United States: The KSR Decision: Implications Of A Modified Standard Of Obviousness For Patents

A unanimous decision by the U.S. Supreme Court in KSR International Co. v. TeleFlex Inc., No. 04-1350 (2007) may make it easier to combine prior art references to invalidate patents or prevent the issuance of a patent on the ground that the claimed invention is obvious.

The Court’s decision modified the Federal Circuit’s standard for obviousness under 35 U.S.C. §103 from a rigid application of the "teaching, suggestion or motivation" test in determining whether one skilled in the art would have combined the references, and returned to an "expansive and flexible approach" more in line with prior Supreme Court precedent.

KSR International Company ("KSR") had previously designed and patented an adjustable mechanical pedal. KSR later modified the patented adjustable mechanical pedal by adding a previously known modular sensor at the request of General Motors Corporation ("GM"). Upon learning of KSR’s design made for GM, Teleflex Incorporated ("Teleflex") sent a letter to KSR informing KSR that any supplier of a product that combines an adjustable pedal with an electronic throttle control necessarily employs technology covered by "one or more" of Teleflex’s patents. KSR refused to enter into a royalty arrangement with Teleflex, so Teleflex sued for infringement of its U.S. Patent No. 6,237,565 ("the ‘565 patent"). Specifically, Teleflex asserted claim 4 of that patent against KSR. Claim 4 claims an adjustable pedal assembly with an electronic sensor controlled by a vehicle’s throttle.

Lower Court Rulings

Teleflex argued that the addition of the sensor to KSR’s previously designed pedal was infringement of the ‘565 patent. KSR countered that the ‘565 patent was invalid because its subject matter was an obvious combination of elements known in the prior art. KSR filed a motion for summary judgment of invalidity based on obviousness.

The decision in Graham v. John Deere Co., 383 U.S. 1, 148 USPQ 459 (1966), set out four factual inquiries defining analysis of a determination of obviousness ("Graham factors"):

1. 1.determining the scope and contents of the prior art;
2. ascertaining the differences between the prior art and the claims in issue;
3. resolving the level of ordinary skill in the pertinent art; and
4. evaluating evidence of secondary consideration.

The U.S. District Court for the Eastern District of Michigan¹ applied the Graham factors to determine whether KSR had overcome the presumption of validity and demonstrated that claim 4 was obvious in light of the prior art in existence when the claimed subject matter was invented.

The district court determined, in light of the expert testimony and the parties’ stipulations, that the level of ordinary skill in pedal design was "an undergraduate degree in mechanical engineering (or an equivalent amount of industry experience) [and] familiarity with pedal control systems for vehicles."

The district court granted KSR’s summary judgment motion based on the prior art disclosed in the Asano patent (U.S. Patent No. 5,010,782) and the White patent (U.S. Patent No. 5,385,068) and the sensors already used by Chevrolet. The Asano patent disclosed everything contained in claim 4 except the use of a sensor to detect the pedal’s position. That element was disclosed in the White patent. The White patent described modular sensors that could be taken off the shelf and attached to mechanical pedals of various types. The district court then applied the Federal Circuit’s "teaching, suggestion or motivation" ("TSM") test. The district court found that the TSM test was satisfied. As a final matter, the district court considered the commercial success of Teleflex’s ‘565 patented pedal. Nonetheless, the district court held that the invention disclosed in claim 4 of the ‘565 patent was an obvious combination of the prior art taught in Asano’s adjustable pedal assembly and position sensors already well known in the industry.

The Federal Circuit reversed, ruling that the district court erred in its obviousness analysis. According to the Federal Circuit, the correct standard requires precise findings showing a "teaching, suggestion, or motivation" to combine prior art teachings in the particular manner claimed in the patent at issue. The Federal Circuit went on to say that although "it might have been obvious to try the combination of Asano and a sensor … "‘[o]bvious to try’ has long been held not to constitute obviousness." The Federal Circuit held that summary judgment was inappropriate because there existed genuine issues of material fact, such as Teleflex’s expert proffer that "claim 4 was a simple, elegant, and novel combination of features" in that the sensor was mounted on the support bracket rather than the pedal itself.

Supreme Court Decision Reaffirms the Graham Factors

In April 2005, KSR filed a petition for certiorari with the Supreme Court ("Court"), seeking review of whether the Federal Circuit erred in holding that a claimed invention cannot be held "obvious," and thus unpatentable under 35 U.S.C. §103, in the absence of some precisely proven "‘teaching, suggestion, or motivation’ that would have led a person of ordinary skill in the art to combine the relevant prior art teachings in the manner claimed." The Court agreed to review the decision.

KSR maintained that the standard used by the Federal Circuit departed from the Supreme Court’s precedents construing Section 103, particularly the Court’s decision in Graham. The Court agreed, explaining: "Throughout [the] Court’s engagement with the question of obviousness, our cases have set forth an expansive and flexible approach inconsistent with the way the [Federal Circuit] applied its TSM test here." The Court observed that Graham calls for a broad inquiry and a look at any secondary considerations that would prove insightful. Quoting language from Great Atlantic & Pacific Tea Co. v. Supermarket Equipment Corp., 340 U.S. 147, 87 USPQ 303 (1950), the Court said, "For over a half century, the Court has held that a ‘patent for a combination which only unites old elements with no change in their respective functions … obviously withdraws what is already known into the field of its monopoly and diminishes the resources available to skillful men.’"

Many observers had speculated that the Supreme Court would throw out the TSM test altogether. Instead, the Court simply has rejected a rigid application of the TSM test. The Supreme Court explained that when the Court of Customs and Patent Appeals, the Federal Circuit’s predecessor, first established the requirement of demonstrating a "teaching, suggestion or motivation" to combine known elements to show that the combination is obvious, it "captured a helpful insight." The Court added that, "[h]elpful insights ... need not become rigid and mandatory formulas, and when it is so applied, the TSM test is incompatible with our precedents."

For example, in United States v. Adams, 383 U.S. 39 (1966), the Court recognized that it was not enough to show obviousness by proving that a patent is composed of elements that existed independently in the prior art.

According to the Supreme Court, the Federal Circuit erred because it had transformed the TSM test into a rigid rule. The Supreme Court held that any need or problem known in the field of endeavor at the time of invention and addressed by the patent can provide a reason for combining elements in the manner claimed. Further,

The Supreme Court cautioned, however, that a "fact finder should be aware, of course, of the distortion caused by hindsight bias and must be cautious of arguments reliant upon ex post reasoning." Some examples of obviousness cited by the Court were:

• When a work is available in one field of endeavor, design incentives and other market forces can prompt variations of it, either in the same field or a different one. If a person of ordinary skill can implement a predictable variation, §103 likely bars its patentability. (emphasis added).

• If a technique has been used to improve one device, and a person of ordinary skill in the art may recognize that it would improve similar devices in the same way, using the technique is obvious unless its actual application is beyond his or her skill.

Thus, courts must ask whether the invention or any improvement is more than simply the predictable use of prior art elements according to their established functions. The Supreme Court noted that determining whether there was an apparent reason to combine the known elements in the manner claimed in the patent at issue should address the following elements:

• the interrelated teachings of multiple patents;

• the effects of demands known to the design community or present in the marketplace; and

• the background of the knowledge possessed by a person having ordinary skill in the art.

Has the Obviousness Analysis Changed Because of the KSR Decision?

The proper application of the Graham factors, and consequently, the ultimate judgment of obviousness is clearly a legal determination for the courts.

Summary judgment appears to be appropriate where:

1. the content of the prior art, the scope of the patent claim and the level of ordinary skill in the art is not in material dispute; and
2. the obviousness of the claim is apparent in light of the Graham factors.

The KSR decision also implies that secondary considerations, one of the four Graham factors, are particularly relevant to an obviousness analysis. This is particularly true of inventions which combine previously known elements. The Court stated that "the sequence of [the Graham factors] might be reordered in any particular case, the factors define the controlling inquiry."

As discussed in the balance of this article, the KSR decision has implications for both patent litigation and prosecution.

What Impact Will the KSR Decision Have on Litigation?

Defendants accused of patent infringement may have an easier task in arguing that a patent’s claim is invalid for obviousness. The Court stated that it "nevertheless [thought] it appropriate to note that the rationale underlying the presumption—that the PTO, in its expertise, has approved the claim—seems much diminished here." This will be particularly true for combination inventions where the invention is a relatively minor incremental improvement. Following the KSR decision it will no longer be necessary for the defendant to show that there was a specific suggestion to combine the elements of the prior art within the prior art cited.

The KSR decision endorses the use of "common sense," which may result in an increased emphasis at trial on the use of expert opinions, particularly where the expert is both educationally qualified and knowledgeable about the state of the specific art at the time the patent was applied for and issued. There also may be fewer successful claims by the so-called patent trolls, since their patents often involve small incremental changes in the prior art and the high hurdle to invalidity often coerces settlement on economic grounds.

Further, in those situations where a company has obtained a validity opinion stating that there were no obviousness issues, the company may want to consider revisiting the breadth of the opinion and have it updated based on the broader application voiced in the KSR decision. This is particularly important for patents claiming combination products.

In the first post-KSR jury verdict, Pillsbury trial attorneys, led by William P. Atkins, overcame an opponent’s attempts to invalidate two patents that were being asserted by Pillsbury's client. Fellowes, Inc. v. Michilin Prosperity Ltd. and Intek America Inc., Civ. No. 2:06cv289 (E.D. Va.). Thus, two patents asserted to be infringed were held valid, due in no small part to well-documented conception and reduction to practice events by the inventors, combined with solid objective evidence of secondary considerations. Thus, it is still possible in the post-KSR environment to withstand charges that an asserted patent is obvious, but it will likely take extra effort in presenting the invention story and the other Graham factors.

What are the Implications of the KSR Decision on Generic Drug Makers?

A generic drug maker need only submit an Abbreviated New Drug Application ("ANDA") that relies upon FDA approval of the pioneer/brand name drug to demonstrate safety and effectiveness. Because each New Drug Application ("NDA") must include information about patents that are applicable to the drug product, these patents are listed in the Approved Drug Products with Therapeutic Equivalence Evaluations (The Orange Book). The ANDA filed by the generic drug maker must include one of four statutory certifications for each of the patents in the pioneer drug's NDA: 1) that no patent is listed for the pioneer drug; 2) that such patent has expired; 3) the date on which the patent will expire; or 4) that such patent is invalid or not infringed. These certifications are referred to as "paragraph I" through "paragraph IV" certifications, respectively.

The KSR decision will not change the generic drug maker’s approach in attacking patents under paragraph IV, but it may make it easier for the generic drug maker to establish the invalidity of those patents.

What Should Patentees Consider When Prosecuting a Patent Application?

The Supreme Court said that "as progress beginning from higher levels of achievement is expected in the normal course, the results of ordinary innovation are not the subject of exclusive rights under the patent laws. Were it otherwise, patents might stifle, rather than promote, the progress of useful arts." (emphasis added). Does this mean that only "extraordinary innovation" is patentable?

The Court’s flexible approach to the TSM test should be applied during prosecution. The Court stated that it is "important to identify a reason that would have prompted a person of ordinary skill in the relevant field to combine the [prior art] elements" in the manner claimed. In response, the Deputy Commissioner of Patent Operations sent a memo to Examiners reminding them to continue to look for specific reasons why prior art would be combined before rejecting patent applications for obviousness. Consequently, there may be more explicit PTO rejections based on §103 by the Examiner. Patents may become more difficult to obtain.

Although the KSR decision will have a more significant effect on some technology areas more than others, regardless of the technology, it will likely make it easier for an Examiner to demonstrate an apparent or "common sense" reason to combine prior art references and thus reject the application. But even in these circumstances, the Court made it clear that the Examiner must be explicit and did not weaken the requirement that, when combined, the prior art reference must teach or suggest all of the limitations of the claim.

System and apparatus claims in the engineering arts may face greater difficulty in rebutting obviousness rejections in light of the KSR decision. Other patents that may also experience an increased uphill battle are those in the area of business methods, which apply established techniques used in one economic sector to another. This increased level of uncertainty is in large part due to the fact that these inventions often combine known components that have a limited number of functions. In light of this, it will be important to support the non-obviousness of such inventions, for example, through unpredictable results relating to the invention and evidence in the cited references which teach against the proposed combination.

The KSR decision likely will have a less significant effect on patent prosecution in the chemical and biotechnology arts, since these areas are already considered to be inherently unpredictable. Patent prosecution in those disciplines frequently includes evidence of surprising and unexpected results to rebut obviousness. However, even with the chemical and biotechnology arts, certain inventions may be more likely to have problems during prosecution. For example, diagnostic claims where there is a known correlation between a disease and a marker or other characteristic may now be more difficult to obtain. Likewise, obtaining claims to new drug formulations, such as where a new route of administration is developed, may be more difficult.

When prosecuting a patent application, the following suggestions are worth discussing with patent counsel:

• Consider telling more of a story in the patent application, rather than waiting to tell the story during prosecution.

• With respect to high technology patent applications, claim the invention using more functional language.

• Avoid arguing lack of motivation to combine references cited in an obviousness rejection.

• Closely monitor statements across families of patents to be consistent.

• Make it standard patent practice to conduct prior art searches before filing the patent application, i.e., conduct a pre-filing investigation.

• Consider the implications of using Declarations across a family of patent applications. For example, provide evidence of surprising or unexpected results in the patent application, rather than waiting to submit such support of non-obviousness in a Declaration during prosecution.

Where patents are issued, a patentee may want to consider a re-examination procedure to address additional prior art obviousness issues. This is especially true if during prosecution it was argued that there was a lack of motivation to combine the cited prior art references.

In light of the KSR decision, there may be an increase in the number of third-party requests for re-examination. A party need only present "a substantial new issue of patentability" to be considered by the United States Patent and Trademark Office, i.e., the party must present a reason not previously considered as to why one skilled in the art would have combined prior art references. "The existence of a substantial new question of patentability is not precluded by the fact that a patent or a printed publication was previously cited by or to the Office or considered by the Office."² Thus, the KSR decision may have made the requirement of presenting "a substantial new issue of patentability" easier to meet.

In the wake of the KSR decision, patentees may want to reevaluate their approach, not only in formulating their obviousness arguments to an obviousness rejection, but the content of the patent applications as well.

Because the KSR decision applies broadly to all types of patents, the implications of this decision will vary with the technology. The Intellectual Property Group at Pillsbury Winthrop Shaw Pittman is closely monitoring developments in this area, such as how future litigation and the Patent Office apply the KSR decision, and we would be pleased to consult on any additional questions our clients may have.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.