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The Year in Review: #12. IP Shake-up

After leaving the Federal Circuit to its own devices for nearly 20 years, the Supreme Court undertook a major cleanup of IP law in 2007 with a string of decisions that reshaped the way companies anticipate and defend IP litigation, derive profit from their patent portfolios and protect their intellectual property rights overseas.

In KSR v. Teleflex the Court overturned the Federal Circuit's standard for determining whether a patent on an invention that combines two pre-existing elements should be invalidated for "obviousness." The Federal Circuit had held that such a patent is valid unless there was some express "teaching, suggestion or motivation" for the combination.

The Supreme Court deemed that test too restrictive--instructing the lower courts and patent examiners to take a "common sense" approach to determining whether an invention is obvious.

"[KSR makes it] harder to get a patent issued from the Patent Office and easier to get a patent invalidated in litigation," says George Best, a patent litigator in the Washington, D.C. office of Foley & Lardner. "[I]t puts a significant number of existing patents at risk," he says.

The Court further eroded protections for patent owners in Microsoft v. AT&T, in which it held that the export of a component part used to assemble and sell an infringing product abroad was not actionable in U.S. courts.

But the Court delivered its biggest blow to patent owners in MedImmune v. Genentech. Once again, the Court did away with the Federal Circuit's old standard, which didn't allow a party to file a declaratory judgment action to invalidate a patent unless it had "reasonable apprehension" it would be sued for infringement.

The Supreme Court relaxed that standard, ruling that a licensee has standing to sue to invalidate a licensed patent and thus calling into question the economic viability of many existing licensing arrangements.

"MedImmune will change the way licenses are negotiated and structured," says Mike Dzwonczyk, partner at Sughrue Mion. "The licensors will have to be creative in finding ways to mitigate the losses associated with licensee's new rights."

Adele Nicholas

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