Rulings Weaken Patents' Power

In particular, he predicted that generic drug makers would increasingly sue pharmaceutical companies.

Though the court has heard a series of patent disputes during the past two years, the KSR case is unique because it addresses the nature of patents themselves rather than questions about how patent disputes are litigated and resolved.

"KSR had to do with the fundamental issue that affects all patents: whether a patent should be issued in the first place. That touches all patents," said George Best, a patent expert and partner at the Foley & Lardner law firm who did not represent the parties involved in the three cases.

The case could "change the rules of the game from the way they've been for the last 20 years or so," he said, adding that the Supreme Court was not trying to set new law but rather saw its task as reining in the lower appeals court. Other patent lawyers and specialists also called the rulings yesterday the latest rebuke to the federal circuit.

Though the Supreme Court's decision in KSR was focused on the specific case -- "the most detailed technical discussion that's come out of the Supreme Court since the 19th century," according to Thomas -- the justices were intent on sending a broader message.

Microsoft v. AT&T centered on whether Microsoft's liability for infringing AT&T's patent on a speech processor extended to computers manufactured overseas and loaded with Windows software copied abroad. "Our answer is no," Ginsburg wrote.

She said that because the master disk Microsoft sends from the United States is never installed on any of the foreign-made computers, the law prohibiting the exportation of patented "components" has not been violated.

The court's decisions come as an effort to retool the patent system is gaining momentum on Capitol Hill. Members of Congress are grappling with some of the same basic issues about patent rights that the justices faced in these two cases, in particular the question of whether the protection for patents has grown too strong and the penalty for violating them too costly.

As part of the overhaul drive, many high-tech companies have been urging Congress to make clear that U.S. patent law cannot be applied to activities outside the country. But the court's decision seems to settle that.

"Today's Supreme Court decision is important for the entire information technology industry, adding clarity and balance to our patent system," said Brad Smith, Microsoft's general counsel.

Though the Microsoft case turned on a relatively narrow legal issue, Smith said the ruling was crucial for the future because it could affect the country's most innovative industries, in particular the computer and biotechnology sectors.

Stifel Nicolaus, a research firm specializing in technology and telecommunications, said in a report yesterday that a ruling in favor of AT&T could have caused far-reaching harm to other companies.

"The Federal Circuit decision would create massive liability for high-tech firms operating in the United States, including biotech, semiconductor, software and Internet companies that rely on information created in the United States that is transferred abroad by computer code," the research firm wrote.

Patent experts agreed that the ruling also could be relevant to biotech firms, such as those producing genetically engineered cell lines that are sent overseas to be converted into proteins for commercial use.