iplaw-quality.com/economic/

EERE eA SS CE TT OE 7

Adam B. Jaffe & Josh Lerner, INNOVATION AND

I eich cccticciciacncinsindsirtrennmahisinneteed ll

Peter Judge, Wi-Fi World Under Threat from

Symbol Patent: Wireless Vendor to Seek Li-

cense Fees from All Wi-Fi Equipment Ven-

dors, Techworld.com, Sept. 23, 2004, at

NINN sitishetiincthiibicsnrehitinicienitlinidinsndildeodtune 12

William O. Kerr & Gauri Prakash-Canjels, Pat-

ent Damages and Royalty Awards: The Con-

vergence of Economics and Law, in Les

EE LSS AINE NRE 7

Edmund W. Kitch, Graham v. John Deere Co:

New Standards for Patents, 1966 Sup. CT.

EA Be Te Ne Oe Se, ND 27

Glynn S. Lunney, Jr., E-Obviousness.

7 Micu. TELECOMM. & TECH. L. REV. 363

Martin LaMonica, Small Company Makes Big

Claims on XML Patents, CNET News.com,

Oct. 21, 2005, at http://tinyurl.com/ae9dpg ...............0.-. 1]

Nat’l Res. Council, A PATENT SYSTEM FOR THE

I a 14, 16

Gerald Paterson, THE EUROPEAN PATENT Sys-

IS iii a iL 22, 28

ix

TABLE OF AUTHORITIES — continued

Page(s)

Press Release, USPTO, USPTO Releases An-

nual List of Top 10 Organizations Receiving

Most U.S. Patents (Jan. 10, 2006), at

dT * ET TEE EE ETE

Price WaterhouseCoopers, 2006 PATENT AND

TRADEMARK DAMAGES STUDYV..........:::eccceesseeseseeeeeeeeeenens 7

Giles S. Rich, The Principles of Patentability,

42 J. PAT. OFF. SOC’Y 75 (1960) ......cccrcrssrcoserscreorsecesseees 18

Carl Shapiro, Navigating the Patent Thicket:

Cross Licenses, Patent Pools, and Standard

Setting, in INNOVATION POLICY AND THE

ECONOMY 126 (Adam B. Jaffe et al., eds.,

ricci ihiiaania intial italia tinsar ciliata 12

Software Patent Institute Database of Software

Technologies, af www.spi.org/missendo.htm ................ 15

U.S. Dep’t of Commerce, Bureau Econ. Analy-

sis, at http://tinyurl .COM/JYV4C.........ccseceerereeesesereesereseesens |

University of Houston Law Ctr. Inst. for Intel-

lectual Prop. & Info. Law, Patstats, at

UIT OTR ITI OD, cccccsccercnssscnsnensnencesenennsasecsnenennaneens 9

USPTO, Performance and Accountability Re-

port Fiscal Year 2005, available at

Eee EE 12

INTEREST OF THE AMICUS CURIAE'

The Business Software Alliance (“BSA”) is an associa-

tion of the world’s leading software and hardware technology

companies, including Adobe, Apple, Autodesk, Avid, Bent-

ley Systems, Borland, Cadence Design Systems, Cisco Sys-

tems, CNC Software/Mastercam, Dell, Entrust, HP, IBM,

Intel, Internet Security Systems, Microsoft, PTC, RSA Secu-

rity, SAP, Solidworks, Sybase, Symantec, Synopsys, The

Mathworks, and UGS. BSA’s members collectively own

more than 30,000 patents, and include three of the four lead-

ing U.S. based patent recipients for 2005. See Press Release,

USPTO, USPTO Releases Annual List of Top 10 Organiza-

tions Receiving Most U.S. Patents, af http://tiny-

url.com/c69e2 (Jan. 10, 2006). These companies—which

represent an industry that is crucially important to the U.S.

economy*—have an obvious stake in the proper functioning

of the U.S. patent system.

BSA’s members believe that the Federal Circuit’s stan-

dard for assessing whether a particular combination of prior-

' The parties have consented to the filing of this brief; the writ-

ten consents have been filed with the Court. This brief was not au-

thored in whole or in part by counsel for a party, and no person or

entity, other than the amicus curiae, its members, and its counsel

made a monetary contribution to the preparation and submission of

this brief.

* In 2005, the information technology industry directly contrib-

uted $481 billion to the U.S. GDP. U.S. Dep’t of Commerce, Bu-

reau Econ. Analysis, af http://tinyurl.com/jyv4c. More important,

though, are the industry’s indirect contributions to the economy:

Former Federal Reserve Bank Chairman Greenspan has observed

that “information technology” and “information innovation lief] at

the root of productivity and economic growth” in the economy as a

whole. Remarks Before the Economic Club of New York, NY:

Technology and the Economy (Jan. 13, 2000), at http://tiny-

url.com/a23za.

art elements is obvious—and therefore unpatentable—

frustrates Congress's goal of ensuring that patents are granted

only to deserving advances. Because the Federal Circuit's

approach elevates objective documentation over the statutory

requirements and common sense, it compels the U.S. Patent

and Trademark Office (“PTO”) to grant patents for inven-

tions that would be obvious to any skilled practitioner of the

art. The standard also makes it much more difficult for the

party challenging a patent to demonstrate obviousness in

court—and nearly impossible for it to do so at the summary-

judgment stage.

The multiplication of undeserved patents resulting from

the Federal Circuit's obviousness standard is especially

harmful to technology companies because the complexity of

technology products provides a fertile field for unjustified

patent claims based upon combinations of preexisting inven-

tions. A finding of obviousness under the Federal Circuit

standard depends on the existence of objective documenta-

tion in the prior art, moreover, and the standard therefore

places a particularly heavy finger on the scale in favor of pat-

entability in the technology sector, where the prior art record

is often incomplete.

BSA is well situated to demonstrate the flaws in the Fed-

eral Circuit’s approach to obviousness and to explain the

proper standard for courts to apply in making obviousness

determinations.

INTRODUCTION AND SUMMARY OF ARGUMENT

Congress withheld patent protection from inventions,

even inventions that are novel and useful, whenever “the sub-

ject matter as a whole would have been obvious at the time

the invention was made to a person having ordinary skill in

the art to which said subject matter pertains.” 35 U.S.C.

§ 103(a). As this Court explained in Graham vy. John Deere

Co., 383 U.S. 1 (1966), Section 103(a) codified the require-

ment that claimed inventions must take a sufficiently innova-

tive step from the prior art in order to be patentable.

Under Graham, the determination whether an invention

is obvious requires “factual inquiries” into “the scope and

content of the prior art,” the “differences between the prior

art and the claims at issue,” and “the level of ordinary skill in

the pertinent art.” 383 U.S. at 17. If the hypothetical person

of ordinary skill in the relevant art would be capable of mak-

ing the inventive step from the prior art, then the subject mat-

ter of the claimed invention is obvious.

The Federal Circuit has grafted a different and more re-

strictive test for obviousness onto the plain text of Section

103(a). It holds that a patent examiner or judge may deem a

claimed invention that combines elements from the prior art

to be obvious, and hence non-patentable, oly if the prior art

contains “some suggestion, teaching, or motivation * * * to

combine the relevant prior art teachings in the manner

claimed.” Pet. App. 6a (internal quotation marks omitted). In

the absence of such evidence, the Federal Circuit requires a

finding of non-obviousness even if common sense dictates

the opposite, because in the Federal Circuit's view

““[c]Jommon knowledge and common sense,’ even if assumed

to derive from the [PTO’s] expertise, do not substitute for

authority.” /n re Lee, 277 F.3d 1338, 1345 (Fed. Cir. 2002).

The Federal Circuit’s rigidity in determining obviousness

results in the issuance of numerous questionable patents, and

erects a substantial—and unjustifiable—barrier to overturn-

ing these questionable patents in litigation. Under the Federal

Circuit's test, trivial changes to prior art, involving no sub-

stantial inventive step, receive patent protection because no

documented “teaching, suggestion, or motivation” for the

inventions can be identified by patent examiners. These du-

bious patents enjoy a presumption of validity when ques-

tioned in litigation, where they are again insulated against

challenge by the Federal Circuit’s requirement of documenta-

tion in the prior art.

The Federal Circuit’s rule makes it particularly difficult

for defendants facing patent-infringement claims to establish

obviousness at the summary-judgment stage. Even if the de-

fendant can adduce undisputed evidence of a “teaching, sug-

gestion, or motivation” to combine prior-art references, a

court following the Federal Circuit’s approach will withhold

summary judgment if the patent holder can produce evidence

of “secondary” indicia of non-obviousness, such as commer-

cial success. But the holders of even illegitimate patents usu-

ally can produce evidence of such secondary factors.

Accordingly, a defendant accused of infringing a patent on an

obvious invention faces the unpalatable choice of undergoing

an expensive trial with potentially bet-the-company stakes or

paying an exorbitant settlement.

Technology companies are particularly vulnerable to the

harmful practical effects of the Federal Circuit’s standard.

Hardware and software products often include many different

components that can be rearranged in many different combi-

nations. Because the prior art record for hardware and soft-

ware is incomplete. it is often difficult for both patent

examiners and companies accused of infringement to find

documentation of prior combinations. The Federal Circuit's

standard thus leads to a proliferation of unjustified patents for

obvious combinations of prior hardware and software inven-

tions—many of them obtained by patent speculators. The

multiplication of such patents has a snowball effect, as others

are forced to accumulate patents defensively. This phenome-

non imposes huge transaction costs on businesses and the

patent system, and obstructs real innovation.

The Federal Circuit’s standard for determining obvious-

ness is not supported by the plain language of the Patent Act

or this Court’s decisions. While documentation in the prior

art surely is one way of demonstrating obviousness, it clearly

5

is not the only way the Patent Act permits. The Court should

reaffirm its holding in Graham that the inquiry as to whether

an invention is obvious is a flexible and context-specific one,

undertaken from the perspective of a person of ordinary skill

in the art, with appropriate but not undue consideration given

to “secondary” factors. This will ensure that the requirement

of non-obviousness serves as an independent and important

limitation on patentability, as Congress intended.

ARGUMENT

1. THE PRACTICAL EFFECTS ON TECHNOLOGY

INDUSTRIES OF THE FEDERAL CIRCUIT’S

“TEACHING, SUGGESTION, OR MOTIVATION”

RULE DEMONSTRATE THE STANDARD’S

FLAWS AS A TEST FOR OBVIOUSNESS

The inevitable effect of the Federal Circuit’s obviousness

standard is to “permit the patenting of extremely trivial inno-

vations” (John H. Barton, Non-Obviousness, 43 IDEA 475.

482 (2003)), merely because the documentation necessary to

satisfy the Federal Circuit’s test is absent. In fact, the Federal

Trade Commission has discerned “a trend since the advent of

the Federal Circuit toward reducing the size of the step re-

quired for patentability—that is, reducing the rigor of the

nonobviousness standard.” TO PROMOTE INNOVATION: THE

PROPER BALANCE OF COMPETITION AND PATENT LAW AND

POLicy ch. 4, at 8 (Oct. 2003) (hereinafter “FTC Report”).

As the Federal Trade Commission explained, “{i]nventive

processes typically involve judgment, experience, and com-

mon sense capable of connecting some dots. The suggestion

test, rigidly applied, assumes away a [person having ordinary

skill in the art’s] typical levels of creativity and insight and

supports findings of nonobviousness even when only a modi-

cum of additional insight is needed.” /d. at 14. The result is

that “patents [are awarded] for inventions that inevitably

would be forthcoming.” /bid.

By establishing an unwarranted barrier to finding obvi-

ousness, the Federal Circuit’s standard creates several prob-

lems that are particularly acute for technology companies.

First, because the Federal Circuit’s rule makes it much more

difficult to establish obviousness at the summary-judgment

stage, the standard unduly inflates the settlement value of

claims of infringement arising from questionable patents.

Second, the standard results in a proliferation of illegitimate

patents for trivial innovations that generate cost and uncer-

tainty without spurring genuine advances. Third, because the

Federal Circuit’s rule makes the obviousness determination

heavily dependent on written proof, it creates a particularly

strong—and unjustifiable—bias in favor of patentability in

the technology industries, where the prior-art record is in-

complete.

A. The Federal Circuit’s Test Makes It Difficult To

Establish Obviousness At The Summary-

Judgment Stage, Making Infringement Claims

More Expensive To Litigate And Riskier To De-

fend

It is critical that defendants in infringement actions have

a reasonable chance to establish the invalidity of illegitimate

patents at the summary-judgment stage. Defending patent

infringement claims is expensive, and trials are unpredict-

able. If summary judgment is unavailable to defendants, then

claimants holding patents of questionable validity will be

able to extract exorbitant settlements from defendants who

are reluctant to roll the dice on a trial. Under the Federal Cir-

cuit’s standard, it is in fact inordinately difficult to establish

obviousness before trial. The test thus gives the owners of

dubious patents undue leverage to extract license fees from

the manufacturers of allegedly infringing products.

Patent-infringement litigation is unusually expensive.

According to a recent survey, the cost of litigating a patent-

infringement case with less than $1 million at risk was ap-

7

proximately $290,000 through discovery and $500,000

through trial and appeal; the median cost of participating in a

case involving between $1 million and $25 million at risk

was approximately $1 million through discovery and $2 mil-

lion through trial and appeal. See Am. Intellectual Prop. Law

Ass’n, REPORT OF THE ECONOMIC SURVEY 22 (2003). These

sums underestimate actual costs because a significant number

of infringement cases involve claims of hundreds of millions

of dollars.

Aside from the substantial litigation costs, the magnitude

and unpredictability of a potential judgment makes the trial

of an infringement case a daunting prospect. Since 2000, the

median amount of damages awarded in patent cases follow-

ing a bench trial has been $1.9 million. See Price Water-

houseCoopers, 2006 PATENT AND TRADEMARK DAMAGES

STUDY, at 3 (“PWC Srupy”). Trial before a jury is even risk-

ier: during the same period, the median jury award was $8

million—nearly four times the median bench award.

And a growing number of cases involve huge sums. Be-

fore 1990, only one patent damage award in history exceeded

$100 million. William O. Kerr & Gauri Prakash-Canjels,

Patent Damages and Royalty Awards: The Convergence of

Economics and Law, in LES NOUVELLES at 83 (June 2003). In

the 1990s, judgments or settlements in 13 cases topped that

figure. The last six years have seen 21 more mega-cases, in-

cluding one award for $1.35 billion. Internet Patent News

Service & Source Translation and Optimization Co., Pat-

ent/Copyright Infringement Lawsuits/Licensing Awards, at

http://www. iplaw-quality.com/economic/awards.htm.’ With

the potential stakes so high, many defendants simply cannot

* The number of patent-infringement claims also is growing. The

number of new cases nearly tripled between 1991 and 2004, reach-

ing 3,075 filings in 2004. See PWC STUDY, supra, at 3. See also

Kerr & Prakash-Canjels, supra, at 83.

afford to continue litigating infringement claims that survive

summary judgment.

Under any circumstances, establishing patent invalidity at

the summary-judgment stage is an uphill battle. An issued

patent enjoys a presumption of validity, see 35 U.S.C. § 282,

which can be overcome only by clear and convincing evi-

dence, see Rockwell Int'l Corp. v. United States, 147 F.3d

1358, 1364 (Fed. Cir. 1998). Accordingly,

a moving party seeking to invalidate a patent at sum-

mary judgment must submit clear and convincing evi-

dence of invalidity so that no reasonable jury could

find otherwise. Alternatively, a moving party seeking

to have a patent held not invalid at summary judg-

ment must show that the nonmoving party, who bears

the burden of proof at trial, failed to produce clear

and convincing evidence on an essential element of a

defense upon which a reasonable jury could invali-

date the patent.

Eli Lilly & Co. v. Barr Labs., Inc., 251 F.3d 955, 962 (Fed.

Cir. 2001) (en banc).

While obtaining summary judgment on invalidity is al-

ways a challenge, the Federal Circuit’s rule on obviousness

stacks the deck even more heavily against a company ac-

cused of infringement. Failure to adduce the required objec-

tive documentation of a “teaching, suggestion or motivation”

for the invention necessarily results in the denial of summary

judgment to a defendant claiming obviousness.’ This case is

' See, ¢.g., Turbocare Div. of Demag Delaval TurboMachinery

Corp. v. Gen. Elec. Co., 214 F. Supp. 2d 170, 181 (D. Mass. 2002)

(finding a disputed issue of material fact where there was “no ex-

plicit suggestion in the technical literature, or on the face of the

patents themselves,” to combine the prior art in the manner

claimed and the patent holder's expert testified that the patent

would not have been obvious) (emphasis added), Emerson Elec.

Co. v. Spartan Tool, LLC, 223 F. Supp. 2d 856, 912 0.48 (N.D.

9

a perfect example of that phenomenon—the Federal Circuit

reversed the district court’s grant of summary judgment be-

cause the available prior-art references did not anticipate the

exact combination at issue with sufficient particularity. See

Pet. App. la, 12a—16a.

At the same time, a defendant who cannot produce such

evidence is vulnerable to a ruling on summary judgment that

the invention is non-obvious. In fact, of the five published

district court opinions granting summary judgment on the

issue of obviousness in 2005, every single one favored the

patentee. See Univ. of Houston Law Ctr. Inst. for Intellectual

Prop. & Info. Law, Patstats, at http://www.patstats.org.

Moreover, even if the infringement defendant proffers the

requisite documentation of “teaching, suggestion, or motiva-

tion,” the Federal Circuit’s approach makes it easy for the

patentee to avoid summary judgment by creating a factual

issue. As we discuss further below, the Federal Circuit in-

structs the lower courts to deny summary judgment if the

patent holder submits in rebuttal amy objective evidence of

non-obviousness, such as commercial success. Pro-Mold &

Tool Co. v. Great Lakes Plastics, Inc., 75 F.3d 1568 (Fed.

Cir. 1996); see also Glynn S. Lunney, Jr., E-Obviousness, 7

MICH. TELECOMM. & TECH. L. REV. 363, 375 (2001) (observ-

ing that the Federal Circuit has elevated “secondary consid-

erations, such as commercial success, * * * toa central, if not

dominant, role in the obviousness inquiry”).

Ohio 2002) (denying summary judgment because patent challenger

did not point to “specific information in the prior art references

that suggests their combination”); Remcor Prods. Co. v. Scotsman

Group, Inc., 860 F. Supp. 568, 574 (N.D. Il. 1994) (holding that

challenger’s failure to “assert a motivation or suggestion in the

prior art to combine all three references” precluded summary

judgment).

10

In addition, the Federal Circuit has discouraged lower

courts from finding obviousness through the exercise of

common sense. See /n re Lee, 277 F.3d at 1345. These re-

strictions make it even more difficult for courts to conclude

as’a matter of law that an invention is obvious, and more

likely that any factual dispute related to the issue of obvious-

ness—even a seemingly immaterial one—will result in a

costly and risky trial.

The difficulty of proving obviousness at the summary-

judgment stage vastly increases the cost of infringement

claims. When a patent holder sends a letter demanding li-

censing fees from an alleged infringer, the target company

knows that it may prevail—if at all—only after an expensive

trial, and thus may be forced to settle for an inflated sum. As

we next discuss, moreover, technology companies may face

multiple potential infringement claims in connection with the

launch of a single new product. The prospect of expensive

and protracted litigation to defeat an infringement claim can

create a substantial disincentive to innovation.

B. The Availability Of Patents For Obvious Combi-

nations Of Prior Art Imposes Substantial Costs

On Technology Companies

Because of the nature of their products, technology com-

panies are strongly affected by the award of patents to obvi-

ous combinations of prior art. Hardware and software

products often include many different components, each of

which may be covered by different patents. Thus, software

programs can consist of millions of lines of codes, FTC Re-

PORT, supra, ch. 3, at 44, and “a given semiconductor product

* * * will often embody hundreds if not thousands of ‘poten-

tially patentabie’ technologies.” Bronwyn H. Hall & Rose-

marie Ham Ziedonis, The Patent Paradox Revisited: An

Empirical Study of Patenting in the U.S. Semiconductor In-

dustry, 1979-1995, 32 RAND J. Econ. 101, 110 (2001). With

sO many components in each product, opportunities abound

to seek patents for a combination of several components, no

matter how obvious, and then argue that any company using

that combination must obtain a license.

Under these circumstances, the availability of patents for

obvious combinations of prior art has a snowball effect, lead-

ing to the proliferation of dubious patents. When patents are

easy to obtain, more patent applications are filed. See Adam

B. Jaffe & Josh Lerner, INNOVATION AND ITS DISCONTENTS

175 (2004) (“While the increase in the rate of patent applica-

tions over the last two decades is driven by many factors, one

important factor is the simple fact that it has gotten so much

easier to get a patent, so applications that never would have

been submitted before now look like they are worth a try.”).

Patent speculators fuel this trend: as Justice Kennedy has re-

cently pointed out, “[a]n industry has developed in which

firms use patents not as a basis for producing and selling

goods but, instead, primarily for obtaining licensing fees.”

eBay Inc. v. MerExchange, L.L.C., 126 S. Ct. 1837, 1842

(2006) (Kennedy, J., concurring). And as more patents are

awarded, more companies seek them defensively.

Many questionable patent claims in the technology sector

arise in connection with the voluntary standards that are nec-

essary to make technology products interoperable. After a

voluntary standard is agreed upon, and products conforming

to the standard begin to be manufactured, the manufacturers

receive letters—often from previously-unknown patent hold-

ers—claiming that any product incorporating the voluntary

standard necessarily infringes their patents, and that a license

fee must be paid on every single product that utilizes the

standard.”

* See, e.g, Martin LaMonica, Small Company Makes Big Claims

on XML Patents, CNET News.com, Oct. 21, 2005, at http://tiny-

url.com/ae9dpq (firm asserts ownership of XML, “a widely used

method for storing and sharing information in many forms, from

purchase orders to information in Web pages” developed by the

12

These additions to the patent thicket impede rather than

encourage genuine innovation. First, the multiplication of

patents for obvious combinations increases both the re-

sources that must be poured into patent searches and the risk

of infringement claims—making it more difficult to market

new products. Second, the increase in patent applications

interferes with the effective administration of the patent sys-

tem. Indeed, the recent explosion of new patent applications

has strained the resources of the PTO and required the hiring

of thousands of inexperienced patent examiners. See USPTO,

Performance and Accountability Report Fiscal Year 2005, at

3, available at http://tinyurl.com/qvjmh (reporting PTO’s

hiring of new examiners at the rate of 1,000 per year).

World Wide Web Consortium in the 1990s); Peter Judge, Wi-Fi

World Under Threat from Symbol Patent: Wireless Vendor to Seek

License Fees from All Wi-Fi Equipment Vendors, Techworld.com,

Sept. 23, 2004, at http:/Ainyurl. com/gjt2s (a number of patent

owners claim that their patents are infringed by every device com-

patible with the Wi-Fi standard for wireless communication); Matt

Hines, Graphics Patent Suit Targets Dell, Others, CNET

News.com, Apr. 23, 2004, at http://tinyurl.com/ae73h (firm claim-

ing to own a patent covering the JPEG standard for sharing images

on the Internet has sued 30 companies).

* As several panelists explained to the FTC when it explored the

issue, “the plethora of patents in the computer hardware industry

makes it ‘virtually impossible to search all potentially relevant pat-

ents, review the claims,’ and evaluate the infringement risk.” FTC

REPORT, supra, ch. 2 at 3. See also Julie E. Cohen & Mark A.

Lemley, Patent Scope and Innovation in the Software Industry, 89

CAL. L. REV. |, 43 (2001) (“the diffuse nature of the knowledge

base and the lack of a comprehensive system for cataloguing and

indexing software-related developments defy even the most

knowledgeable and diligent examiner(s]”). In these industries,

therefore, “the danger that a manufacturer will step on a land mine

is all too real.” Carl Shapiro, Navigating the Patent Thicket: Cross

Licenses, Patent Pools, and Standard Setting, in INNOVATION POL -

ICY AND THE ECONOMY 126 (Adam B. Jaffe et al., eds., 200! ).

13

The growth in illegitimate patents for obvious combina-

tions of existing art inhibits innovation in another way: it di-

minishes the value of the patents on the component parts,

even if those components were truly innovative and the com-

bination was not. As one patent law professor has explained:

“So | get a patent on the telephone, but * * * some-

body can get a patent on using the telephone to place

business orders, using the telephone to place orders

for airline tickets, using the telephone to do other

things, then pretty soon | lose my royalties. My royal-

ties are diminished because in order to sell my tele-

phone somebody’s going to say well, I’d be willing to

pay $100 for the telephone, if | could use it. But now,

I’ve got to pay some money to you, and I've got to

pay some money to all these other people who've got

patents on the uses of the telephone. So I'll give you

$10, and Ill spread out the other money that I’m will-

ing to pay to all these other inventors who've got

massive numbers of patents on that.”

John Duffy, Address to Am. Enter. Inst. For Pub. Policy Re-

search: The Patent System & the New Ecoomy (Mar. 10,

2005), at http://tinyurl.com/zw3ez; see also FTC Report,

supra, at 5 (“if the required step [for patentability] is too

small, * * * an initial inventor must split royalties with im-

provers that otherwise could not patent in the ‘obvious’ area

around the initial patent”) (footnote omitted).

This dilutive effect is particularly pronounced in the

technology sector, where a single product may implicate

scores of different patents. The resulting reduction in the

value of patents on truly innovative inventions is the precise

opposite of the result intended by the patent law.

14

C. The Often-Incomplete Prior-Art Record For

Hardware And Software Magnifies The Negative

Effect Of The Federal Circuit’s Standard

By directing the courts to look only at published materi-

als in making determinations about non-obviousness, the

Federal Circuit’s test requires an inquiry that often makes

little sense. As the National Academies of Science observed,

“creative people generally speaking strive to publish non-

obvious information. So if it is obvious to those of skill in the

art to combine references, it is unlikely that they will publish

such information.” Nat’! Res. Council, A PATENT SYSTEM

FOR THE 21ST CENTURY 90 (2004) (“NRC REPORT”).

Because of its focus on documentation, the Federal Cir-

cuit’s test creates especially acute problems for technology

patents. Observers of patent law have frequently noted the

difficulty of finding records of inventions involving com-

puter hardware and software.’ Despite ongoing efforts to

gather descriptions of otherwise undocumented inventions,®

See, e.g., Richard S. Gruner, Everything Old is New Again:

Obviousness Limitations on Patenting Computer Updates of Old

Designs, 9 B.U. J. SCL. & TECH. L. 209, 275 (2003) (“These new

processing techniques or other computer-based inventions similar

to the updates may not appear in the relevant prior art. Therefore,

the suggestion and motivation tests may not yield meaningful re-

sults * * * .”); Cohen & Lemley, supra, 89 CAL. L. REV. at 43

(“the diffuse nature of the knowledge base and the lack of a com-

prehensive system for cataloguing and indexing software-related

developments defy even the most knowledgeable and diligent ex-

aminer[s]”); FTC REPORT, supra, ch. 4, at 40 (“Locating prior art

is particularly difficult for business methods.”).

8

Several organizations are working to gather descriptions of

otherwise undocumented computer innovations. The Software Pat-

ent Institute, for example, “is dedicated to providing information to

the public and assisting the United States Patent and Trademark

Office and others by providing technical support in the form of

educational and training programs and providing access to infor-

15

the accessible published prior art remains, at best, an incom-

plete patchwork that records only a fraction of existing ad-

vances. Many of the gaps in the record can be attributed to

the patent law, which until recently denied patent protection

to most software inventions.’ The incompleteness of the writ-

ten record also results from rapidity of innovation, which of-

ten leads inventors to bypass publishing their work.'°

A spotty record of prior art may make it difficult to dem-

onstrate that a claimed hardware or software invention is not

novel, but it should not also defeat a showing that an inven-

tion is obvious. To the contrary, obviousness should function

as an independent basis for defeating patentability when, be-

cause of poor documentation, novelty cannot be disproved.

mation and retrieval resources concerning software prior art.” See

Software Patent Institute Database of Software Technologies, at

www.spi.org/missendo.htm (last visited August 18, 2006).

In the 1970s, “courts generally rejected software patent appli-

cation on the grounds that software was really just a concatena-

tions of unpatentable algorithms.” Cohen & Lemley, supra, 89

CAL. L. REV. at 8. Not until 1998 did the Federal Circuit defini-

tively permit patent protection for a freestanding software com-

puter program. See State Street Bank & Trust Co. v. Signature Fin.

Group, Inc., \49 F.3d 1368, 1373 (Fed. Cir. 1998); see also ATAT

v. Excel Communications, Inc., 172 F.3d 1352 (Fed. Cir. 1999).

The long delay in recognizing software patents still affects today’s

prior art searches.

'’ See Cohen & Lemley, supra, 89 CAL. L. REV. at 6 (“The soft-

ware indusiry is characterized by a culture of reuse and incre-

mental improvement, a lack of reliance on systems of formal

documentation used in other technical fields, the short effective

life of software innovations, and the inherent plasticity of mi-

crocode.”); Hall & Ziedonis, supra, 32 RAND. J. ECON. at 102

(firms designing the central processing chips that run computers

are “(djriven by a rapid pace of technological change and short

product life cycles”).

16

Instead, under the current standard, the obviousness determi-

nation itself also turns heavily on the quality of the published

record of prior art: even if an invention combines prior art

elements in a manner that truly would be obvious to one

skilled in the art, lack of documentation may make it difficult

or impossible for patent examiners or litigants to satisfy the

Federal Circuit’s test. See Barton, supre 43 IDEA at 482

(“The [Manual of Patent Examining Procedure]’s demand

that there be suggestions in the prior art as a prerequisite to

combine references converts non-obviousness to something

near novelty.”).

There is no reason why the incomplete published prior-art

record for technology inventions should stand in the way of a

showing that an invention is obvious. Indeed, the National

Research Council for the National Academies of Sciences

has specifically recognized that, because “the common gen-

eral knowledge is not fully described in published literature

that is likely to be consulted by patent examiners, another

method of determining the state of general knowledge needs

to be employed.” NRC REPORT, supra, at 81.

Moreover, as we next discuss, the Federal Circuit's sin-

gle-minded focus on documentation is inconsistent with Sec-

tion 103(a) and this Court’s decisions.

Ii. THIS COURT SHOULD REAFFIRM THE BROAD

SCOPE OF THE OBVIOUSNESS INQUIRY AND

MAKE CLEAR THAT PROOF OF A SPECIFIC

“SUGGESTION, TEACHING, OR MOTIVATION”

IS NOT ESSENTIAL TO A FINDING OF OBVI-

OUSNESS

The legal issue before the Court in this case resembles in

key respects the one the Court addressed last Term in eBay.

There, the governing statute provided that district courts

“may grant injunctions” (35 U.S.C. § 283), and this Court

had interpreted similar statutory language to require applica-

tion of the traditional four-factor test for determining the

17

propriety of injunctive relief. The Federal Circuit nonetheless

held that district courts “will issue permanent injunctions

* * * absent exceptional circumstances.” 126 S. Ct. at 1839.

This Court reversed, holding that district courts must exercise

their discretion “consistent with traditional principles of eq-

uity, in patent disputes no less than in other cases governed

by such standards.” /d. at 1841.

Here, the statute bars issuance of a patent if the claimed

invention “would have been obvious at the time the invention

was made to a person having ordinary skill in the art to which

said subject matter pertains.” 35 U.S.C. § 103(a). This Court

has construed that language to require a case-specific inquiry

akin to the “reasonable person” standard applied in negli-

gence actions. The Federal Circuit’s standard curtails the in-

clusive inquiry mandated by Congress, holding that a patent

is obvious only if the prior art contains some “teaching, sug-

gestion or motivation” respecting the ciaimed invention.

Although the Federal Circuit surely has identified one

means of demonstrating obviousness, the lower court’s error

is its view that this constitutes the only way to show obvi-

ousness. That conclusion is just as inconsistent with the

statutory language and this Court’s precedents as the rigid

Federal Circuit rule overturned in eBay. This Court should

make clear that obviousness may be demonstrated through

any evidence establishing that the claimed invention would

have been obvious “to a person having ordinary skill in the

art to which said subject matter pertains.”

This Court also should correct another error in the Fed-

eral Circuit’s understanding of obviousness. Even if the prior

art clearly reveals a “teaching, suggestion, or motivation” for

the claimed combination of prior art elements, the Federal

Circuit refuses to grant summary judgment to the defendant

in an infringement action whenever the patent holder musters

the sort of circumstantial evidence of non-obviousness that

this Court has downplayed as having only “secondary”

———

Status. Because the realities of patent litigation are such that

there is almost always at least a triable issue of fact on one of

these “secondary” factors, the Federal Circuit’s standard ef-

fectively deprives defendants in infringement actions of

summary disposition, therefore dooming them to the unenvi-

able choice between an expensive trial and an exorbitant set-

tlement. Nothing in the statutory language or this Court‘s

decisions requires that absurd result.

A. The Federal Circuit’s “Teaching, Suggestion, Or

Motivation” Test Improperly Disregards Other

Methods Of Demonstrating That A Claimed

~—-Invention Is Obvious To A Person Having

Ordinary Skill In The Art

Section 103(a) of the Patent Act of 1952 is a cornerstone

of the congressional—and constitutional—policy to grant

patent protection to foster the dissemination of technological

innovations. See U.S. Const. art I, § 8, cl. 8 (granting patent

power to “promote the progress of science and useful arts”).

As one of the principal drafters of the Patent Act of 1952 ob-

served, obvious discoveries do not merit patent protection

because they would “be made anyway, without the ‘fuel of

interest’ which the patent system supplies.” Giles S. Rich,

The Principles of Patentability, 42 J. PAT. OFF. Soc’y 75,

81-82 (1960).

Indeed, Justice Bradley explained over a century ago that

conferring patent monopolies on the obvious would “ob-

struct” rather than “stimulate invention” by “creat[ing] a

class of speculative schemers” who would use patents on tri-

fling innovations “to lay a heavy tax upon the industry of the

country. without contributing anything to the real advance-

ment of the art[s].” Atl. Works v. Brady, 107 U.S. 192, 200

(1883). Thus, Section 103’s non-obviousness requirement

ensures that “concepts within the public grasp, or those so

obvious that they readily could be, are the tools of creation

19

available to all.” Bonito Boats, Inc. v. Thunder Crafi Boats,

Inc., 489 U.S. 141, 156 (1989).

In Hotchkiss v. Greenwood, 52 U.S. (11 How.) 248, 267

(1850), this Court ruled that patent protection does not ex-

tend to an “improvement [that] is the work of the skilful [sic]

mechanic,” rather than “that of the inventor.” In Graham, this

Court concluded that Section 103(a) “was intended merely as

a codification” of Hotchkiss and subsequent decisions hold-

ing that claimed inventions must take a sufficiently innova-

tive step from the prior art to be patentable. 383 U.S. at 17.

In particular, while “the ultimate question of patent valid-

ity is one of law,” the obviousness determination is informed

by “factual inquiries” into “the scope and content of the prior

art,” the “differences between the prior art and the claims at

issue,” and “the level of ordinary skill in the pertinent art.”

/bid. (citation omitted). If the hypothetical person of ordinary

skill in the relevant art would be capable of making the in-

ventive step from the prior art, then the subject matter of the

claimed invention is obvious. This Court further explained

that “secondary considerations,” such as “commercial suc-

cess, long felt but unsolved needs, failure of others, etc.,” are

“indicia of obviousness or nonobviousness” that “may have

relevancy.” /d. at 18.

The Court in Graham expressly eschewed any rigid for-

mula for conducting the non-obviousness inquiry. Instead,

the Court explained that the non-obviousness determination

would depend on the “given factual context” in a manner

akin to other fact-sensitive legal judgments, such as “negli-

gence and scienter,” that are “amenable to a case-by-case de-

velopment.” /hid.

Indeed, this Court’s post-Graham decisions applying the

obviousness requirement demonstrate that a claimed inven-

tion may be obvious or non-obvious for a variety of reasons.

For example, in United States v. Adams, 383 U.S. 39 (1966),

the Court ruled that a combination patent on a new type of

20

battery was non-obvious not merely because the prior art did

not suggest combining the elements in the manner claimed,

but rather because the prior art taught away from the new

combination, the new battery “unexpected|ly]” functioned

better than predecessor batteries, and “noted experts ex-

pressed disbelief” that the new battery could possibly work.

Id. at 51-52.

In Sakraida v. Ag Pro, Inc., 425 U.S. 273 (1976), the

Court deemed a combination patent on a “water flush system

to remove cow manure from the floor of a dairy barn” to be

obvious because the manner in which the publicly known

elements were rearranged merely “exploit{ed] * * * the prin-

ciple of gravity” without demonstrating any synergistic ef-

fect. /d. at 282.

And in Dann vy. Johnston, 425 U.S. 219 (1976), the Court

held that a computerized system for “providjing] bank cus-

tomers with an individualized and categorized breakdown of

their transactions during the period in question” was obvious

because, given the “extensive use of data processing systems

in the banking industry” and the patented system’s similarity

in “characteristics and capabilities” to known computerized

data processing systems, “[{t]he gap between the prior art and

respondent’s system is simply not so great as to render the

system nonobvious to one reasonably skilled in the art.” /d.

at 222, 229-30."

_— ——

'' Nor do the obviousness decisions preceding the 1952 Patent

Act, which Section 103 codifies, Graham, 383 U.S. at 17, contain

a rigid “teaching, suggestion, or motivation” requirement. Sec,

e.g., Great Atl. & Pac. Tea Co. v. Supermarket Equip. Corp., 340

U.S. 147, 151-52 (1950); Toledo Pressed Steel Co. v. Standard

Parts. Inc., 307 U.S. 350, 356 (1939); Lincoln Eng'g Co. of lil. v.

Stewart-Warner Corp., 303 U.S. 545, 549 (1938); Adams vy. Bel-

laire Stamping Co., 141 U.S. 539, 542 (1891); Reckendorfer v.

Faber, 92 U.S. 347, 357 (1875); Hailes v. Van Wormer, 87 U.S.

353, 368 (1873); Hotchkiss, 52 U.S. (11 How.) at 265-67.

21

The common-sense, case-specific approach with which

this Court has evaluated obviousness adheres to the intent of

Section 103(a) much more closely than the Federal Circuit’s

rigid formulation. By requiring objective evidence in the

prior art of a teaching, suggestion, or motivation to combine

known elements, the Federal Circuit’s test substantially con-

flates non-obviousness with novelty and that inquiry’s single-

minded focus on the precise content of the prior art.

Even more importantly, the court of appeals’ view disre-

gards the ability of a “person of ordinary skill in the art” to

rearrange old elements without being told, merely by exercis-

ing common sense, especially if the innovative step is a tri-

fling one. Under this approach, even the most trivial

rearrangement of prior art elements may receive patent pro-

tection, as long as the particular combination has not been

written down before.

For example, in one case, the Federal Circuit reversed a

determination by the PTO that a claimed invention of a lawn

trash bag having a Halloween pumpkin design was obvious

because the prior art references—describing conventional

trash bags and methods for making “paper bag pumpkins”—

did not specifically suggest the combination of those refer-

ences. See /n re Dembiczak, 175 F.3d 994, 997, 1000 (Fed.

Cir. 1999). Although common sense dictates that such a

combination is obvious, the Federal Circuit ruled that the

PTO could not rely on common sense in determining that the

decorated trash bags were not patentable.

In fact, the Federal Circuit has repeatedly ruled that

“{c]lommon knowledge and common sense” never adequately

substitute for evidence of a “specific hint or suggestion” to

combine the prior art references. /n re Lee, 277 F.3d at 1344—

45; see also /n re Huston, 308 F.3d 1267, 1280 (Fed. Cir.

2002) (affirming invalidation of combination patent as obvi-

ous in light of “common knowledge and common sense,”

only because the Board of Patent Appeals also “has found the

22

motivation [for the combination] in the prior art references

themselves”); Jn re Zurko, 258 F.3d 1379, 1386 (Fed. Cir.

2001) (“The Board cannot simply reach conclusions based on

its own understanding or experience—or on its assessment of

what would be basic knowledge or common sense [to one of

ordinary skill in the art}.”). While the Federal Circuit’s stan-

dard has frequently been applied to invalidate findings of ob-

viousness in appeals from PTO determinations, the standard

is even more difficult to satisfy when defending against an

infringement claim in district court—where a patent’s inva-

lidity must be established by “clear and convincing” evi-

dence.

The Federal Circuit’s approach is not only inconsistent

with this Court’s decisions, it also conflicts with the way

other nations with similar patent systems avoid giving pat-

ents to obvious inventions. The European Union’s analogue

to obviousness is the “inventive step” requirement. See Euro-

pean Patent Convention art. 52(1), 56, 1065 U.N.T.S. 255

(1973). In identifying patent applications that lack the requi-

site “inventive step,” the EU does mot impose any require-

ment paralleling the Federal Circuit’s “teaching, suggestion,

Or motivation” rule. As one commentator has written, “It is

normally regarded as part of the skill of a skilled person that,

being aware of the literature in his own and related fields, he

is in principle capable of seeking and recognising technical

developments which can be derived from simple combina-

tions of documents within such literature.” Gerald Paterson,

THE EUROPEAN PATENT SYSTEM 549 (2d ed. 2001).

The flexibility in assessing claimed inventions for obvi-

ousness that this Court prescribed in Graham is a sensible

construction of Section 103(a) for the additional reason that

the obviousness inquiry must be structured to produce

equivalent results in all fields of scientific and technical

knowledge. Even if there were a convincing argument that

the content of the prior art could somehow serve as a sure

barometer of obviousness in mature fields (and we believe

23

there is not), such an argument could only rest on the view

that, because of the sheer abundance of the prior art, the ab-

sence of a teaching, suggestion, or motivation permits an in-

ference of non-obviousness. That reasoning is wholly

inapplicable to fields such as computer hardware and soft-

ware, in which the prior art less visibly illuminates the ability

of the person of ordinary skill in the art to combine prior-art

references. That fact provides another basis for rejecting the

court of appeals’ straitjacket on the obviousness inquiry.

The Federal Circuit has justified its standard as a neces-

sary bulwark against “hindsight-based obviousness analysis.”

Pet. App. 6a—7a (quoting /n re Dembiczak, 175 F.3d at 999).

But the Federal Circuit’s desire to minimize hindsight bias,

however salutary, does not justify its adoption of a prophy-

lactic test that departs from the standard mandated by Con-

gress. See, e.g., Dir. Office of Workers’ Comp. Programs,

Dep't of Labor v. Newport News Shipbuilding & Dry Dock

Co., 514 U.S. 122, 135-36 (1995) (explaining that the

“proposition that the statute at hand should be liberally con-

strued to achieve its purposes * * * does not add features that

will achieve the statutory ‘purposes’ more effectively”).

Decision-makers should, of course, take steps to avoid

hindsight bias: this Court has commended the use of “secon-

dary considerations” as objective ‘sdicia of non-obviousness

that help guide district courts in conducting obviousness in-

quiries. See Graham, 383 U.S. at 17-18. But the Court has

carefully explained that these objective indications of non-

obviousness do not necessarily override other factors point-

ing toward obviousness. See Sakraida, 425 U.S. at 282-83:

Anderson's-Black Rock, Inc. v. Pavement Salvage Co., 396

U.S. 57, 61 (1969).

The Federal Circuit has taken the opposite approach—-

adopting a narrow inquiry that trumps the broad statutory

test. But it has ignored the risk—a risk that most observers

believe has materialized that its cure is worse than the dis-

24

ease. Its test forces courts and examiners to close their eyes

to entire categories of evidence of obviousness out of an in-

ordinate fear of hindsight bias. The appropriate safeguard

against hindsight bias is, instead, careful application of the

standard announced by the Court in Graham. "”

Finally, defenders of the Federal Circuit's approach argue

that it does not circumscribe the obviousness inquiry, point-

ing to that court’s statements that teaching, suggestion, or

motivation “may be found * * * implicitly * * * in the

knowledge of those of ordinary skill in the art that certain

references * * * are of special interest or importance in the

field,” or “from the nature of the problem to be solved, ‘tead-

ing inventors to look to references relating to possible solu-

tions to that problem.”” Pet. App. 6a (citations omitted). A

more recent Federal Circuit decision contends that its teach-

ing, suggestion, motivation test is “consistent with” Section

103(a) and Graham by downplaying the starring role that the

Federal Circuit’s test assigns to evidence from prior art in

determining obviousness. Jn re Kahn, 441 F.3d 977, 987

(Fed. Cir. 2006).

Nevertheless, the majority of the Federal Circuit’s deci-

sions still require “objective evidence” of a particular “teach-

ing, motivation, or suggestion to * * * combine the [prior art}

references.” /n re Lee, 277 F.3d at 1343; see also /n re Zurko,

258 F.3d at 1386 (requiring “concrete evidence” of prior art

teaching, suggesting, or motivating combination); /n re

Dembiczak, 175 F.3d at 999 (refusing to deem claimed in-

vention to be obvious absent “actual evidence” showing a

'? Significantly, the other inquiries to which this Court in Graham

analogized the obviousness test—negligence and scienter—also

carry a risk of hindsight bias. When an accident causing substantial

harm is examined retrospectively, there is a natural impulse to

conclude that a “reasonable person” would have taken some action

to avoid the harm. Yet the tort standard does not incorporate a pro-

phy lactic barrier against that impulse.

25

“clear and particular” reason to combine the prior art refer-

ences); C.R. Bard, Inc. v. M3 Sys., Inc., 157 F.3d 1340,

1351-52 (Fed. Cir. 1998) (ruling that a “teaching or sugges-

tion or motivation” to combine prior art references is an “es-

sential evidentiary component” of any obviousness

determination).

If the Federal Circuit in fact applies a broader standard,

then rejection by this Court of its narrow test will simply

clarify the law—just as this Court’s holding in eBay elimi-

nated any doubt about the governing standard. This Court

should unambiguously reject the view that evidence of a

teaching, suggestion and motivation is the only way of show-

ing that an invention is obvious and hence unpatentable.

B. The Federal Circuit Places Inordinate Weight On

“Secondary” Circumstantial Evidence Of

Obviousness

As discussed above, even when a defendant in an in-

fringement action points to objective evidence of a “teaching,

suggestion, or motivation” to combine the elements of the

claimed invention, the Federal Circuit generally withholds

summary judgment of invalidity if the patent holder submits

any circumstantial evidence of nonobviousness, such as

commercial success or long felt but unsolved needs.

Although this Court in Graham downplayed this sort of

evidence as constituting “secondary considerations” of non-

obviousness that “may have relevancy” (383 U.S. at 17-18

(emphases added)), the Federal Circuit insists that this evi-

dence deserves equal billing with conclusions derived from

the prior art, even if based upon the Federal Circuit's docu-

mented prior-art standard. Hybritech Inc. v. Monoclonal An-

tibodies, Inc., 802 F.2d 1367, 1380 (Fed. Cir. 1986).'* The

'’ See also Tec Air, Inc. v. Denso Mfg. Mich. Inc., 192 F.3d 1353,

1360 (Fed. Cir. 1999) (“[O}bjective evidence of non-obviousness

may be used to rebut a prima facie case of obviousness based on

26

Federal Circuit has even instructed that “evidence of secon-

dary considerations may often be the most probative and co-

gent evidence in the record.” Siratoflex, Inc. v. Aeroquip

Corp., 713 F.2d 1530, 1538 (Fed. Cir. 1983) (emphasis

added); see Jn re Piasecki, 745 F.2d 1468 (Fed. Cir. 1984)

(reversing trial court’s finding of obviousness based on sec-

ondary considerations); Simmons Fastener Corp. v. lll. Tool

Works, Inc., 739 F.2d 1573, 1575-76 (Fed. Cir. 1984)

(same).

The Federal Circuit’s undue emphasis on “secondary

considerations” of non-obviousness has no basis in either

Section 103(a) or this Court’s decisions. To the contrary, this

Court has reiterated that these sorts of “secondary considera-

-tions” do not “tip the scales of patentability” when review of

the prior art reveals that a claimed invention was obvious to a

person of ordinary skill in the art. Graham, 383 U.S. at 36;

see also Sakraida, 425 U.S. at 282-83; Anderson's-Black

Rock, 396 U.S. at 62-63. As this Court has explicitly in-

structed, “commercial success without invention will not

make patentability.” Great Ail. & Pac. Tea Co., 340 U.S. at

153.

prior art references.”) (internal quotation marks omitted); Panduit

Corp. v. Dennison Mfg. Co., 810 F.2d 1561, 1570 (Fed. Cir. 1987)

(“[A] court [must] withheld a conclusion of obviousness until it

has fully assessed the impact of any objective evidence of nonob-

viousness.”); Alco Standard Corp. v. Tenn. Valley Auth., 808 F.2d

1490, 1499-150! (Fed. Cir. 1986) (finding that evidence of com-

mercial success and long felt needs demonstrated nonobviousness

even though “the prior art provides significant support for the ap-

pellants’ contention that the ‘006 patent would have been obvi-

ous”); Stratoflex, Inc. v. Aeroquip Corp., 7\3 F.2d 1530, 1538-39

(Fed. Cir. 1983) (holding that “evidence rising out of the so-called

‘secondary considerations’ must always when present be consid-

ered,” and noting that it “may often establish that an invention ap-

pearing to have been obvious in light of the prior art was not”).

27

The ill effects of the Federal Circuit's approach are dem-

onstrated by the Federal Circuit's treatment of the commer-

cial success factor. Summary judgment on obviousness is

virtually unavailable to alleged infringers because some evi-

dence of commercial success is available in virtually every

contested case. After all, it is only when money is at stake—

that is, when a challenged patent appears to have met with

some commercial success—that litigation is worthwhile. See

FTC REPORT, supra, ch. 4, at 16 (“Yale University President

Richard Levin and U.S. District Judge T.S. Ellis Ill * * *

voiced concern that the commercial success test has ‘diluted’

or ‘trivialized’ the obviousness inquiry”) (footnotes omitted);

see also Pro-Mold & Tool, 75 F.3d at 1573-74; Simmons,

739 F.2d at 1574-76.

As Professor Kitch warned 40 years ago, reliance on sec-

ondary considerations such as commercial success to resolve

questions of patent validity leads to a rule “that all patents

that are litigated should be held valid,” because “it is unlikely

that patents that are not commercially successful will be

brought to litigation.” Edmund W. Kitch, Graham v. John

Deere Co: New Standards for Patents, 1966 Sup. Cr. REV.

293, 333. These results, all stemming from the Federal Cir-

cuit’s obviousness test, illustrate the problems it has caused.

The secondary factors surely are relevant, as this Court

held in Graham. The Federal Circuit’s error is that it auto-

matically elevates these facts to the status of material facts

precluding summary judgment regardless of the other evi-

dence relating to obviousness and regardless of how these

facts fit into the overall picture. For example, as the FTC

pointed out, “[e}ven if commercial success reflects a claimed

invention’s economic significance, economic significance

does not necessarily reflect technical significance * * * so a

commercial success standard will not necessarily yield accu-

rate nonobviousness results.” FTC Report, supra, ch.4, at

28

18. Courts therefore should be cautious about attributing

weight to this factor. '*

Again, the Federal Circuit has lost sight of the governing

legal standard. This Court should make clear that the applica-

tion of the summary-judgment standard turns upon the fac-

tual record in each case, and reject the Federal Circuit's

transformation of a rule identifying relevant evidence into a

substantive standard for obviousness.

‘* The EU does not follow the Federat Circuit’s practice of ascrib-

ing heavy weight to “secondary factors” of non-obviousness, such

as commercial success. Rather, the European Patent Office has

instructed that “a mere investigation for indications of the presence

of inventive step is no substitute for the technically skilled assess-

ment of the invention.” 724/81 BASF/Metal refining O.J. EPO

1983, 133; [1979-85] E.P.O.R.: B:354. in other words, according

to the EPO, “such so-called secondary indicia in support of an in-

ventive step represent auxiliary considerations which can in certain

cases facilitate a decision. . . . However, [their] presence does not

mean that an inventive step must be recognized.” 1270/89

ICl/Fusecord {1987} E.P.O.R. 193 (cases cited in Paterson, supra,

at 560 n.1 16; 561 n.117).

29

CONCLUSION

The judgment of the court of appeals should be reversed.

Respectfully submitted.

ANDREW J. PINCUS

Counsel of Record

MIRIAM R. NEMETZ

EVAN P. SCHULTZ

KEVIN S. RANLETT

Mayer, Brown, Rowe & Maw LLP

1909 K Street, NW

Washington, DC 20006

(202) 263-3000

AUGUST 2006