Supreme Rulings on Innovation

The Supreme Court ruled this week on a case that impacts past and future patents while also commenting on the nature of innovation. I’ll get to the innovation part in a second.

Briefly, the Court threw out the previously used test for whether an invention was obvious or not. Most new ideas do not pop out of the air but are combinations of two or more disparate concepts that, when put together, create something new. One of the most critical questions before patent examiners and patent trial judges has been whether this new creation is nonobvious. A patent attorney that I used to work with explained the concept of nonobviousness by holding up a pen and saying that his pen has never been made in the color chartreuse, so such a pen would be new/novel but would also be an obvious modification of currently available pens—there would be nothing nonobvious about it. A chartreuse pen would not elicit a, “Wow, how did you think of that?” response.

In a nutshell, this week’s Supreme Court ruling makes it easier to denote an invention as obvious. One interesting aspect of the ruling for this blog is that the language of the Court ruling speaks to the definition of innovation. Several blogs on innovation, including this one, have attempted to define what innovation is and is not (see the left column of Broken Bulbs, for example). Surprisingly, there is disagreement on the matter, with some people claiming that an invention must be successful in the marketplace in order for it to be innovative. I’ve argued against that definition.

One can look at quotes from the Court’s ruling to infer the judges’ opinion on what defines innovation.

Justice Kennedy wrote,

Granting patent protection to advances that would occur in the ordinary course without real innovation retards progress.

Here he says that innovation is more than just the “ordinary course” of development of something new. Now, how one differentiates an “ordinary course” from an “extraordinary course” is another matter (presumably, one has to rely on the expert opinion of someone knowledgeable within that field of technology).

Interestingly, the court also wrote that ordinary innovation is not entitled to patent protection because it “does no more than yield predictable results.” So, what exactly is ordinary innovation? My best guess is that it is synonymous with the more commonly used term incremental innovation which is differentiated from radical innovation. The former is the common process of improving a product or process through regular R&D development and results in small and predictable improvements. The latter requires creativity and produces unanticipated inventions, resulting in often dramatic changes to product or process performance and often gives the inventing company a significant competitive advantage.

Other sources offered their opinions on innovation in this case. According to the New York Times,

Pharmaceutical and biotechnology industry groups…argued that innovation would suffer if patents became too hard to defend.

This argument was against the Supreme Court’s final decision, which will make it easier to file invalidity claims against issued patents. The biotech industry was worried that if straightforward tests for determining obviousness were eliminated, then innovation programs would be difficult for companies to justify because of the potential for increased uncertainty in issuance and litigation risk. This is counter to many recent arguments that the current state of patents has stifled innovation by creating such a minefield of potential litigation that companies have difficulty doing anything without infringing on weak patents and potentially facing frivolous litigation.

In contradistinction to the biotech group, Microsoft and Cisco filed a brief that was in support of how the Court finally ruled, stating bluntly, “The Federal Circuit’s current test for obviousness hurts innovation” and “has had a stifling effect on true innovation.” Their argument was simple:

Defensive, large scale patenting drains resources away from real innovation: scientists and engineers must spend time working with lawyers and patent agents to file patent applications where their time would be better spent on product development and research.

In their decision on this case that included discussion of obvious innovation, as discussed above, the Supreme Court seems to be aligning the legal assessment of patentability with the concepts of incremental vs radical innovation that have been developed over the past decade. There’s no doubt that the Court accepted the case due to their frustration with the current state of patents (given the unanimous decision, any guesses if the judges are all Blackberry users?), but it’s interesting to see their decision’s collateral contribution to the innovation discussion. I would say that this Supreme Court decision solidifies Innovation as the key business concept of this decade.

I will leave the final words of this post to the following three quotes on innovation from Justice Kennedy in the opinion of the court:

…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 in the art 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.

This is so because inventions in most, if not all, instances rely upon building blocks long since uncovered, and claimed discoveries almost of necessity will be combinations of what, in some sense, is already known.

We build and create by bringing to the tangible and palpable reality around us new works based on instinct, simple logic, ordinary inferences, extraordinary ideas, and sometimes even genius. These advances, once part of our shared knowledge, define a new threshold from which innovation starts once more. And 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.