« Patent Board of Arrogance and Interferences | Main | Urging A Rethink »

May 14, 2007

The Dynamics of Obviousness

The Supreme Court ruling in KSR v. Teleflex unleashed wide-ranging dynamics: diminishing the value of patent portfolios, helping and hurting start-up companies, and promoting generic drugs.

With KSR, the Supreme Court set the patent standard to that last seen in the 1970s, when an incredible number of granted patents were invalidated. In turning back the clock, SCOTUS looked to its 1950 decision of Great Atlantic & Pacific Tea v. Supermarket Equipment, the bedrock 1966 prior art decision of Graham v. John Deere, 1969's Anderson's-Black Rock v. Pavement Salvage, and the 1976 Sakraida v. AG Pro ruling.

In appeals court rulings months prior to KSR, the CAFC was showing its anticipation of SCOTUS raising the patentability bar, inching toward what KSR would be, invalidating as obvious a slew of patents: Pfizer's Norvasc® compound (Apotex v. Pfizer), Astra's Prilosec® gas pills, Aventis's drug to treat Lou Gehrig’s disease, Abbott's Sevoflurane anesthetic, DyStar's dyeing process, Alza's anti-incontinence drug, Align Technology's orthodontics treatment, and Leonard Kahn's reading machine for the blind. After KSR, the CAFC Leapfrog v. Fisher-Price & Mattel obviousness ruling, unpatenting an electronic child learning toy, cast in concrete what is to be - only patents for ideas that seem clever in hindsight will withstand scrutiny.

The once solid fabric of building a patent portfolio of incremental improvements has been torn to shreds. There is a domino effect to patents now: with rare exception of spark-of-genius "a-ha" patents, patents now represent a history of incremental improvements, a stack of "common sense" innovations now unworthy, stretching back to antecedent time of expired patents. Entire patent family lines won't be worth the paper they were printed on, a chronicle rendered obvious in hindsight.

Patent applications are going to decline, though it will be a gradual process, as dreams die hard. Patentability searches, once a luxury, will become de rigueur. USPTO pendency will drop in years to come, but, in the meantime, the appeals board (BPAI) is going to be crushed with appeals, the death rattle of incremental patenting.

While there's still going to be a lot of prosecution work to be had, patent law as a career is going to tend more towards litigation, as demand for new applications declines and enforcement battles rage on. Prior art searchers are going to have a field day that stretches for years.

Chemical and pharmaceutical companies have fat patent portfolios that now resemble houses of cards. Expect a lot of maneuvering by the top-tier pharmaceuticals to cut deals with generic drug makers. With only "unexpected results" as a patent shield, a lot of litigation swords will be drawn to take slices of the big pies. Recent drug cases at the CAFC, particularly the Pfizer Norvasc ruling, are an omen.

A lot of companies, particularly start-ups, are going to feel more freedom to operate, to take on the fortresses established companies built with their patent portfolio. But, with patents harder to get, start-ups that were reliant upon patent sparkle for venture capital funding face the prospect of tighter wallets. That said, VC funding has always been about the fundamentals of savvy and nimble entrepreneurs, more about personality and execution of game plans than ideas and patent prospects per se.

Congress is unlikely to step in. The Patent Reform Act of 2007 didn't touch the obviousness clause, though Patent Hawk at least thought it should. The impetus for patent reform was largely driven by the computer industry, and KSR takes steam out of that stride. While drug companies are likely to shovel money at politicians to re-tighten obviousness, the prospect of more generic drugs at lower cost pays big political dividends just by standing pat. Large computer companies couldn't be more tickled with KSR. Microsoft's patent litigators, constantly hammered by small fry patents, were positively gleeful. Even IBM, with its patent licensing juggernaut, seems content.

What may turn the tide years from now is a rising flood of technology imports, American ideas having flowed to lower-cost foreign manufacturers, particularly the Chinese. In time, the companies happiest now with everything obvious may want some patent protection from getting their lunch eaten.

Posted by Patent Hawk at May 14, 2007 10:30 PM | The Patent System