> Simply put, the court was wrong. They created a straw-man argument--that knowledge of the underlying principles makes all inventions obvious--and based their conclusion on that rather than the actual argument.
I think you're making a strawman from my limited quote— I apologize if I encouraged that.
The court has a nuanced view of the subject— they start by saying 'well, you can't argue that because its reduceable to natural law it's not patentable' and effectively continue 'so we have to figure out where the boundary is'.
For the latest in the court's views, I recommend today's Mayo v. Prometheus: http://www.supremecourt.gov/opinions/11pdf/10-1150.pdf (which is perhaps interesting for this discussion in light of the fact that they solidly avoided adding any new explicit tests or criteria, but decided against patentability on the basis of the same case law I was quoting).