William Cory Spence, Jason Wejnert, Jason Sanders, Laura Shapiro

As any patent practitioner, whether in patent prosecution, patent licensing or patent litigation, has witnessed over the past several years, patent eligibility under 35 U.S.C. § 101 has undergone a sea change back and forth. Cases have gone from District Court to Federal Circuit to Supreme Court and back again. The USPTO and PTAB has weighed in repeatedly, sometimes taking matters into their own hands, sometimes pleading to the higher authorities and Congress to intervene and provide more clarity. As we close out 2019 and open a new decade, there are several messages and considerations that a patent practitioner must consider as the pendulum swings in patent eligibility jurisprudence.

35 U.S.C. § 101 of the Patent Act states that anyone who invents a new and useful “process, machine, manufacture, or composition of matter” may be entitled to a patent. While one of the main bases for obtaining a patent in the U.S. should be a straightforward proposition, such a straightforward statute governing patent eligibility has generated significant confusion, frustration and uncertainty as of late. Specifically, the patentable subject matter trio of Supreme Court cases, Bilski v. Kappos ¹ , Mayo Collaborative Servs. v. Prometheus Labs, Inc. ² , and Alice Corp. Pty. Ltd. v. CLS Bank Int’l ³ , has made it far harder to prosecute and enforce software and business method patents. These cases have also placed significant limits on patents relative to pharmaceutical methods of treatment. Further, cases following this trio have even threatened mechanical inventions.

Such limitations and general confusion surrounding subject matter that is potentially eligible has generated subsequent problems and profound uncertainty in U.S. patent litigation. After Alice , accused infringers have routinely brought early motions to dismiss against software and business method patents – some of them quite questionable in merit – arguing that they are unpatentable “abstract ideas.” Unfortunately, no concrete definition of “abstract ideas” has been proffered – adding to the uncertainty surrounding § 101 patent eligibility. Although the question of patent eligibility, including whether a specific patent is directed toward an “abstract idea”, is a question of law, the Federal Circuit has announced that certain factual allegations may underly the ultimate decision ⁴ . Moreover, the surrounding confusion (and sometimes arbitrariness) of § 101 patent eligibility case law has made it difficult for attorneys to predict the outcome of a particular case. Patent infringement cases now run the ever-increasing risk of the patent becoming invalidated through incoherent and sometimes contradictory understandings of § 101. As of March 1, 2019, there have been 359 software/technology patents and 37 biotechnology/life sciences patents held ineligible under Alice , compared to 170 software/technology patents and 27 biotechnology/life sciences patents held subject matter eligible pursuant to § 101 ⁵ . In addition, 97 software/technology patents and 15 biotechnology/life sciences patents have been categorized as to be premature in an Alice determination of patent-eligible subject matter ⁶ . Clearly, there is a heightened proclivity to designate patents as ineligible via § 101 post- Alice.

The USPTO has identified the perplexity surrounding § 101 and has been proactive in addressing the concerns. Recently, the USPTO released the 2019 Revised Patent Subject Matter Eligibility Guidance (2019 PEG), specifically outlining a new approach to the categorization of patent eligible material. Aimed at increasing both clarity and uniformity relative to how § 101 is applied during examination, the 2019 PEG introduces a new two-step analysis during step 2A of a patent eligibility examination. Under this analysis, subject matter is eligible for a patent, unless: (1) the claims recite a judicial exception; and (2) the exception is not integrated into a practical application of the exception. The 2019 PEG has offered “groupings” of abstract ideas (including mathematical concepts and mental processes) and has determined that “integration into a practical application” requires the claims to have an additional element or elements to transcend the judicial exception. Notwithstanding the USPTO’s bona fide attempt to provide clarity, the tortuous steps of determining § 101 patent eligibility persist.

Congress may be looking to overturn many of these unfavorable decisions (including the aforementioned Supreme Court cases) and help provide bright line rules regarding § 101 eligibility. Senators Thom Tillis (R-NC) and Chris Coons (D-DE), the Chairman and Ranking Member of the Intellectual Property Subcommittee, recently in 2019, held three days of Congressional hearings on a bill that would revise 35 U.S.C. §§ 100, 101, and 112 to overrule Mayo and Alice by abrogating the judicially created exceptions to patent eligibility ⁷ . The bill is still in its nascent stages and has a long way to go, but it has garnered bipartisan support and a new draft should be proposed after the July 4th recess. In the meantime, some courts are experimenting with other creative ways to address the increasing (some say “over”) use of early summary judgment motions based on patentability under 35 U.S.C. § 101.

Eastern District of Texas

Chief Judge of the United States District Court for the Eastern District of Texas, Rodney Gilstrap, has since this past August 2019 implemented procedural changes surrounding 35 U.S.C. § 101 patent eligibility contentions relative to patent infringement litigation. The Eastern District of Texas, among others, contains local rules requiring that defendants raise invalidity challenges based on both anticipation (§ 102) and obviousness (§ 103) early in the case – effectively streamlining discovery ⁸⁹ . Defendant’s contentions relative to § 101 ineligibility must include, at minimum, the following requirements: (1) a chart sketching out their arguments, including factual basis for those arguments; (2) the chart must also contain the relevant industry at the time of the invention and explain why each element would have been well-understood, routine, or conventional; and (3) corporations must disclose and produce all material they will rely upon ¹⁰ . Except in limited circumstances, the aforementioned contentions will be final, barring subsequent claim construction and the opportunity to raise § 101 ineligibility assertions at the summary judgment phase of the proceeding.

Potentially affected defendants include those that employ the tactic of raising § 101 patent ineligibility assertions at the summary judgment phase (delaying the judicial process and possibly receiving a second chance at claim construction), and those defendants that are teetering on whether to raise a § 101 or not. Although in the nascent stages, Judge Gilstrap’s new rule should certainly be factored in when potential patent infringement plaintiffs are considering which venue to choose. One potential outcome of the new rule: based upon the quasi-use-it-or-lose-it rule, more defendants raise § 101 patent ineligibility assertions early in the case. Simply due to the mere amount of assertions, more patents become invalid via § 101 and the Eastern District of Texas transforms into a defendant-friendly hotbed for invalidating patents. However, an alternative outcome: Judge Gilstrap’s new rule represents a higher threshold for success relative to § 101 patent ineligibility. Defendants subsequently forego utilizing their ineligibility assertions, and instead focus exclusively on their non-infringement position. The Eastern District of Texas becomes very plaintiff-friendly relative to § 101 patent eligibility and represents leverage for the plaintiff to help induce and facilitate settlement.

A recent case from the United Stated District Court for the Eastern District of Texas gives guidance as to where Judge Gilstrap’s rule may be headed: towards plaintiff-friendly territory. In PPS Data, LLC v. Jack Henry & Assocs. , the court denied the defendant’s motion to dismiss the patent infringement suit, determining the patent-in-suit (an electronic check deposit processing) as eligible. The court concluded that three inventive concepts within the patent-in-suit had genuine disputes of material fact, which saved the plaintiff from early dismissal ¹¹ .

Western District of Texas

The Western District of Texas also appears to be following the Eastern District’s lead by taking a plaintiff-friendly approach to patent validation. For example, in a recent case decided this past September, Ubiquitous Connectivity, LP v. City of San Antonio d/b/a CPS Energy , the Western District court found that patent claims must not be oversimplified ¹² . After the plaintiff showcased in its proposed amended complaint three inventive concepts regarding the patent-in-suit (a thermostat control system), the court generously allowed Ubiquitous to file its amended complaint, ruling that once amended, an inventive concept would sufficiently be alleged ¹³ .

The Western District’s patents eligibility suits have evolved over time to become more plaintiff-friendly, specifically to software/tech patents. To illustrate, in an early 2015 decision, Affinity Labs of Texas, LLC v. DirecTV, LLC , the broadcasting content in contention was determined to be directed toward an age-old concept “… accompanied by a generic recitation of a conventional cellular phone.” ¹⁴ Later in 2015, another software/tech patent was not dismissed because the defendants had not established the patent (mobile device data monitoring patent claims) was directed towards an abstract idea ¹⁵ . In a 2018 case, CliniComp International, Inc. v. athenahealth, Inc. the defendant’s motion to dismiss was denied because the plaintiff well-pled an inventive concept within their asserted healthcare management system ¹⁶ . Further, in a January 2019 case, Multimedia Content Mgm’t LLC v. DISH Network Corp. , the Western District determined that the plaintiff’s claim contained an inventive concept regarding their asserted network access patent. Therefore, the defendant’s motion to dismiss was denied ¹⁷ .

Further, Judge Albright has made it clear that he disfavors early Alice motions. His past orders on §101 motions have cited Aatrix ¹⁸ in relation to factual issues that might affect Alice analysis, and MyMail ¹⁹ in cases where claim construction might affect it. Since he intends to delay discovery until after the Markman hearing, Albright said Alice motions “are more properly preserved for summary judgment … both because of claim construction and because of need for discovery.”

Judge Albright has also cited the ruling in Berkheimer v. HP when denying Section 101 motions to dismiss. In Berkheimer , the Federal Circuit vacated a district court decision that granted summary judgment to HP Inc. after finding that a digital file archiving patent inventor Steven Berkheimer accused HP of infringing was invalid for claiming an abstract idea. The Federal Circuit said factual questions about whether the invention contained innovations beyond what was routine and conventional could not be resolved so early in a case.

Additionally, in support, according to RPX Corp., a patent risk management company, quick Alice wins have dwindled after the Federal Circuit’s Berkheimer ruling, with district courts granting only 45% of motions to dismiss on eligibility grounds compared to 70% before the decision. ²⁰

Other District Decisions

Despite more clarity in the Texas districts, other developments in case law have further succeeded to confuse patent-holders on the eligibility of their patents under § 101. Eligibility appears to be a venue-by-venue determination. For example, the Northern District of Illinois has been less clear in its approach to patent eligibility. Before 2018, there were more defendant-friendly judgments made on patent eligibility. In 2016, 9 software/tech patents were deemed ineligible compared to one case where the defendant’s motion to dismiss was denied. In 2017, 5 patents were deemed ineligible while no parents survived a motion to dismiss. In 2018, the Northern District appeared to take a turn as more plaintiff friendly with 3 cases surviving motions to dismiss ²¹ .

As of 2019, there has so far been a tangible split in whether a patent would be considered eligible or ineligible. In the recent decision of Checksum Ventures, LLC v. Dell Inc. , the Court ruled the plaintiff’s patent ineligible and accordingly, granted the defendant’s motion to dismiss. In its ruling, the court stated that it must only take the patent’s purported inventive improvements as true “to the extent they are captured in the claims” ²² . In fact, the Checksum court looked only to the patents-in-suit themselves before favoring the defendant’s motion to dismiss. Although the Checksum court allowed for a future amended complaint from the plaintiff, the analysis of the patent, a data identifier, reads far less friendly as opposed to the Ubiquitous court’s patent analysis. The Checksum court outright stated that the patent was directed toward an abstract idea and had no inventive concept, boiling the claims down to “apparatus, method and program” ²³ of well-known technology.

In another Northern District of Illinois case, FYF-JB, LLC v. Pet Factory, Inc. , the court ruled in favor of the plaintiff regarding patent eligibility. Despite the defendant’s position that the patent-in-suit, a pet tug-toy, was directed to the natural law of force and direction, the court ruled that there was an adaptation to the toy, thereby rejecting defendant’s motion to dismiss. Further, the court reminded the defendant that “claims must be considered as a whole ²⁴ ” when determining § 101 patent eligibility. This allowed for the court to reject the defendant’s stance that the tangible components included in the patent should be ignored ²⁵ .

Federal Circuit Decisions

Despite Berkheimer and Aatrix , the Federal Circuit appears to take a strongly patentee-adverse position, albeit inconsistently. In a recent decision, In re Greenstein , the Federal Circuit court maintained a high standard for patent eligibility by dismissing the plaintiff’s patent as ineligible. The court determined the patent-in-suit, a computer program, did “…no more than the automation of the longstanding fundamental economic concept of personal financial planning. ²⁶ ” Subsequently, the court claimed that whether considered individually or as an ordered combination, the patent-in-suit failed to recite an inventive concept and only recited an abstract idea with instructions to implement it on the computer ²⁷ .

In an additional patentee-adverse case brought earlier this October, American Axle & Manufacturing, Inc. v. Neapco Holdings LLC and Neapco Driveline LCC , the Federal Circuit appeared to expand § 101 patent ineligibility to encompass mechanical patents alongside the typical software and business patents normally accused of being “abstract”. This was due to the court’s understanding of the patent describing a drive shaft. The court stated that the patent claims did not describe a specific method in applying a scientific law. Further, the court thought the patent-in-suit should have included finite element analysis models. Finally, the court found no inventive concept within the patent. The patent was deemed ineligible, and the case was promptly dismissed ²⁸ .

American Axle is an especially concerning case. It could lead to more patent eligibility challenges in technology. Further, it expands the context in which patents in general can be challenged. Prior to American Axle , technology patents, unlike software or business patents, rarely faced challenges. If they were challenged, the patent-in-suit was typically directed towards a medical device or the high-tech field, such as biotech. Now, mechanical inventions face the line of fire. Further, patents-in-suit historically have faced challenges of abstractness. Now, claiming a patent in directed towards a natural law may be a fruitful motion for defendants to raise.

Next Steps

Despite the uncertainty of § 101 and how different venues are responding, there is hope for clarity. The Supreme Court is currently considering several petitions to deal with patent eligibility. Further, Representative Doug Collins (R-GA) has relit the fire for senators to act, calling for patent reform and a new patent eligibility test after American Axle was decided. He will likely join in with Senators Thom Tillis (R-NC) and Chris Coons (D-DE) in the drafting of their patent-reform bill ²⁹ .

Patent holders need to understand that the pendulum has been swinging back and forth on § 101 for the past few decades. The law is in flux and district courts and the Federal Circuit have looked to both the Supreme Court and Congress to demarcate what the rule should be. Until that is decided, patent applicants must continue to prepare specifications and a file history that clearly and amply describes the invention and the technological innovation that the invention provides with as much detail as possible. Also, as always, articulate and describe the invention in claim language that incorporates the technological innovation, to avoid having a court “abstract” away the invention. Attorneys at SpencePC have prosecuted, licensed and litigated patents with § 101 considerations many times in the past and we are available to discuss these issues in detail.

¹ Bilski v. Kappos , 561 U.S. 593 (2007) (holding “machine-or-transformation test is not the sole test for determining patent eligibility” and the method directed toward the economic concept of hedging was “a unpatentable abstract idea”).
² Mayo Collaborative Servs. V. Prometheus Labs., Inc., 566 U.S. 66 (2012) (holding “patents claiming methods for calibrating proper dosage of thiopurine drugs to treat autoimmune diseases were effectively claim[ing] the underlying laws of nature themselves, and thus were invalid”).
³ Alice Corp. Pty. Ltd. v. CLS Band Int’l , 134 S.Ct. 2347 (2014) (holding “the abstract idea of an intermediated settlement was not patentable” and “method claims requiring generic computer implementation failed to transform the abstract idea of intermediates settlement into a patent-eligible invention”).
⁴ See Berkheimer v. HP Inc. , 881 F.3d 1360, 1366 (Fed. Cir. 2018); Ultramerical, Inc. v. Hulu, LLC, 722 F.3d 1335, 1338-39 (Fed. Cir. 2013).
⁵ Chart of Post-Alice Cases , GIBSON DUNN (as of March 1, 2019), https://www.gibsondunn.com/wp-content/uploads/2019/03/Overview-of-Section-101-Patent-Cases-Decided-After-Alice-v-CLS-as-of-03-01-19.pdf
⁶ Id.
⁷ Patent Eligibility in Flux: Tracking the Tillis-Coons Bill , JDSUPRA (Aug. 9, 2019), https://www.jdsupra.com/legalnews/patent-eligibility-in-flux-85215/
⁸ Matthew Bultman, Gilstrap Changes Playing Field With Patent Eligibility Rule, LAW360 (Aug. 14, 2019), https://www.law360.com/articles/1188573/gilstrap-changes-playing-field-with-patent-eligibility-rule
⁹ Id.
¹⁰ Id.
¹¹ PPS Data, LLC v. Jack Henry & Associates , 2019 U.S. Dist. LEXIS 169218, at *2 (E.D. Tex. Sep. 6, 2019)
¹² Ubiquitous Connectivity, LP v. City of San Antonio , 2019 U.S. Dist. LEXIS 165197, at *3 (W.D. Tex. Sep. 26, 2019) (citing Enfish, LLC v. Microsoft Corp. , 822 F.3d 1327, 1334 (Fed. Cir. 2016)).
¹³ Id.
¹⁴ Affinity Labs of Texas, LLC v. Directv, LLC , 109 F. Supp. 3d 916, 935 (W.D. Tex. 2015)
¹⁵ Versata Software, Inc. v. Zoho Corp. , 2015 U.S. Dist. LEXIS 145225, at *2 (W.D. Tex. Oct. 26, 2015)
¹⁶ CliniComp International, Inc. v. Athenahealth, Inc. , 2018 U.S. Dist. LEXIS 224777, at *4 (W.D. Tex. Oct. 3, 2018)
¹⁷ Multimedia Content Management LLC v. Dish Network Corp. , No. 6:18-CV-00207-ADA, 2019 U.S. Dist. LEXIS 198875, at *16 (W.D. Tex. Jan. 10, 2019)
¹⁸ Aatrix Software, Inc. v. Green Shades Software, Inc. , 882 F.3d 1121 (Fed. Cir. 2018) (holding that whether a patent is invalid can involve factual questions about what was routine and conventional at the time of the invention)
¹⁹ MyMail, Ltd. v. ooVoo, LLC , 934 F.3d 1373 (Fed. Cir. 2019).
²⁰ See https://www.law360.com/articles/1230433/is-a-delay-of-alice-motions-bringing-plaintiffs-to-west-texas-, last reviewed Jan. 6, 2020.
²¹ Chart of Post-Alice Cases , GIBSON DUNN (as of March 1, 2019), https://www.gibsondunn.com/wp-content/uploads/2019/03/Overview-of-Section-101-Patent-Cases-Decided-After-Alice-v-CLS-as-of-03-01-19.pdf
²² Checksum Ventures, LLC v. Dell Inc. , 2019 U.S. Dist. LEXIS 168216, at *18 (N.D. Ill. Sep. 30, 2019) (quoting Berkheimer v. HP Inc. , 890 F.3d 1369, 1373 (Mem))
²³ Id.
²⁴ FYF-JB, LLC v. Pet Factory, Inc. , 2019 U.S. Dist. LEXIS 162929, at *8 (N.D. Ill. Sep. 24, 2019) (citing Diamond v. Diehr , 450 U.S. 175, 191 (1981)).
²⁵ Id.
²⁶ In re Greenstein , 2019 U.S. App. LEXIS 26893, at *4 (Fed. Cir. Sep. 6, 2019)
²⁷ Id.
²⁸ American Axle & Manufacturing v. Neapco Holdings LLC , 2019 U.S. App. LEXIS 29655, at *1 (Fed. Cir. Oct. 3, 2019)
²⁹ Ryan Davs, Drive Shaft Ruling May Expand Challenges to Patent Eligibility , LAW360 (Oct. 24, 2019)
http://www.mondaq.com/unitedstates/x/853350/Patent/Rep+Collins+RGa+Calls+for+Patent+Reform+After+American+Axle+Decision

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