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PostPosted: Tue May 01, 2007 8:23 am    Post subject: Good News For Vonage? Reply with quote Back to top

Court douses patent wildfire
Firms laud a ruling making it harder to own an idea

By Jon Van
Tribune staff reporter
Published May 1, 2007

In a unanimous decision that some touted as promoting innovation, the U.S. Supreme Court ruled Monday in a case that involves automobile gas pedals but will have the effect of revising existing patent law.

Experts said the ruling will change the balance of power between patent holders and the rest of the world, making it easier for firms to defend against accusations that they infringed on an existing patent.

The court's decision implied that the system needs correction because it had tilted too far in favor of granting patent protection, in many cases to ideas that were obvious and therefore not worthy of being patented.

"This is an activist court in respect to patent reform," said Lee Eulgen, a Chicago attorney specializing in intellectual property. "The court seems to be displeased with the snail's pace of patent reform chugging along and has taken it upon itself to push the law on key precepts that have been in place a long time."

Making it easier to challenge patents will diminish the value of many existing patents, and that may require corporations to notify shareholders of reduced assets in their intellectual-property holdings. Monday's decision also could be good news for Vonage Holdings Corp., which has been locked in a life-and-death patent infringement struggle with Verizon Communications Inc.

The Monday decision also could apply a brake to patent applications, which have tripled over the past two decades to some 440,000 a year. One certainty lawyers see resulting from the new direction set by the court is an increase in patent litigation in coming years.

The case turned on a decision by the U.S. Court of Appeals upholding a patent for an adjustable gas pedal. KSR International Co. was defending itself in a patent infringement suit brought by Teleflex Inc. The Supreme Court threw out the Teleflex patent claim, which relates to a system that combines sensor technology with a mechanism that automatically sets the height of vehicle control pedals to suit drivers of differing size.

Combining the two concepts was obvious, the justices ruled, and therefore not worthy of protection.

In another case Monday, the court said AT&T Inc. could not collect damages from Microsoft Corp. for patented software sold in other countries.

The two decisions, taken with an opinion earlier this year allowing firms to challenge a patent even as they pay royalties to patent holders, shifts power away from patent holders.

"Granting patent protection to advances that would occur in the ordinary course without real innovation retards progress and may ... deprive prior inventions of their value," Justice Anthony Kennedy wrote in the KSR decision.

Both of Monday's decisions won praise from technology and software companies that are frequent targets of patent infringement lawsuits. "These decisions are a clear victory for promoting patent quality and more equitable damages standards," said Robert Holleyman, chief of the Business Software Alliance trade group.

For Vonage, which is appealing a patent infringement suit brought by Verizon, the high court decision makes it easier to argue that Verizon's patents should be invalidated because they combine well-known concepts of Internet telephony with wireless phone networks.

"Vonage is trying to invalidate Verizon's patents," said John Fuisz, a Washington patent lawyer. "I'm sure the KSR decision will help them."

While the patent system is intended to foster innovation by protecting intellectual property, it can actually stifle innovation if taken too far, experts said. Many technology companies say the proliferation of marginal patents and infringement lawsuits makes it difficult to do business.

"In the past decade, patent judges have been vigorously expanding the scope of U.S. patent law," said Ben Klemens, an economist who wrote "Math You Can't Use," a book about patenting software. "The Supreme Court has made it clear they wish to put an end to that expansion."

In recent years patents have been granted that cover mathematical algorithms and business practices. Simple processes such as using a computer mouse to make an online purchase have been covered by numerous patents.

Some patents are quite broad, Klemens said. One held by Acacia Research Corp. covers virtually all online media. The firm has sought royalty payments from universities that use the Internet for distance learning.

"These patents cover things, like the Internet, that are so obvious no one else bothered to apply for a patent," Klemens said. "They use language in the patent application that obfuscates so much that the patent examiner cannot find prior art."

Patent proliferation has spawned firms called "patent trolls" that use broad patents to threaten businesses with lawsuits if they do not pay royalties, said Cynthia Kernick, a Pittsburgh-based patent attorney.

Monday's Supreme Court decision could discourage enforcement of marginal patents, Kernick said. "Now that it's easier to dispute a patent using obviousness, lawyers may be less willing to represent patent trolls on a contingency basis."

Steve Szczepanski, an intellectual-property attorney based in Chicago with Foley & Lardner, said the high court's anti-patent decision "has introduced a lot of uncertainty. There will be a lot of litigation.

"The court has thrown out the existing standard without replacing it. I'm not sure how the patent office will deal with it."

Because patents granted under the old standard are now vulnerable to challenge, companies with large intellectual-property portfolios will have to reassess the value of their patents, said Alan Thiele, an intellectual-property attorney based in San Antonio.

"Under the Sarbanes-Oxley law any substantial decline in value must be reported," Thiele said. "Companies could be held liable under Sarbanes-Oxley if they fail to look at the record of each patent to determine its vulnerability."


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PostPosted: Tue May 01, 2007 6:05 pm    Post subject: Reply with quote Back to top

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PostPosted: Tue May 01, 2007 7:39 pm    Post subject: Reply with quote Back to top

Vonage seeks retrial of Verizon patent case
Internet phone provider claims Supreme Court decision changes standard
Updated: 4:51 p.m. CT May 1, 2007
WASHINGTON - Internet phone company Vonage Holdings Corp. said on Tuesday it is seeking a retrial of a key patent infringement case against the company in light of a landmark patent ruling by the Supreme Court on Monday.

Vonage said it had filed a motion with a federal appeals court asking it to vacate a March 8 patent infringement verdict against the company and send the case back to a lower court for a new trial.

Vonage said the infringement verdict in favor of Verizon Communications Inc. should be reconsidered because of a Supreme Court ruling on Monday in which the high court loosened a key legal standard making it easier to invalidate some patents on the grounds they are obvious inventions.

Vonage said the lower court should be instructed to review the case taking into account the Supreme Court’s opinion on Monday, which called for “a more expansive and flexible approach that allows for consideration of common sense when assessing whether an invention is ordinary or obvious, and thus ineligible for patent protection.”

“Vonage is confident this ruling should have a positive impact on its case,” the company said in a statement.

Verizon is seeking to bar Vonage from any use of its patented technologies after a jury in March found Vonage had infringed three patents.

On April 6 a federal court in Alexandria, Virginia, barred Vonage from adding new customers while it appeals the patent infringement finding. However, the U.S. Court of Appeals for the Federal Circuit has stayed the injunction while Vonage appeals the case.

Copyright 2007 Reuters Limited. All rights reserved. Republication or redistribution of Reuters content is expressly prohibited without the prior written consent of Reuters.


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