Expert Commentary

Supreme Court Weighs in on Patent Issues

In recent years, the Supreme Court has taken an increasingly active role in the patent world. In fact, the Supreme Court has heard patent cases at a pace unprecedented in recent history. These cases may have a profound impact on patent law, and, as such, a working knowledge of these cases may be useful for corporations facing patent suits.


Intellectual Property
September 2008

The most recent Supreme Court patent case is Quanta Computer, Inc. v. LG Elecs., Inc., 128 S. Ct. 2109 (U.S. 2008). In Quanta, the Court dealt with the issue of patent exhaustion. Patent exhaustion describes the tenet that the sale of a patented item terminates patent rights in that item. In Quanta, the Court specifically addressed whether patent exhaustion is applicable to method patents. The Court held that patent exhaustion indeed applies to method patents. Specifically, the Court stated:

It is true that a patented method may not be sold in the same way as an article or device, but methods nonetheless may be "embodied" in a product, the sale of which exhausts patent rights.

Id. at 2117.

Thus, corporations purchasing products may have a defense to a patent infringement claim in the instance of a seller asserting a method patent, when that method is embodied in the product sold.

In another case, KSR Int'l Co. v. Teleflex Inc., 127 S. Ct. 1727 (U.S. 2007), the Court lessened the standard for finding a patent invalid as obvious. In KSR, the Court rejected the rigid application of the teaching-suggestion-motivation test for obviousness. Under this test, for a patent to be obvious in view of several prior art references, there must have been some teaching, suggestion, or motivation to combine those references; otherwise, an obviousness argument would fail. In rejecting the rigid application of this test, the Supreme Court stated that:

a combination of familiar elements according to known methods is likely to be obvious when it does no more than yield predictable results.

Id. at 1739.

Ultimately, KSR lessens the standard for obviousness and, therefore, may be helpful for corporations asserting obviousness in their defense against patent suits.

In 2007, the Supreme Court decided Microsoft Corp. v. AT&T Corp., 127 S. Ct. 1746 (U.S. 2007). There, the Court focused on an exception to the general rule in U.S. patent law that no infringement occurs when a patented product is made or sold in another country. The exception to this rule occurs in the situation when one supplies from the United States, for combination abroad, the components of a patented invention. In Microsoft, the Court considered whether this exception applied to:

computer software first sent from the United States to a foreign manufacturer on a master disk, or by electronic transmission, then copied by the foreign recipient for installation on computers made and sold abroad.

Id. at 1750.

The Court found that this action was not covered by the exception, and, thus, defendant Microsoft was not liable for infringement occurring by way of software installed on computers abroad. Corporations may note that this decision demonstrates a wariness on the part of the Court to apply U.S. patent law outside of its jurisdiction.

Also in 2007, the Supreme Court decided MedImmune, Inc. v. Genentech, Inc., 127 S. Ct. 764 (U.S. 2007). In that case, the Court addressed the issue of declaratory judgments on patents, i.e., where a possibly accused infringer preemptively seeks to invalidate a patent, seeks a judgment of noninfringement, and/or seeks a judgment of unenforceability. Specifically, the Court considered whether a patent licensee must:

&terminate or be in breach of its license agreement before it can seek a declaratory judgment that the underlying patent is invalid, unenforceable, or not infringed.

Id. at 767.

The Court held that the licensee need not terminate or breach its license agreement before seeking declaratory judgment. Following this decision, it may be useful for corporations to be aware that licensees may rightfully bring declaratory judgment actions based on licensed patents without breaching or terminating the license.

In eBay v. MercExchange, L.L.C., 547 U.S. 388 (U.S. 2006), the Supreme Court handled the issue of injunctions. Before eBay, the:

general rule [was] that courts will issue permanent injunctions against patent infringement absent exceptional circumstances.

Id. at 391.

The Court in eBay rejected this general rule and instead focused on a more stringent four-part test for injunction. That test requires a plaintiff to demonstrate:

  1. that it has suffered an irreparable injury;
  2. that remedies available at law, such as monetary damages, are inadequate to compensate for that injury;
  3. that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and
  4. that the public interest would not be disserved by a permanent injunction.

Id.

Thus, the Court's decision in eBay increased the bar for a plaintiff to be awarded an injunction in a patent suit. That being said, corporations facing patent suits may rest a little easier when faced with the threat of an injunction in a patent suit.

Conclusion

The Supreme Court has recently heard many patent cases, the majority of which have been discussed here. The Court's newfound interest in patent law seems to indicate that the Court is taking a more active role in shaping patent law, and it may continue to do so for years to come. Thus, it is prudent for corporations to familiarize themselves with the new case law to ensure optimal business practices rooted not only in this new law but also in the future of patent law implied by these cases.


Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.

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