Blog Post

AEIdeas

The Supreme Court’s Alice decision has haunted patent owners and legal practitioners alike since its issuance in 2014, resulting in the liquidation of a slew of patents and pending applications. However, a pair of recent rulings mark a continued softening of the blow.

As I’ve explained before, the Court’s ruling in Alice v. CLS Bank required patent applications to identify something “significantly more” than a mere natural phenomenon, abstract idea, or law of nature to earn patent protection.

Justice Clarence Thomas, writing for a unanimous court, declared that

[T]he mere recitation of a generic computer cannot transform a patent-ineligible abstract idea into a patent-eligible invention. Stating an abstract idea “while adding the words ‘apply it'” is not enough for patent eligibility. . . . Stating an abstract idea while adding the words “apply it with a computer” simply combines those two steps, with the same deficient result.

Initially, patents and applications, especially in software and business methods, entered a bloody abattoir of cancellations and invalidations. Up to 90 percent of court rulings on eligibility disputes — also known as “101 questions,” after the relevant patent statute, 35 USC § 101 — ended badly for patent owners in the early years following the Supreme Court’s decision, and applications were met with an equally chilly welcome at the US Patent and Trademark Office.

That percentage, however, has dipped more recently as the Patent Office issued more refined guidelines for coexistence with Alice, as patent practitioners adapted to the new normal and as the most vulnerable patents were weeded out.

And now, in the wake of two rulings last month by the Court of Appeals for the Federal Circuit, the exclusive court for patent appeals, the noose around the neck of patent owners has loosened further.

First, in Berkheimer v. Hewlett-Packard, the Federal Circuit upended a lower court’s entry of summary judgment — a pre-trial legal ruling — that the patent (for processing and archiving files in a digital asset management system) was ineligible under Alice. Instead, the appellate court held that:

While patent eligibility is ultimately a question of law, the district court erred in concluding there are no underlying factual questions to the § 101 inquiry. Whether something is well-understood, routine, and conventional to a skilled artisan at the time of the patent is a factual determination.

In other words, while judges typically decide eligibility issues early in the case, since they are legal determinations, these rulings may nonetheless be premature because they depend on facts, which can be properly developed and assessed only at trial.

Just a week later, in a similar case, Aatrix v. Green Shades Software, the Federal Circuit again vacated a lower court’s early rejection on eligibility grounds, this time of a patent on “designing, creating, and importing data into a viewable form on a computer so that a user can manipulate the form data and create viewable forms and reports.”

Here, too, the appellate court held that “there are factual allegations in the second amended complaint, which when accepted as true, prevent dismissal.”

Thus, again, while patent eligibility is ultimately a legal issue, to be decided by a judge, it often involves fundamental factual determinations that may have to await a full evaluation of the facts before being resolved.

In practice, assuming these rulings hold up, they will likely spell a measure of relief for patent owners filing infringement suits. Early dismissal motions under Section 101 had amounted to something of a get-out-of-jail-quick card for defendants in patent suits, but as the “quick” part of that card disappears, patent owners have now advanced a few spaces on the game board.