Supreme Court is Skeptical About the Federal Circuit’s Test for Obviousness in Patent Cases

On November 28, 2006, the Supreme Court heard oral argument in KSR International, Co. v. Teleflex, Inc. The issue on appeal is whether the Federal Circuit’s “suggestion test” for finding a patent invalid based on obviousness is inconsistent with Supreme Court precedent and likely to lead to the over-granting of patents or, instead, is an appropriate test and an important protection against invalidating legitimate patents based on improper use of hindsight. Numerous amicus briefs have been filed, both for and against the test.

First, some history. Since 1952, the patent statute has provided that a patent may not be obtained “if the differences between the subject matter sought to patented and the prior art [e.g. earlier patents] are such that the subject matter as a whole would have been obvious to a person having ordinary skill in the art [i.e. technical area] to which said subject matter pertains.” 35 U.S.C. § 103(a) The Supreme Court first interpreted this provision in 1966 in Graham v. John Deere Co., where it identified four factors to examine for obviousness:

(1) the scope and content of the prior art; (2) the differences between the claimed invention and the prior art; (3) the level of ordinary skill in the art; and (4) any relevant secondary considerations, including commercial success, long felt but unsolved need and failure of others.

Thereafter, the Supreme Court reaffirmed the four factor test in a number of subsequent decisions. In 1982, the Court of Appeals for the Federal Circuit began to hear all patent appeals. It was hoped that this court would make patent jurisprudence more consistent across the country. One of the things the Federal Circuit did was to develop the suggestion test, which required, as stated in KSR, that there be some “‘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 matter claimed.”

Over the years, there has been disagreement regarding the metes and bounds of the suggestion test and, in particular, whether the teaching, suggestion or motivation must be express (rather than merely implied) and whether it must be found in prior art references or, instead, may derive simply from “common sense”. The respective positions taken before the Supreme Court in KSR have reflected these differences. Appellant and its supporting amici characterize the test as demanding and inflexible; in contrast, appellee and its supporting amici characterize the test as flexible and consistent with the Graham v. John Deere four factor test. Indeed, since certiorari was sought, the Federal Circuit in a number of cases, the most recent being Diptar Textilfarben v. C.H. Patrick Co., has argued the latter view. As it explained in Dystar, the suggestion test is a “subsidiary requirement” for the first Graham factor and is designed to implement the Supreme Court’s recognition in Graham of the importance of guarding against impermissible hindsight reasoning. The test, according to Dystar, is not a rigid categorical rule. Rather, “[t]he motivation need not be found in the references sought to be combined, but may be found in any number of sources, including common knowledge, the prior art as a whole, or the nature of the problem itself.” Thus, “there is no requirement that the prior art contain an express suggestion to combine known elements to achieve the claimed invention.”

The net effect is that the suggestion test has become a bit of a “moving target”. The oral argument to the Supreme Court reflected that fact. During argument, at least three Justices professed not to understand what “motivation” in the suggestion test was intended to cover. Justice Scalia, in fact, variously viewed the test as “meaningless”, “misleading” and “a lot of gobbledygook”. Justice Roberts, in a similar vein, called the test “a layer of Federal Circuit jargon the lawyers can then bandy back and forth . . . [that is] worse than meaningless because it complicates the inquiry rather than focusing on the statute.”

Other Justices were not as negative about the test. Justice Kennedy inquired whether “the motive [suggestion] test teaches us something important; it has a valuable place; it’s just not the exclusive test for what’s obvious.” He saw “the problem with the Federal Circuit’s test [as being that] . . . it makes that the exclusive test and precludes obviousness determinations in the absence of satisfaction of that test, which this Court’s precedents are clearly not consistent with.” Indeed, the Deputy Solicitor General, appearing for the United States as amicus curiae, confirmed at oral argument that considering teaching, suggestion and motivation had its place, but it should not be the exclusive test. In a related vein, Justice Breyer suggested returning to the statute and say “the standard here is obvious” and then list additional factors that “can be considered in an appropriate case.”

Some Justices inquired about the concern that a change in the test could have serious practical consequences. Justice Souter asked what petitioner made of the “revolution argument”-- i.e. that to change the test was going to “produce chaos”. Did that mean, he inquired, that there were going “to be 100,000 cases filed tomorrow morning”?

None of the Justices seemed especially impressed with the invention in dispute -- i.e., claim 4 of the patent, which reveals an adjustable pedal apparatus that combines an adjustable gas pedal assembly with an electronic position sensor. Justices Kennedy, Roberts, Scalia and Stevens all seemed to suggest that the claim appeared to be obvious. However, Justice Kennedy also remarked that the fact that it took 10 years to go from the main prior art reference (the Asano reference) to the patented invention suggested that the invention perhaps was not so obvious after all.

One striking fact was that the four factor test articulated by the Supreme Court in Graham v. John Deere was not the subject of questions or discussion by the Justices. Another was that the Court was less than impressed with the recent efforts by the Federal Circuit in Dystar and other recent cases to explain its position on obviousness. Justice Kennedy suggested that those later decisions were “irrelevant” or, at most, entitled to “much less weight”. Justice Roberts, in turn, suggested that the “Federal Circuit’s approach focuses narrowly prior to our grant of certiorari, allegedly more flexibly after, on prior art as opposed to . . . common sense.” Justice Breyer suggested that the Federal Circuit had “quickly modified itself ” while Justice Scalia noted that “after we granted cert in this case after these decades of thinking about it [the Federal Circuit] suddenly decides to polish it up.”

In summary, the Supreme Court hardly seems enamored with the Federal Circuit’s suggestion test. However, the Justices did not, at least based on questioning during oral argument, appear to have firmly in mind a suitable alternative test. And, the Justices seemed to recognize that there were flaws in the appellant’s position.

It may be instructive to review what the Supreme Court has done recently with other patent appeals to predict what will happen in KSR. In 1997 in Warner - Jenkinson Co. v. Hilton Davis Chemical Co., the Supreme Court was faced with a somewhat similar situation regarding the correct way to determine infringement under the “doctrine of equivalents” (i.e. as opposed to “literal infringement,” when all of the claim limitations are found in the allegedly infringing products). There was much debate as to which test to apply. The Federal Circuit had developed a “triple identity” test – i.e., whether there was the same function, way and result as between the claim elements and the allegedly infringing device. Another approach was to compare claims elements and the allegedly infringing device and determine whether there were “insubstantial differences.” The Supreme Court decided that “the particular linguistic framework used is less important than whether the test is probative of the essential inquiry: Does the accused product or process contain elements identical or equivalent to each claimed element of the patented invention?” The inquiry was to be made with “a special vigilance” against allowing the concept of equivalence to introduce imprecision into the patent process.

Here, in a similar fashion, the Supreme Court, as perhaps suggested by Justice Breyer at oral argument, could return to the statute and the word “obvious” and the Graham four factor test, but acknowledge that the suggestion approach could be a helpful tool, especially in supplying “special vigilance” to avoid impermissible hindsight.

It also may be instructive to consider eBay v. MercExchange, decided by the Supreme Court earlier this year. In that case, the issue was what test should be utilized in granting a permanent injunction. The Federal Circuit had been using its own test rather than the four-prong test generally used outside the patent context. Under the Federal Circuit’s test, there appeared to be a stronger presumption of irreparable harm. The Supreme Court unanimously declared that the Federal Circuit should follow the general four factor test rather than its own test. Then, in two separate (and conflicting) concurrences, the Justices opined about issues of concern relating to granting permanent injunctions in patent cases, such as whether a permanent injunction should be granted to a “patent troll” or in situations where the patented item covers only one component of a much larger device.

In similar fashion here, the Supreme Court could reaffirm its commitment to the Graham v. John Deere four factor test and note that the Federal Circuit’s suggestion approach should not be an exclusive test but could be helpful in some cases. And, if no further consensus could be reached, the Justices in separate concurrences would be free to explain their respective concerns about obviousness and the state of the U.S. patent system.