While our current disclosure/inv does not even remotely match and has more than the quoted refs (xyz1/2); is not obvious.
If you're saying that the combination still doesn't include all of the claim limitations, assuming arguendo that the references are properly combined under prevailing US patent law (always good to preserve that argument for later), that's your best argument. However, I'd expect the examiner to just search for the missing element(s) and toss those references in with yet another motivation plucked from his posterior portions. This is particularly common and frustrating in computer-implemented inventions.
Examiner is merely arguing (speculating); what would be the best way to handle such objections
(minimize the chances of delay due to lengthy process of appealing).
Well, the approach above is the best.
Second would be that the combination would not function in a way that infringes the claim. Impossibility, which you mentioned.
Third would be attacking the motivation to combine. Examiner's always snicker when they hear that. They think that KSR has opened the way for a box of random, unconnected parts to form a water-tight obviousness rejection. But don't be discouraged; they're wrong.
One of the things that I see all the time (pretty much without exception) is that the motivation to combine is not even alleged to (i) have been known by those of ordinary skill in the art (ii) at the time the invention was made. The latter is the significant one. Even people arguing against obviousness completely forget to raise that issue. It's not enough that the motive for combination is known by the examiner at the time of examination (one would be motivated to make the combination because completes the obviousness argument and gets me my count).
I always infer Official Notice when there's no source of the motivation other than the examiner's vivid imagination and seasonably challenge it, requesting supporting documentation.
So, failure to allege, in and of itself, proves failure of a prima facie case for obviousness. The rejection should just be withdrawn. However, don't expect that. The examiner can just add "at the time the invention was made" and make the next rejection final. So, you'll have to address more than just the failure to even allege.
You'll have to address the failure to show. I usually point out that the examiner also fails to show any evidence whatsoever that the ordinary artisan would have been so motivated at the time the invention was made. I usually observe that the only source of such a motivation is in Applicant's Specification (with a quote and citation). I don't say "hindsight" (that makes examiners laugh, too), but that's the crux of the argument. The only motivation to combine on record just happens to be the one that the examiner had just read in our application. Without some showing that the motivation didn't predate the application, the obviousness argument has failed to make a prima facie case.
I've been quite vocal (particularly around the time of KSR) that the Office's attempt to rid itself of the TSM test for obviousness was to attempt to rid itself of the only mechanism by which obviousness can be found without having to produce detailed factual findings regarding the level of ordinary skill in the relevant technology/ies. If there is documented teaching, suggestion, or motivation to combine in the manner asserted by the examiner, the level or ordinary skill need only include literacy. Without that, Graham requires detailed findings of fact regarding the level of ordinary skill in the art(s). Yet, I've never ever seen anything remotely approaching that.
cont.