By Rich Acello, Small Times contributing editor

June 1, 2007 — A case about a relatively simple gas pedal may have an enduring impact on nanotechnologists’ ability to obtain and defend patents crucial to innovation and commercialization — and may potentially serve to drive down the valuations of emerging technology firms.

The Supreme Court recently overturned doctrine developed by the Federal Circuit — the appellate court specializing in patent law — by making it easier to find that an invention is “obvious,” and therefore not worthy of patent protection, in KSR International Co. vs. Teleflex Inc.

“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,” wrote Justice Anthony M. Kennedy wrote on behalf of the unanimous court.

In the case, plaintiff KSR challenged the patent of Teleflex for an adjustable gas pedal that contained a pedal and an electronic sensor. Under prior law, the Federal Circuit had established a standard that asked whether a “teaching, suggestion or motivation” anticipated the invention in determining whether the invention was obvious.

In its decision, the Supreme Court found the Federal Circuit’s analysis “narrow and rigid” and suggested a more expansive and flexible approach that intellectual property attorneys say marks a significant change in patent law.

“It’s a decision with wide-ranging impact,” says Matthew Kreeger, a partner at Morrison Foerster in San Francisco. “The court applied a common sense rationale which focuses on how predictable it was when these elements as combined would work this way. If the ideas were predictable when put together in this way that heightens the case for obviousness.”

In applying for patents, innovators will have to consider more fully whether their invention is truly novel or a mere variation of an existing product. Or as Kennedy put it, “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, [the statute] likely bars its patentability . . . a court must ask if the improvement is more than the predictable use of prior art elements . . . “

The U.S. Patent and Trademark Office (USPTO) will also need to take the Supreme Court’s decision into account in considering future patent applications, says Kreeger. “In the past, it’s been a persuasion argument, back and forth at the patent office,” Kreeger explains. “Now they’ll have to react to the ruling.”

The KSR-Teleflex case is being viewed as part of a tendency to limit the impact of patents and potentially make patents less valuable.

“This case is part of a larger trend in the Supreme Court over the last five to 10 years,” Kreeger says. “The Supreme Court is taking a lot more patent cases and when they do the result is they’re reversing the Federal Circuit in a way that limits patents, makes it harder to get a patent, to defend a patent, and that reduces the value of patents. There’s been a series of cases with that flavor.”

Over that time, the Supreme Court has focused on patent quality over value. “The concern on the Court is that innovation actually being retarded by patents that never should have issued in the first place,” Kreeger adds.

If patents are seen as easier to attack, manufacturers who are sued by patent holders may less motivated to license intellectual property which could reduce valuations placed on emerging technology firms.

Some observers, however, caution against reading too much into the Court’s decision. “When the Supreme Court takes a case like this, there are a lot of amicus briefs (filed by “friends of the court” who are not parties to the suit) and it looks like they are all set to write a sweeping opinion,” says David McGowan, a law professor at the University of San Diego. “In this instance, the Supreme Court is saying courts should be flexible and use common sense in determining whether an invention is obvious.”