Some thoughts about KSR v. Teleflex: The “Marketplace” Test for Obviousness

The following commentary is from Michael Barclay of Wilson Sonsini Goodrich & Rosati. The views expressed in this posting are those of the individual author, and do not necessarily reflect the views of his law firm or any of his clients.

This decision makes it far easier to invalidate patents based on obviousness. Thus, this is the most important patent case of the last 20 years, and perhaps since the passage of the 1952 Patent Act. Virtually every litigated patent case includes an assertion of obviousness – and ones that might not have included that defense up until now are more likely to do so. The PTO examines every patent application for obviousness. KSR v. Teleflex will thus have an enormous impact on both the prosecution and litigation aspects of patent practice.

The Supreme Court continues to take a close look at the Federal Circuit’s jurisprudence and how the Court of Appeals for the Federal Circuit (CAFC) interprets the Patent Act or other relevant statutes. In eBay v. MercExchange, decided in May 2006, the Court unanimously reversed the CAFC’s reading of 35 U.S.C. Section 283, where the CAFC had engrafted a “general rule” requiring permanent injunctions in favor of a victorious patent owner, even though the language of the statute said no such thing. In Medimmune v. Genentech, decided in January 2007, by an 8-1 vote, the Court reversed the CAFC’s reading of Article III’s case or controversy requirement, and of the declaratory judgment statute. In Microsoft v. AT&T, decided the same day as KSR v. Teleflex, the Court reversed the Federal Circuit’s reading of 35 U.S.C. Section 271(f) by a 7-1 vote.

Now in KSR v. Teleflex, the Court has again reversed the CAFC’s reading of a statute, namely 35 U.S.C. Section 103. At the outset, the Court’s unanimous opinion abolished the CAFC’s imposition of a “teaching, suggestion, motivation” (TSM) test for obviousness. Slip Opn. at 11. By way of background, there are two ways to invalidate a patent based on prior art: (1) Anticipation under 35 U.S.C. Section 102, which requires a showing that the identical thing was invented earlier in a single piece of prior art; or (2) obviousness under 35 U.S.C. Section 103:

A patent may not be obtained though the invention is not [anticipated], if the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains.

Before the creation of the Federal Circuit in 1982, Supreme Court cases interpreted Section 103 without adopting the TSM test. For example, Graham v. John Deere Co., 383 U.S. 1, 17 (1966), stated:

Under 103, the scope and content of the prior art are to be determined; differences between the prior art and the claims at issue are to be ascertained; and the level of ordinary skill in the pertinent art resolved. Against this background, the obviousness or nonobviousness of the subject matter is determined. Such secondary considerations as commercial success, long felt but unsolved needs, failure of others, etc., might be utilized . . . . As indicia of obviousness or nonobviousness, these inquiries may have relevancy.

The CAFC adopted the TSM test even though the language of Section 103 lacked any such requirement. Adding the TSM test to the statutory and Graham v. John Deere requirements made it more difficult to invalidate patents as obvious, since either an express or implied “teaching, suggestion, motivation” had to be shown. The CAFC’s main rationale for the TSM test was to avoid invalidating patents as obvious based on a hindsight analysis, and most patent practitioners liked the TSM test both for this reason and because it usually seemed straightforward to apply.

Having abolished the TSM test, the Court had to figure out what to replace TSM with. The replacement test can be summarized as a “marketplace” test – Justice Kennedy’s well-written opinion uses phrases such as “marketplace,” “market forces,” “market demand” and “market pressure” no less than five times in describing replacement formulations and in holding claim 4 of the Teleflex patent obvious as a matter of law. Slip Opn. at 13, 14, 15, 17, 20.

a. For example, in summarizing the Supreme Court’s prior decisions on obviousness, the opinion states (Slip Opn. at 13):

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. For the same reason, if a technique has been used to improve one device, and a person of ordinary skill in the art would 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. Sakraida and Anderson’s-Black Rock are illustrative – a court must ask whether the improvement is more than the predictable use of prior art elements according to their established functions.

b. Immediately thereafter, the opinion elaborates as follows (Slip Opn. at 14; citation omitted):

Often, it will be necessary for a court to look to interrelated teachings of multiple patents; the effects of demands known to the design community or present in the marketplace; and the background knowledge possessed by a person having ordinary skill in the art, all in order to determine whether there was an apparent reason to combine the known elements in the fashion claimed by the patent at issue. To facilitate review, this analysis should be made explicit. As our precedents make clear, however, the analysis need not seek out precise teachings directed to the specific subject matter of the challenged claim, for a court can take account of the inferences and creative steps that a person of ordinary skill in the art would employ.

c. Next, the Court rejected the CAFC’s sporadic requirement of a “teaching, suggestion, motivation” that appears in published literature or patents, and again discussed the “market demand” approach to determining if something is obvious (Slip Opn. at 15):

The obviousness analysis cannot be confined by a formalistic conception of the words teaching, suggestion, and motivation, or by overemphasis on the importance of published articles and the explicit content of issued patents. The diversity of inventive pursuits and of modern technology counsels against limiting the analysis in this way. In many fields it may be that there is little discussion of obvious techniques or combinations, and it often may be the case that market demand, rather than scientific literature, will drive design trends. Granting patent protection to advances that would occur in the ordinary course without real innovation retards progress and may, in the case of patents combining previously known elements, deprive prior inventions of their value or utility.

d. Finally, after noting 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 the elements in the manner claimed,” Slip Opn. at 16, the Court overruled the CAFC’s prohibition against proving obviousness by showing that the combination of elements was “obvious to try” – again, a significant erosion of the CAFC’s jurisprudence. The Court stated (Slip Opn. at 17; citation omitted):

The same constricted analysis led the Court of Appeals to conclude, in error, that a patent claim cannot be proved obvious merely by showing that the combination of elements was “obvious to try.” When there is a design need or market pressure to solve a problem and there are a finite number of identified, predictable solutions, a person of ordinary skill has good reason to pursue the known options within his or her technical grasp. If this leads to the anticipated success, it is likely the product not of innovation but of ordinary skill and common sense. In that instance the fact that a combination was obvious to try might show that it was obvious under §103.

The Court applied its reasoning to conclude that claim 4 of the Teleflex patent was obvious as a matter of law. It noted that there “existed a marketplace that created a strong incentive to convert mechanical pedals to electronic pedals, and the prior art taught a number of methods for achieving this advance.” Slip Opn. at 20. In so doing, the Court did not merely vacate the CAFC’s decision; it reversed the CAFC and ordered reinstatement of the district court’s summary judgment of obviousness. The Court noted that the “conclusory” affidavits of Teleflex’s experts were no bar to summary judgment on the record of this case. Slip Opn. at 23.

Abolishing the TSM test, then, will make it easier to invalidate patents, which is why KSR v. Teleflex is of such importance. As an example, many patent practitioners working in computer or electronics technologies have seen the following type of patent in the last 10 years. Many people filed for patents in the early to mid-1990’s that claimed little or nothing more than (a) a well known, prior art process or technology – such as methods for commercial sales, computer networking, security, or the like – that (b) were performed over the Internet, which the patent applicant assuredly did not invent either. The patent would not be anticipated, because the well known process had not been previously performed over the Internet before it became popular in the mid-1990’s. The patent owner would also argue that the patent was not obvious, since there was no “teaching, suggestion, or motivation” to combine the prior art process with the prior art Internet, again because the Internet was new. While the parties could debate the latter point – an “implied” TSM would seem likely in many cases – this has led to much litigation and licensing demands over the last decade. Under KSR’s “marketplace” test, the market demands of going to the Internet could be evidence of obviousness.

The Supreme Court appears to be concerned with some public pronouncements about patent quality and the number of dubious patents. For example, the rate of issuance of new patents has increased significantly since the CAFC’s TSM rule, far beyond what can be attributed to mere population growth. When U.S. Patent No. 7,000,000 issued in February 2006, the USPTO issued a press release about the event. That press release noted that “It took 75 years to get from patent No.1 to patent 1 million. It has taken less than one tenth of that time [i.e. only 6 years] to go from 6 million to 7 million patents.”
While quantity might not be an indication of lack of quality, the acceleration of the issuance of patents is of some concern.

The level of skill is likely to become very important in future obviousness determinations. Since TSM has been abolished as a doctrine, the level of ordinary skill remains as a factor under the statute and under Graham v. John Deere. If the level of skill is high, many more things will be obvious – a genius will find lots of inventions obvious. If the level of skill is very low, an invention is less likely to be obvious. While the level of skill was not frequently the subject of much debate in patent suits – its importance paled by comparison to the question of whether a TSM existed – level of skill may well be more of a key factor going forward. See, e.g., Slip Opn. at 16-17.

There is an interesting interplay between an enabling disclosure under Section 112 of the Patent Act and obviousness. Among other things, section 112 requires that the patent specification “contain a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same.” Note that the level of skill is relevant to whether the patent is enabling. If the level of skill is low, more detail must be included in the patent disclosure to make it enabling; less detail is required if the level of skill is high. However, as discussed in the previous point, if the level of skill is high, the patent is more likely obvious.

For patents with a skimpy disclosure, an accused infringer may wish to put the patent owner to the dilemma of facing (a) an enablement defense if the level of skill is low, so the skimpy disclosure isn’t sufficiently enabling; or (b) an obviousness defense if the level of skill is high enough to avoid the enablement defense. Patent prosecutors going forward can make litigation counsel’s life easier by putting a meaningful amount of background and detail in the patent application, giving the litigators the flexibility of arguing for an enabling disclosure to someone of a low level of skill, and for a finding of non-obviousness because of that same low level of skill.