RealNetworks Case Highlights Sea-Change In Patent Law

Discerning what’s obvious and what isn’t when it comes to technology
patents became a bit less gray last week when a federal judge in San
Francisco reversed himself and abruptly dismissed a case brought against
RealNetworks.

Attorneys as well as U.S. patent examiners say Judge William
Schwarzer’s surprising about-face is just the first of what will be many
reverberations felt in courtrooms in the coming months, changing not only
the way patent-infringement cases are adjudicated but also whether or not
patents are granted in the first place.

RealNetworks  is the first high-profile
beneficiary of a new standard established in April when the Supreme Court
issued its ruling in the case of KSR International v. Teleflex Inc. At the
core of the Court’s decision was the notion of “obviousness,” a fundamental
component of patent law.

In its ruling,
the High Court said the current “rigid” application of existing tests for
determining obviousness that courts have used since 1851 should be changed
to allow for a more “expansive and flexible approach” that gives judges more
latitude to apply commonsense to these lawsuits.

This fundamental shift in determining obviousness, experts say, means
technology companies with legitimate patents will have a much easier time
defending themselves from expensive and occasionally frivolous
patent-infringement lawsuits.

And companies that have simply tied together
obvious combinations of existing products — for example adding an eraser to the
tip of pencil — will have a much harder time making their case in court.

“There has been a confidence crisis within the high-tech industry in
regard to some of these patents,” Morgan Reed, executive director of the
Association for Competitive Technology, told internetnews.com.

“Too
many poor-quality patents got through the system, and this decision will give
examiners and judges the opportunity to put these patents to the ‘duh’ test.
If patent examiners pay attention to the Supreme Court, it will restore
confidence in the system and reduce the amount of money companies waste on
frivolous lawsuits.”

In 2003, Friskit Inc., a San Francisco-based patent-licensing company,
filed a suit alleging RealNetworks infringed on patents related to
technology used for organizing and playing video and audio files. While
dismissing the case, Judge Schwarzer cited the Supreme Court’s ruling in KSR
v. Teleflex and concluded that Frisket’s “idea of integrating these
different components was not novel.”

RealNetworks spokesman Matt Graves said the company had no comment on the
decision but would be making a statement Wednesday.

Technology companies of all types are constantly fighting
off
patent-infringement lawsuits of varying degrees of merit. In August,
Apple agreed
to pay Creative Technology $100 million to settle a squabble over patents
for music players.

Analysts and technology executives have argued that patent-infringement
litigation stymies
innovation and compatibility and force companies to waste money that could
be used on research and development on legal fees.

“The KSR decision provides courts more flexibility in determining whether
a patented invention is obvious in view of the prior art,” Peter Sullivan, a
partner at New York City law firm Hughes Hubbard, said in an e-mail.

“This
may result in the invalidation of patents that represent routine variations
in the prior art. Innovation will still be rewarded, however, and the patent
on an innovation may prove even more valuable (now) because it will be less
encumbered by follow-on patents that seek to cover routine improvements
stemming from the innovation.”

But high-tech companies are hoping patent examiners at the United States
Patent and Trademark Office (USPTO) will follow the Supreme Court’s lead and
nix the so-called obvious patent applications long before they ever see the
inside of a courtroom.

Today it takes between 28 and 40 months to process and grant a patent,
according to Howard Locker, a primary patent examiner who has processed an
average of 100 patent applications a year for more than 25 years. In 1995,
the USPTO received more than 288,000 patent applications and granted more
than 114,000 patents. Ten years later, it received 417,000 applications of
which 157,000 were approved.

Locker estimates the USPTO has a backlog of roughly 750,000 applications
waiting to be processed.

“I can tell you that as a result of the KSR decision, we are receiving
new training to determine how we process patent applications,” Locker said.
“Right now it’s an open question as to how it will impact us. But it very
well may mean that it will be a lot tougher for people to get patents.”

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