In 1790, Congress enacted the first patent statute and imposed two substantive requirements before a patent could issue: novelty and utility. Administrators of the patent system, however, recognized from the outset that patents ought not be granted for every trivial advance in an art; some more substantial improvement was required In 1851, the Court formally tied this third substantive requirement for patentability to the language of the Constitution by distinguishing minor improvements reflecting "the work of the skilful mechanic" from substantial improvements reflecting "[the work] of the inventor." In 1952, Congress formally incorporated this third requirement, mandating substantial improvements, into section 103 of the patent statute. Yet rather than phrase the requirement in terms of whether the advance constituted an "invention" or the work of an "Inventor," Congress described the necessary advance in terms of whether the claimed subject matter "would have been obvious at the time the invention was made to a person having ordinary skill in the art." Although there was some suggestion to the contrary in both the statutory language and the legislative history, the Court in 1966 held that section 103 "was intended merely as a codification of judicial precedents embracing the Hotchkiss condition" and "was not intended by Congress to change the general level of patentable invention." This action by Congress effectively changed the name for this third substantive requirement for patentability from "invention" to "nonobviousness." The key issue, however, remained the same: How much of an advance is required to support a patent? As patents expand into e-commerce and methods of doing business more generally, both the uncertainty and the risk of unjustified market power that the present approach generates suggest a need to rethink our approach to nonobviousness. If courts fail to enforce the nonobviousness requirement and allow an individual to obtain a patent for simply implementing existing methods of doing business through a computer, even where only trivial technical difficulties are presented, entire emarkets might be handed over to patent holders with no concomitant public benefit. If courts attempt to enforce the nonobviousness requirement, but leave undefined the extent of the advance required to establish nonobviousness, wide variance in the doctrine's application to particular cases will continue. The resulting uncertainty regarding patent enforceability will substantially undermine the patent system's ability to encourage innovation and serve the public interest more generally. In an attempt to define the extent of the advance that should be required, this article reexamines the economic justifications for the nonobviousness requirement and for the patent system more generally. Traditionally, courts and commentators have justified the nonobviousness requirement on the ground that patents are monopoly rights, presumptively undesirable, and so require "drawing a line between the things which are worth to the public the embarrassment of an exclusive patent, and those which are not." Under this traditional perspective, patents, like monopolies more generally, impose' undesirable deadweight losses. To minimize such losses, the traditional view suggests that we should grant patents only to "those inventions which would not be disclosed or devised but for the inducement of a patent." Only for such inventions are the benefits from the patent likely to outweigh the monopoly costs it generates. The nonobviousness requirement plays a central role in this process. By requiring inventions to demonstrate a significant level of technical advance before they may receive a patent, the nonobviousness requirement helps separate those inventions that would likely have been created, developed, and disclosed even in the absence of a patent from those that would not. The requirement thereby tends to ensure that only deserving inventions receive patents. To set the stage for this discussion, Section I begins with a brief review of the current state of nonobviousness and its diminished role under the Federal Circuit.
