In a decision in May, 2002, the U.S. Supreme Court vacated the much-discussed Festo decision of the Court of Appeals for the Federal Circuit but nevertheless still restricted the range of applicability of the so-called "doctrine of equivalents" of patent law. Although the popular press hailed the May decision as one which clarified patent law and which assisted patent holders, the decision in fact has created new uncertainties which are not necessarily favorable to patent holders. Technology managers need to be familiar with the changes in the patent landscape.

The earlier decision of the Federal Circuit had been criticized because of its harshness. If in the course of interacting with the Patent Office during the prosecution of the patent application, the patent applicant narrowed an element of a patent claim by amendment, then the patent holder could not assert patent protection through the so-called doctrine of equivalents at a later time. The Festo case itself gives an example of the doctrine of equivalents. There was a claim to piston device which had a sleeve. In the initial application, the sleeve could be made of anything, but then the patent applicant added an amendment that the sleeve had to be magnetizable. The accused infringer used a sleeve made out of a certain aluminum, which was not magnetizable but which had a number of ferromagnetic impurities, which allowed the sleeve of the accused infringer to capture some of the benefits of the Festo invention. Under the clear, but draconian, rule of the Federal Circuit, the amendment by Festo gave up protection to non-magnetizable sleeves, even those sleeves which had many ferromagnetic impurities and thus worked in much the same way as the Festo sleeve. In spite of this harsh result, many U.S. companies favored this "absolute bar." IBM, Kodak, Ford, Applera, DuPont, Genentech, Applied Materials, Cisco, Micron Technology, and Oracle, all of whom have many patents, preferred the certainty of the "absolute bar" to the uncertainty of litigating patent rights at the margins, whether as plaintiff or, more importantly, as defendant.

In most cases, the new decision of the Supreme Court will lead to the same result as the earlier decision. The Supreme Court created a rebuttable presumption of surrender of equivalent rights which can be overcome only if the patent holder can show 1) equivalents that were unforeseeable at the time of the amendment, 2) the aspects of the invention have only a peripheral or tangential relation to the reason the amendment was submitted or 3) there is some reason suggesting the patent holder could not have described the aspect in question. Results from the initial district court decisions employing the new rule indicate that the patent holder generally fails to overcome the rebuttable presumption and thus obtains the same result as under the earlier rule.

There are strategic implications of the new rule. Although the Festo decision has nothing to do with patent claim interpretation, it is to the patent holder’s advantage to secure a broad patent claim interpretation to avoid facing the rebuttable presumption of surrender of the new rule. The facts of the Festo case illustrate the point. In the case, Festo pursued only a "doctrine of equivalents" theory, and admitted that an aluminum sleeve was not magnetizable. Under the new rule, the better course would have been to have sought a claim interpretation wherein aluminum with many ferromagnets were deemed magnetizable, thereby allowing a literal infringement theory. With the new rule, if the patent holder fails to establish a broad scope as to claim elements which were amended, the patent holder faces an uphill battle, and generally will reach the same result as obtained under the old rule. This heightened importance of claim construction as to existing patents is the most important message of the Festo decision to technology managers.

Although there has been discussion of the clarification created by the new rule, the reality is otherwise. Because the tests to overcome the rebuttable presumption of surrender had no prior existence, the Federal Circuit on September 20, 2002 ordered briefing on whether these tests are questions of law or of fact, and on what factors are encompassed by the tests. Technology managers need to monitor carefully the outcome of this post-May 2002 legal determination, because it will critically determine the practical details of handling an equivalents case involving amended claim elements. For example, the foreseeability test of the IEEE brief pertained to the foreseeability of the effect of the amendment, a legal question, but many district courts have treated the foreseeability test of the Supreme Court as one of foreseeable equivalents, a factual question about which declarations/affidavits would be submitted.

How the question of foreseeability is resolved is critical to technology managers. Should the court determine this to be a factual issue of a foreseeable equivalent, then there is a road map for future copyists. To get around a patent, competitors will identify an amended claim element and create a trivial, foreseeable change to that element, so that there will be neither literal nor equivalent infringement. Intellectual property strategies in this world will differ markedly from those of the past, and one could argue that such a world is not an improvement for patent holders.

Prospectively, as to new patents, one clearly would prefer to avoid amendments. The Festo case itself gives some input. The most important thing for technology managers to do is to ensure that the correct invention gets described, and claimed, in the patent application. In Festo, there was imprecision in describing in the patent application what the invention was. It was about magnetic flux, not about a magnetizable sleeve. Once an invention is properly defined, a prior art search can eliminate the need for amendments created by overlap with the prior art. One does note that in Festo, and in the earlier Hilton Davis case, the problems with equivalents were not really prior art problems, and would not have been eliminated by a better prior art search. As a bare minimum for patents that are intended to be enforced, technology managers must be sure that the proper invention gets out of the laboratory and into the patent application.