UPDATE 2-US high court loosens patent 'obviousness' test

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By Peter Kaplan

WASHINGTON, April 30 (Reuters) - The U.S. Supreme Court on Monday moved to loosen a key legal standard used in patent cases, potentially making it easier to invalidate some patents on the grounds they are obvious.

In a decision applauded by software and technology companies, the justices unanimously said the courts should be more flexible in the way they interpret the standard governing whether patents are valid or merely "obvious" combinations of previous inventions that should be rejected.

"Granting patent protection to advances that would occur in the ordinary course without real innovation retards progress and may, for patents combining previously known elements, deprive prior inventions of their value or utility," the court said in its opinion.

The case has been keenly watched by industries that rely heavily on patents, such as the pharmaceutical, biotechnology and software industries. Obviousness in the most common ground for the U.S. Patent & Trademark Office to reject a patent.

The patent in dispute, held by Teleflex Inc. (TFX.N), combines two existing inventions: an adjustable pedal and an electronic throttle control. It was ruled obvious and invalid by a federal district court after a lawsuit was filed by Canadian manufacturer KSR International.

But the U.S. Court of Appeals for the Federal Circuit, a court that specializes in patent cases and established the obviousness test, overturned the decision, saying the combination could not be considered obvious under its long-standing test.

The federal circuit's test says a patent combining two previous inventions can only be deemed obvious if some earlier "teaching, suggestion or motivation" existed to make the combination.

KSR appealed to the Supreme Court, arguing that the way the federal circuit court was applying the test contradicted previous Supreme Court rulings and made it too easy to defend an obvious patent.

In its decision on Monday, the Supreme Court said KSR had provided "convincing evidence that (combining the sensor and pedal) was a design step well within the grasp" of engineers who designed throttle pedals.

The high court said the "teaching-suggestion-motivation" test was "helpful" in determining obviousness but "helpful insights however need not become rigid and mandatory formulas."

The case was sent back to the federal circuit appeals court for further proceedings.

The decision was the latest in a series of rulings in which the Supreme Court has sought to curtail the use of patents.

Trade groups representing software and technology industries have argued the patent system gives too much power to patent holders, many of whom do not sell any products but seek to make money by suing profitable companies.