The US Supreme Court this afternoon made two decisions that experts say weaken the value of patents, fueling criticism that technological innovation, particularly in the biotech and pharmaceutical sectors, could be hindered.

In the more important of the two cases, the court made it simpler for companies to challenge patents on the grounds that they cover products that are obvious combinations of existing technologies. Under US law, an invention must be new, useful and not obvious in order to merit a patent. The case involved KSR International and Teleflex.

In the second case, the court curtailed the reach of US patent laws overseas, ruling in favor of Microsoft in its dispute with AT&T over Microsoft’s sale of Windows software outside the US that allegedly infringed AT&T’s patents. The decision will likely reduce damage awards in patent cases by excluding patent infringement overseas from consideration.

The biotech and pharmaceutical industries, meanwhile, were on the losing end of the KSR case. Groups from both industries filed friend of the court briefs in support of the obviousness test that the court ruled was applied too narrowly.

Hans Sauer, associate general counsel at BIO said that a weaker patent regime can make it harder for new biotech companies to attract venture capital or other investment. The first question investors will ask is whether the patent will stand up in court.

He said that biotechs have already been hurt by a decision the court made last year in a case involving eBay and a small company known as MercExchange. In that May 2006 case, the court said that if a company infringed a patent, an injunction barring production of the infringing good should be granted on a case-by-case basis, rather than automatically.

And in January, the court ruled in a dispute between MedImmune and Genentech that a company can challenge the validity of a patent in court, even if it continues to pay fees to license the patent. That could make patent challenges more likely, patent experts said, by enabling companies to seek to have a patent declared invalid without having to take the risk of violating the patent, which can result in triple damages if a company loses its case.

Source: Associated Press[tags]Patents[/tags]