Analysis
Quick Alice Wins May Be Tougher After Fed. Circ. Ruling
Share us on: By Ryan Davis
Law360 (February 13, 2018, 8:00 PM EST) -- The days of patents regularly being invalidated under Alice early in a case could be over following a Federal Circuit decision that a judge wrongly granted summary judgment that a patent claimed only abstract ideas, attorneys say, and the contentious issue may now go to juries.
The appeals court held Thursday that it was wrong for a judge to rule that a file-archiving patent asserted against HP Inc. was ineligible for patenting under the standard established in the U.S. Supreme Court’s Alice decision because there were underlying factual disputes that could not be resolved on summary judgment.
Since the high court’s 2014 decision that abstract ideas implemented on a computer are patent-ineligible, judges have used Alice to invalidate many patents on summary judgment or motions to dismiss, sometimes only months after a complaint is filed. But the Federal Circuit’s decision has the potential to halt or significantly curtail that practice, attorneys say.
"This ruling could substantially weaken the power to resolve cases early," said Eliot Williams of Baker Botts LLP. "It's an important decision that is certainly going to shift the pendulum back” in favor of patent owners who argue their patents are not invalid under Alice.
The Supreme Court has held that patents are invalid under Section 101 of the Patent Act if they cover abstract ideas or laws of nature and do not transform them into something more than "well understood, routine and conventional activities previously known to the industry."
The Federal Circuit ruled that inventor Steven Berkheimer's patent covered abstract ideas like sorting data. However, it found there was a genuine factual dispute about whether the claimed invention archived documents in a way that was not previously known and that improved computer functionality, which would save it from being found invalid under Alice. Summary judgment of invalidity was thus inappropriate, the court said in remanding the case.
The decision provides a blueprint for how patents owners can persuasively argue that the validity of their patents should not be resolved on a motion to dismiss or for summary judgment: Point to evidence in the claims that the invention improved on standard industry practices.
"Any attorney worth his or her salt can make a genuine issue of material fact as to whether something is well-understood, routine and conventional," said Jacob Sherkow, a professor at New York Law School.
At that point, courts will essentially need expert testimony about what was known in the field at the time of the invention to determine if it was conventional, which would set the stage for a trial.
"In a good chunk of cases, this will get the patent owner out of summary judgment, and there will need to be a bench trial or a jury trial," Sherkow said.
The decision does not bar judges from making patent-eligibility decisions on dispositive motions. It actually found that the judge was correct to find on summary judgment that other claims of Berkheimer's patent were invalid under Section 101 because there were no factual issues that those claims were conventional. The appeals court also noted that “nothing in this decision should be viewed as casting doubt” on prior eligibility decisions reached on summary judgment.
However, the ruling marks the first time the Federal Circuit has held that patent eligibility involves factual questions that could preclude summary judgment, rather than treating it as a legal issue. Attorneys expect patent owners to latch onto the holding, which is akin to how courts analyze whether a patent is invalid as obvious, to defend patents from early Alice motions.
"Judges have said, 'I can consider this as a matter of law, so facts don’t matter.' We've been seeing a lot of claims thrown out on summary judgment," said Michael Borella of McDonnell Boehnen Hulbert & Berghoff LLP. "The Federal Circuit had never really said until now that there are some underlying facts in 101."
The ability of judges to decide Alice motions on summary judgment or motions to dismiss without fact-finding had made it difficult for patent owners to demonstrate that their claimed invention covers something more than what was routine or conventional.
"Up until now, that evidence was almost inadmissible in these cases, so this is a big change," Borella said.
If the patent owner can make the case that there is a factual issue about whether the invention is conventional, "that'll almost always get you out of summary judgment," said Ronald Abramson of Lewis Baach Kaufmann Middlemiss PLLC. "This opens up a big can of worms to avoid summary judgment."
In addition to potentially keeping eligibility issues from being decided early, the decision also adds some complications to the analysis. It is unclear exactly what an accused infringer would have to show to prove that a patent is merely conventional, rendering it invalid under Alice.
The court said there is a difference between being known and being conventional, noting that the "mere fact that something is disclosed in a piece of prior art … does not mean it was well-understood, routine and conventional."
"This is sort of a new principle in the law that I don’t think I was familiar with before," Williams said. "People are going to struggle with it."
If patent-eligibility issues do end up going to juries, something that has rarely, if ever, happened before, that will present a host of new challenges. Given how much trouble even patent experts have in applying the Supreme Court’s Alice test, it’s sure to be a challenge for laypeople.
“That brings up a whole other issue of how to explain Section 101 and the Alice test and what’s abstract to a jury,” Borella said. “Even on the Federal Circuit, different judges are applying Alice in different ways.”
Beyond the courtroom, the decision could also make it harder for examiners to reject patent applications under Alice. It is now common for applications to be rejected on the ground that the claimed invention is an abstract idea that doesn’t go beyond the routine and conventional, without much more explanation from the examiner.
That may now have to stop, and “people will be pushing back hard against 101 rejections by citing this Berkheimer case,” William said.
The patent office could have to retrain examiners to provide factual evidence for their Alice rejections, so "the impact of this case could be pretty significant, not just for litigation, but for prosecution as well,” Borella said.
Since the Federal Circuit's decision is a seeming departure from past panel decisions that have upheld Alice decisions made on summary judgment, HP is likely to ask the court to rehear it en banc. That could allow the court to provide more guidance and ensure Alice is applied consistently.
“This opinion is such a shift in how people have been understanding 101 that further development is necessary,” Williams said. “Whether that’s in this case or another case, I don’t know.”
The last time the Federal Circuit took a patent-eligibility case en banc was Alice, before it reached the Supreme Court. That led to a notoriously fractured ruling with seven opinions and no consensus. The court might thus be reluctant to wade into Section 101 again, but it may have to, attorneys say.
For now, the Berkheimer decision will be embraced as a way to fend off eligibility challenges since “there is broad language in there that is very patent-owner-friendly,” Williams said.
It remains to be seen if other Federal Circuit panels will follow the reasoning of the judges in this case and vacate Alice rulings made on summary judgment, but if the reasoning in this case becomes standard, "it certainly seems like a big win for patent owners," Borella said.
The case is Berkheimer v. HP Inc., case number 17-1437, in the U.S. Court of Appeals for the Federal Circuit.
Quick Alice Wins May Be Tougher After Fed. Circ. Ruling
Share us on: By Ryan Davis
Law360 (February 13, 2018, 8:00 PM EST) -- The days of patents regularly being invalidated under Alice early in a case could be over following a Federal Circuit decision that a judge wrongly granted summary judgment that a patent claimed only abstract ideas, attorneys say, and the contentious issue may now go to juries.
The appeals court held Thursday that it was wrong for a judge to rule that a file-archiving patent asserted against HP Inc. was ineligible for patenting under the standard established in the U.S. Supreme Court’s Alice decision because there were underlying factual disputes that could not be resolved on summary judgment.
Since the high court’s 2014 decision that abstract ideas implemented on a computer are patent-ineligible, judges have used Alice to invalidate many patents on summary judgment or motions to dismiss, sometimes only months after a complaint is filed. But the Federal Circuit’s decision has the potential to halt or significantly curtail that practice, attorneys say.
"This ruling could substantially weaken the power to resolve cases early," said Eliot Williams of Baker Botts LLP. "It's an important decision that is certainly going to shift the pendulum back” in favor of patent owners who argue their patents are not invalid under Alice.
The Supreme Court has held that patents are invalid under Section 101 of the Patent Act if they cover abstract ideas or laws of nature and do not transform them into something more than "well understood, routine and conventional activities previously known to the industry."
The Federal Circuit ruled that inventor Steven Berkheimer's patent covered abstract ideas like sorting data. However, it found there was a genuine factual dispute about whether the claimed invention archived documents in a way that was not previously known and that improved computer functionality, which would save it from being found invalid under Alice. Summary judgment of invalidity was thus inappropriate, the court said in remanding the case.
The decision provides a blueprint for how patents owners can persuasively argue that the validity of their patents should not be resolved on a motion to dismiss or for summary judgment: Point to evidence in the claims that the invention improved on standard industry practices.
"Any attorney worth his or her salt can make a genuine issue of material fact as to whether something is well-understood, routine and conventional," said Jacob Sherkow, a professor at New York Law School.
At that point, courts will essentially need expert testimony about what was known in the field at the time of the invention to determine if it was conventional, which would set the stage for a trial.
"In a good chunk of cases, this will get the patent owner out of summary judgment, and there will need to be a bench trial or a jury trial," Sherkow said.
The decision does not bar judges from making patent-eligibility decisions on dispositive motions. It actually found that the judge was correct to find on summary judgment that other claims of Berkheimer's patent were invalid under Section 101 because there were no factual issues that those claims were conventional. The appeals court also noted that “nothing in this decision should be viewed as casting doubt” on prior eligibility decisions reached on summary judgment.
However, the ruling marks the first time the Federal Circuit has held that patent eligibility involves factual questions that could preclude summary judgment, rather than treating it as a legal issue. Attorneys expect patent owners to latch onto the holding, which is akin to how courts analyze whether a patent is invalid as obvious, to defend patents from early Alice motions.
"Judges have said, 'I can consider this as a matter of law, so facts don’t matter.' We've been seeing a lot of claims thrown out on summary judgment," said Michael Borella of McDonnell Boehnen Hulbert & Berghoff LLP. "The Federal Circuit had never really said until now that there are some underlying facts in 101."
The ability of judges to decide Alice motions on summary judgment or motions to dismiss without fact-finding had made it difficult for patent owners to demonstrate that their claimed invention covers something more than what was routine or conventional.
"Up until now, that evidence was almost inadmissible in these cases, so this is a big change," Borella said.
If the patent owner can make the case that there is a factual issue about whether the invention is conventional, "that'll almost always get you out of summary judgment," said Ronald Abramson of Lewis Baach Kaufmann Middlemiss PLLC. "This opens up a big can of worms to avoid summary judgment."
In addition to potentially keeping eligibility issues from being decided early, the decision also adds some complications to the analysis. It is unclear exactly what an accused infringer would have to show to prove that a patent is merely conventional, rendering it invalid under Alice.
The court said there is a difference between being known and being conventional, noting that the "mere fact that something is disclosed in a piece of prior art … does not mean it was well-understood, routine and conventional."
"This is sort of a new principle in the law that I don’t think I was familiar with before," Williams said. "People are going to struggle with it."
If patent-eligibility issues do end up going to juries, something that has rarely, if ever, happened before, that will present a host of new challenges. Given how much trouble even patent experts have in applying the Supreme Court’s Alice test, it’s sure to be a challenge for laypeople.
“That brings up a whole other issue of how to explain Section 101 and the Alice test and what’s abstract to a jury,” Borella said. “Even on the Federal Circuit, different judges are applying Alice in different ways.”
Beyond the courtroom, the decision could also make it harder for examiners to reject patent applications under Alice. It is now common for applications to be rejected on the ground that the claimed invention is an abstract idea that doesn’t go beyond the routine and conventional, without much more explanation from the examiner.
That may now have to stop, and “people will be pushing back hard against 101 rejections by citing this Berkheimer case,” William said.
The patent office could have to retrain examiners to provide factual evidence for their Alice rejections, so "the impact of this case could be pretty significant, not just for litigation, but for prosecution as well,” Borella said.
Since the Federal Circuit's decision is a seeming departure from past panel decisions that have upheld Alice decisions made on summary judgment, HP is likely to ask the court to rehear it en banc. That could allow the court to provide more guidance and ensure Alice is applied consistently.
“This opinion is such a shift in how people have been understanding 101 that further development is necessary,” Williams said. “Whether that’s in this case or another case, I don’t know.”
The last time the Federal Circuit took a patent-eligibility case en banc was Alice, before it reached the Supreme Court. That led to a notoriously fractured ruling with seven opinions and no consensus. The court might thus be reluctant to wade into Section 101 again, but it may have to, attorneys say.
For now, the Berkheimer decision will be embraced as a way to fend off eligibility challenges since “there is broad language in there that is very patent-owner-friendly,” Williams said.
It remains to be seen if other Federal Circuit panels will follow the reasoning of the judges in this case and vacate Alice rulings made on summary judgment, but if the reasoning in this case becomes standard, "it certainly seems like a big win for patent owners," Borella said.
The case is Berkheimer v. HP Inc., case number 17-1437, in the U.S. Court of Appeals for the Federal Circuit.
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