[Ip-health] Forbes on Supreme Court Patent Ruling

Mon Apr 30 21:50:03 2007

Regarding today's decision in KSR v. Teleflex:

<Kappos said that the court's decision means, "if you want a patent,
you actually have to invent something."

The biotech and pharmaceutical industries, meanwhile, were on the
losing end of the KSR case. Groups from both industries filed friend
of the court briefs in support of the obviousness test that the court
ruled was applied too narrowly.

Hans Sauer, associate general counsel at the Biotech Industry
Organization, which represents companies such as Amgen Inc. and
Gilead Sciences Inc., said that a weaker patent regime can make it
harder for new biotech companies to attract venture capital or other
investment.

That investment can be crucial when a small firm is seeking millions
of dollars to bring a new drug to market, he said. The first question
investors will ask, Sauer said in a March interview, is whether the
patent will stand up in court.

Sauer said that the biotech industry has already been negatively
affected by a decision the court made last year in a case involving
eBay Inc. and a small, Virginia-based company known as MercExchange.

In that May 2006 case, the court said that if a company has been
found to infringe a patent, an injunction barring production of the
infringing good should be granted on a case-by-case basis, rather
than automatically.

And in January 2007, the court said in a dispute between biotech
firms MedImmune Inc. and Genentech Inc. that a company can challenge
the validity of a patent in court, even if it continues to pay fees
to license the patent. That could make patent challenges more likely,
patent experts said, by enabling companies to seek to have a patent
declared invalid without having to take the risk of violating the
patent, which can result in triple damages if a company loses its case.>

Full story:
http://www.forbes.com/feeds/ap/2007/04/30/ap3669575.html
Associated Press
Court Cases Threaten Weaker Patents
By CHRISTOPHER S. RUGABER 04.30.07, 4:25 PM ET

The Supreme Court on Monday delivered two decisions that experts say
weaken the value of patents, fueling criticism that technological
innovation, particularly in the biotech and pharmaceutical sectors,
could be hindered.

In the more important of the two cases, the court made it simpler for
companies to challenge patents on the grounds that they cover
products that are obvious combinations of existing technologies.
Under U.S. law, an invention must be new, useful and not obvious in
order to merit a patent. The case involved Canada-based KSR
International Inc. and Teleflex Inc., based in Limerick, Penn.

In the second case, the court curtailed the reach of U.S. patent laws
overseas, ruling in favor of Microsoft Corp. in its dispute with AT&T
Inc. over Microsoft's sale of Windows software outside the United
States that allegedly infringed AT&T's patents. The decision will
likely reduce damage awards in patent cases by excluding patent
infringement overseas from consideration.

Boston University law professor Dennis Crouch wrote on a popular
Supreme Court blog, Scotusblog, that "because of KSR, patents will be
more difficult to enforce and easier to invalidate."

"The AT&T case," he added, "cuts in half the value of many of today's
most valuable software patents."

The Supreme Court's recent interest in patent law - it has taken up a
half-dozen cases in the field in the past two years, an unusually
large number - reflects the greater role patents play in the U.S.
economy, as companies earn more revenue from licensing patents and
patent litigation has increased by 50 percent in the last ten years.

IBM Corp., which regularly tops the annual list of top U.S. patent
recipients, receives approximately $900 million in revenue from
licensing its patents and other intellectual property to other
companies. David Kappos, assistant general counsel at IBM, said that
figure is an increase from the "low millions" in the early 1990s.

Microsoft is a big winner in the two decisions today. The court's
ruling in the AT&T case throws out the use of worldwide product sales
as a basis for calculating damages in patent infringement suits, a
formula that has resulted in large judgments against the company in
other cases.

A jury hit Microsoft with $1.52 billion in damages earlier this year
in a suit filed by Alcatel-Lucent, and a separate jury awarded Eolas
Technologies Inc. and the University of California $521 million in
damages from Microsoft. Both damage awards were calculated based on
worldwide sales of Windows software.

In addition, Microsoft and many other high-tech companies, including
Cisco Systems Inc. and Intel Corp., had filed friend of the court
briefs in the KSR case, urging the court to ease the standard for
demonstrating that a new product is obvious. The court largely
decided as the companies had urged.

The companies wanted a more flexible "obviousness" standard that
would make it easier for patent examiners to reject applications for
trivial innovations or obvious combinations of existing products.
Spurious patents have contributed to the recent increase in patent
litigation, they argued.

Kappos said that the court's decision means, "if you want a patent,
you actually have to invent something."

The biotech and pharmaceutical industries, meanwhile, were on the
losing end of the KSR case. Groups from both industries filed friend
of the court briefs in support of the obviousness test that the court
ruled was applied too narrowly.

Hans Sauer, associate general counsel at the Biotech Industry
Organization, which represents companies such as Amgen Inc. and
Gilead Sciences Inc., said that a weaker patent regime can make it
harder for new biotech companies to attract venture capital or other
investment.

That investment can be crucial when a small firm is seeking millions
of dollars to bring a new drug to market, he said. The first question
investors will ask, Sauer said in a March interview, is whether the
patent will stand up in court.

Sauer said that the biotech industry has already been negatively
affected by a decision the court made last year in a case involving
eBay Inc. and a small, Virginia-based company known as MercExchange.

In that May 2006 case, the court said that if a company has been
found to infringe a patent, an injunction barring production of the
infringing good should be granted on a case-by-case basis, rather
than automatically.

And in January 2007, the court said in a dispute between biotech
firms MedImmune Inc. and Genentech Inc. that a company can challenge
the validity of a patent in court, even if it continues to pay fees
to license the patent. That could make patent challenges more likely,
patent experts said, by enabling companies to seek to have a patent
declared invalid without having to take the risk of violating the
patent, which can result in triple damages if a company loses its case.

But Kappos argued last week that the eBay and MedImmune decisions
have resulted in only modest changes to the patent system.

"I don't think the Supreme Court has overcorrected," Kappos said, or
"diminished the value of patents."