New Supreme Court patent ruling may create uncertainty

By Debra Bulkeley, Executive Editor -- Electronic Business, 5/3/2007

The Supreme Court and the U.S. Department of Justice (DOJ) both made significant announcements on April 30 concerning patents that have implications for the electronics industry.

The Supreme Court adopted a new standard that will make it easier for patents to be denied or challenged on the grounds that the invention is too obvious to deserve patent protection. It’s not uncommon for patents to be rejected on obviousness.

The patent ruling, KSR International Co. v. Teleflex Inc., could also subject existing patent-holders to litigation over obviousness. The decision has been viewed as one of enormous importance for U.S. patent law. Many say the ruling was necessary to protect the country’s competitiveness while others wonder whether the ruling will hurt many firms that are at the heart of innovating—start-ups and small companies.

Bruce Sunstein, co-founder of the Boston law firm of Bromberg & Sunstein LLP and who heads the firm’s Patent Practice Group, calls the ruling “somewhat irresponsible” because the justices set the bar higher without being specific.

“In setting the bar higher, they created uncertainty as well. It’s one thing to set the bar higher, but the uncertainty undermines the patent system,” he says. “One of the weaknesses of the ruling is the frequency of the term ‘common sense’,” he adds. Some interpret that as judges will now be able to use their own common sense instead of objective data when deciding whether or not to grant a patent.

While some think the opinion will have stronger implications for companies in specific industries over others (technology companies, for example, that make minor improvements in software programs), the opinion’s impact could be viewed as more of a David vs. Goliath story. Sunstein adds the ruling may yield another example for the law of unintended consequences.

“I think it cuts across industries,” he says. “I think the smaller companies will suffer most, and that’s where a lot of innovation comes from.”

Sunstein contends that if fewer patents are granted and applications are scrutinized more, start-ups and small companies will also be granted fewer patents. Big companies with existing market power, on the other hand, won’t feel the sting of rejected patents as much, he says. He points to a market leader such as Intel, which probably wouldn’t suffer as greatly if a patent wasn’t granted to it.

“If you obsess with not granting patents, don’t you also increase the chances that something that deserves a patent, won’t get patented?” he asks.

The DOJ announced that it will not oppose a proposal by the Institute of Electrical and Electronics Engineers (IEEE) to implement a policy on the disclosure and licensing of patents in IEEE's standards-setting process. The policy allows patent holders to commit publicly to specific restrictions on their future licensing terms and conditions for the use of patents that are essential to IEEE standards.

“I think it’s a terrific development,” Sunstein says. “It’s not guaranteed that it eliminates fighting, but since this is the beginning of standards making it is a wonderful beginning.”