We usually think of the Supreme Court as deciding cases involving life or death, civil rights or constitutional issues. But since Chief Justice John Roberts was elevated to the Court in September 2005, his interest in cases involving technology issues and intellectual property has influenced the Court to accept and review an atypically high number of patent cases. These decisions have fostered a fundamental change in the way patents must be treated by the lower courts, and have generally caused a shift in favor of those who would challenge the patent rights of others.

This special edition of the Kramer Levin Intellectual Property “KLIP” Alert considers several of these recent Supreme Court patent cases.

In a case that has a pervasive impact on patents – obtaining them, enforcing them and defending against them – the Court’s April 2007 decision in KSR Int’l Co. v. Teleflex Inc., 127 S.Ct. 1727 (2007) made it more difficult in the first instance, for an inventor to obtain a patent from the U.S. Patent and Trademark Office, and, at the same time, easier for an alleged infringer to challenge the validity of an issued patent on obviousness grounds. The Teleflex patent at issue in the case covered an adjustable vehicle gas pedal control with an attached pedal position sensor. Prior art patents taught each part individually, but none seemed to clearly suggest combining the two components. Like the cook who first thought to add chocolate chips to pancakes to make them taste even better, the Court held that mounting an available sensor on a fixed pivot point of the prior art pedal was a design step well within the grasp of a person of ordinary skill in the relevant art and that the benefit of doing so would be obvious. The KSR decision criticized the previous rule, rigidly applied, that obviousness may be found only where there is a specific “teaching, suggestion, or motivation” in the prior art to combine prior art references, and, instead, held that “[a] court must ask whether the improvement is more than the predictable use of prior-art elements according to their established functions.” Id. at 1731.

On the same day as the KSR decision, the Court in Microsoft Corp. v. AT&T Corp., 127 S.Ct. 1746 (2007) made it harder to enforce U.S. patents against foreign activities, holding that software that is not expressed in a form ready to be used by other computers, and which would infringe a patent were it to be sold or used in the U.S., may be exported to foreign countries. Id. at 1760.

A little more than a year ago, in January 2007, the Court in MedImmune, Inc. v. Genentech, Inc., 127 S.Ct. 764 (2007) was asked to consider the parameters under which an existing licensee under a particular patent could challenge that patent. Under the old rule, a licensee was generally required to forfeit the license to obtain standing to challenge the validity of a patent. Therefore, licensees had to stop using the licensed technology or risk the possibility of having to pay enhanced damages and the patentee’s attorneys fees should they ultimately not prevail – a powerful disincentive to challenge a patent. The Court rejected this rule, holding that a sufficient “case or controversy” exists to allow a case to proceed even when a licensee continues to make royalty payments under the license agreement. Id. at 776.

Earlier in May 2006, the Supreme Court in eBay Inc. v. MercExchange, L.L.C., 126 S.Ct. 1837 (2006), took away from patent holders the previously almost automatic right to enjoin an infringer from continuing to use a patented invention after infringement had been shown at trial. The Court clarified that trial judges should apply the traditional permanent injunction four-factor balancing test in considering whether to enjoin the infringing activity or to, in essence, force a compulsory license, and that this analysis should not be a rubber stamp (in effect the Court negated the longstanding presumption of irreparable harm anytime infringement is shown, regardless of the particular circumstances). Id. at 1839. Our anecdotal observation has been that, post-eBay, district courts are significantly less likely to grant injunctions absent compelling circumstances (for example, direct competition between the patent holder and the infringer).

Most recently, just a few weeks ago, the Court heard oral argument in yet another patent case, Quanta Computer, Inc. v. LG Elecs., Inc., (Supreme Court Docket No. 06-937). This case will likely decide under what circumstances the grant of a patent license to an entity exhausts the patent rights such that downstream users, such as customers of that entity, also have the right to use the patented invention.