Key Rulings Dilute Power of U.S. Patents

Rhett Pardon
WASHINGTON — The U.S. Supreme Court on Monday in two separate opinions has reversed the Federal Circuit — the U.S. appeals court that has jurisdiction over patent appeals — over several key areas of patent law.

The rulings are important for online adult businesses because so many imperative decision-making processes involve what types of technology to employ and what to avoid.

In one case, the justices ruled that Microsoft Corp., under current federal law, doesn’t owe AT&T Corp. patent royalties on software contained on foreign produced and sold computers.

The other case reversed a lower appeals court test for when a patent is too obvious to warrant protection under federal law. The Federal Circuit had developed a legal test that wrongly gave too much protection to existing patent holders at the expense of new “ordinary” innovations, justices decided.

Obviousness is a key element in defending against allegations of infringement because it allows an accused company the chance to prove a claimed invention is just the obvious next step in existing technology. If obviousness can be proven, the patent is invalid, and the infringement lawsuit is over.

“The ‘obviousness’ case is very good to hear,” online adult observer Brandon Shalton told XBIZ.

Shalton, who has a history of passionate adult industry activism including establishing websites opposing the creation of the recently nixed .XXX top-level domain name and the Acacia patent lawsuit, leads Cydata Services, creator of the T3 traffic analyzation software, and writes a blog for XBIZ.

For years, online adult companies have closely followed the Acacia patent suit against a dozen adult industry companies, as well as numerous cable and satellite TV companies.

The complaints alleged that certain types of programming and activities used by the defendants — including pay-per-view, video-on-demand and digital ad insertion — are infringing on one or more of Acacia’s digital media transmission patents.

Even the adult industry’s leading lady, Jenna Jameson, spoke out against Acacia, accusing the patent holder of “stumbling” in its pursuit of enforcing its DMT patents.

But as the three-year-old case continues to wend its way through U.S. District Court, the judge in the case has pared the defendant’s liability.

“The cable and satellite folks have taken up the brunt of things,” Shalton said. “The last I checked, four out of five patents were taken care of. It’s just a matter of time for the last one to the point where the patent doesn’t apply to anyone.”

In one of Monday’s ruling, the court noted again that fast-paced technological advances are facing off against limits in current patent law.

“If the patent law is to be adjusted better ... the alteration should be made after focused legislative consideration,” Justice Ruth Bader Ginsburg said in majority opinion of the Microsoft-AT&T case.

The court said that U.S. patent laws generally stop at the nation’s borders.

“If AT&T desires to prevent copying abroad, its remedy today lies in obtaining and enforcing foreign patents,” Ginsburg said.

At issue in the case was whether Microsoft violated an AT&T patent on digital speech compression processes when it sent its Windows operating software covering that patent overseas for production and sale outside the U.S.

The legal question at issue is whether software code, which isn’t patentable, is nonetheless a component of a patented device and covered by U.S. patent law that treats domestic and foreign production differently.

The high court’s ruling on patent obviousness involved a dispute over gasoline pedal designs between KSR International Inc. and Teleflex Inc.

The Federal Circuit had ruled that a design by Teleflex for electronically controlled gas pedals qualified for patent protection despite being a combination of existing inventions, allowing the company to assert patent claims on similar inventions.

In taking up the case, the high court looked at whether the Federal Circuit, through changes to a long-standing “obviousness” test in patent law, had wrongly made it harder for a challenger like KSR to avoid patent claims by the holder of a similar patented design.

“The results of ordinary innovation are not the subject of exclusive rights under the patent laws,” Justice Anthony Kennedy wrote. “Were it otherwise patents might stifle rather than promote the progress of useful arts.”

The cases are Microsoft vs. AT&T, No. 05-1056, and KSR International vs. Teleflex Inc., No. 04-1350.