Year of the Tech Patent Lawsuit, Part 1

What is shaping up to be a landmark technology patent lawsuit,KSR v. Teleflex, is pending before the U.S. Supreme Court right now. At its most basic, the decision could redefine the standard of “obviousness” that is usedwhen deciding whether a patent should be granted for aparticular invention or development.

Under KSR, for instance, 3M’s ubiquitous and much beloved Post-it notes might have been harder to patent, because the invention — sticky glue on the back of paper — seems obvious in hindsight.

Functional Definitions, Please

While there are many shades of gray to this issue — andjust as many opinions on what defines an obviousdevelopment versus a patentable invention — at leastone fact is clear: This case is the firstsubstantive patent legislation before the U.S. SupremeCourt in 30 years.

“Other cases that have gone beforethe Supreme Court have been around procedural issues,not a substantive definition,” Tom Goldstein, aKSR v. Teleflexpartner with Akin Gump who argued the KSR v. Teleflex casebefore the Supreme Court, told the E-Commerce Times.

The Supreme Court is still out on the issue, but the expectation is strong thatits reassessment of the standards of what constitutes obviousness is likely to be stunning.

“We hope the decision sets ahelpful, usable test — not something off the wall like’synergism,’ ‘flash of genius,’ or the like, as pastCourts have set forth,” John R. Crossan, an IP partner atChapman and Cutler, told the E-Commerce Times.

The Drama Quotient

It is fitting that 2006 is coming to an end withsuch a major technology patent case before the highest court in the U.S. 2006 wasthe year that “patent troll” entered the generalpublic’s collective vocabulary.

It was also the yearthat millions of Research In Motion (RIM) customers had to face down thereal possibility that they might lose their belovedBlackBerry handheld devices over a patent dispute.

During the past twelvemonths, in short, there has been a seeming whirlwind ofpatent cases, with each apparently more significantthan the last. In truth, if one were to add up thecases this year and compare them to previous years’tallies, the totals wouldn’t vary by much.

“I think the difference between 2006 and earlieryears is that a lot of these cases have been verypublic,” Raymond Van Dyke, a partner with NixonPeabody, told the E-Commerce Times.

“Although 2007 promises excitement in the patentarena, 2006 showed a lot of drama with industrialtitans wrestling to a draw.”

Underlying Issues

However, even more importantdevelopments — largely still unnoticed by the generalpublic — are poised to reshape the patent landscape, Van Dyke added.

“The most important aspect of 2006 from a patentattorney’s perspective is the growing tension inCongress, the Patent Office and in the Supreme Courtabout the reach and limits on patents and patentenforcement,” he said.

“This year presages potentialupheavals for 2007. The internecine struggle betweenthe IT and life sciences industries over the last fewyears for reinterpretation of various basic patenttenets in Congress and the Patent Office will reachsome conclusion in 2007, perhaps resulting fromimminent decisions by the Supreme Court,” predicted Van Dyke.

That said, it is useful to take a look at the casesthat have primed the stage for 2007. In this three-part series, the E-Commerce Times will review some of themost significant patent cases of the year.

eBay v. MercExchange

Of the four patent cases decided by the Supreme Courtin 2006,eBay v. MercExchange is perhaps the highest-profile. The caseinitially focused on the technology behind eBay’s “BuyIt Now” feature, which lets buyers short-circuit theauction process to complete a fixed-price sale.

A lower court ruling barred eBay from using thetechnology; in that same 2003 decision,MercExchangewon a US$25 million jury verdict. Then, MercExchangeasked the U.S. Court of Appeals to enjoin eBay from using the technology, which it did, thus launching the next phase ofthe seemingly endless eBay-MercExchange saga. eBay appealed thatdecision to the Supreme Court, which set aside theinjunction.

“The Supreme Court held that permanent injunctionsshould not automatically be awarded in patent cases,” Michael Shuster, a partner in Fenwick & West’sintellectual property group and co-chair of the firm’slife science practice, told the E-Commerce Times.

“Rather, the same factors considered for their awardin non-patent cases should apply,” he explained.

“This decision weakens the threat posed by so-called’patent trolls’ who assert patents but don’t haveproducts associated with them,” Shuster continued. “It also will likelyencourage life science companies to take additionalrisks in developing new drugs that might infringe onthird-party patents.”

Injunctions: Murky Waters

Van Dyke noted that eBay v. MercExchange — although justa clarification of the law — has realigned patent enforcement by analyzing theeconomics of the situation. Was the case about competitors battling or a gold digger taking unfair advantage?

“The full ramifications of the eBay decision are stillbeing determined,” Van Dyke pointed out. “In short, victorious patentees arenot necessarily guaranteed an injunction against adefendant, and courts must first evaluate the overallcircumstances. Patentees that do not practice theinvention may not receive an injunction, and insteadmay receive only damages.”

Richard Zembek, a partner with Fulbright & Jaworski, commented on how the Court addressed the injunction issue in another case, Finisar v.DirecTV:

  1. It denied issuance of an injunction against adefendant found to have willfully infringed the patent atissue.
  2. It effectively granted a compulsory licensethat permitted the defendant to practice the patentedinvention at a royaltyrate set by the court.

“Post eBay,” Zembek told the E-Commerce Times, “there appears to be an increase in ITC (International Trade Commission) filings, which only provides an injunction against the importation of infringing products, rather thanmonetary damages, as relief to a patentee.”

Year of the Tech Patent Lawsuit, Part 3

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