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

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0086%3A23

## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2007
- **Citation:** 550 U.S. 398

## Text

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! 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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INTRODUCTION AND SUMMARY OF

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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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0086%3A23. Public record. Not legal advice.