The Supreme Court’s decision ten months ago in Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014) pronounced a test that makes it more likely that patent claims, particularly claims that arguably claim or heavily incorporate “abstract ideas,” will be found invalid under 35 U.S.C. § 101 for claiming patent-ineligible subject matter. In Alice’s wake, observers have not only seen a rise in invalidity determinations under § 101 generally, but also a rise in the number and success rate of district court pre-claim-construction motions filed during the pleadings stage that seek to invalidate patent claims directed to “abstract ideas.” Based on current trends, parties engaged in patent suits involving “abstract idea” claims can expect an increased likelihood of litigating pleadings-stage motions alleging invalidity based on § 101.
Much of the recent shift in district courts’ understanding of patent ineligible subject matter under § 101 can be attributed to their application of the Supreme Court’s Alice decision. Alice articulated a two-part test to determine patent subject matter eligibility. The first part requires the court to “determine whether the claims at issue are directed to a patent-ineligible concept.” Alice, 134 S. Ct. at 2355. Such concepts include laws of nature, natural phenomena, and abstract ideas. If the claims at issue are directed to a patent-ineligible concept, the court must then conduct the second part of the Alice test by searching for “an ‘inventive concept’ — i.e., an element or combination of elements that is sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the ineligible concept itself.” Id. (internal quotations and brackets omitted). In searching for the “inventive concept,” the court is to “consider the elements of each claim both individually and as an ordered combination to determine whether the additional elements transform the nature of the claim into a patent-eligible application.” Id.(internal quotations omitted).
The Supreme Court in Alice determined that the claims at issue were invalid because they (1) were “directed to the abstract idea of intermediated settlement,” and (2) did not amount to significantly more than the abstract idea itself. Alice, 134 S. Ct. at 2357. Over the past ten months since the decision’s publication in June 2014,Alice’s impact has been felt in the increased invalidation of claims directed to “abstract ideas,” including by the district courts. While an increased rate of post-claim-construction determinations of invalidity based on § 101 may not be surprising, of note is the recent spike in pre-claim-construction determinations of invalidity in response to motions at the pleadings stage.
For example, in Priceplay.com, Inc. v. AOL Advertising, Inc., No. 14-92, 2015 WL 1246781 (D. Del. March 18, 2015) (Memorandum Opinion), the district court granted the accused infringer’s 12(b)(6) motion to dismiss, based on a finding that the claims at issue were invalid under § 101. The patents in suit claimed a “business process ... for conducting business transactions over the Internet, allowing buyers an opportunity to reduce the price of a product/service based on the buyer's performance during a Price-Determining-Activity.” Priceplay.com, 2015 WL 1246781, at *1. Following the Alice framework, the district court first found that the claims at issue were directed to the abstract idea of “performance of a sales transaction over the Internet.” Id. at *4. Then, the Priceplay.com court found, inter alia, that the claimed computer functions were “purely conventional” and could not save the otherwise well-known claim elements from invalidity under § 101. Id. at *4-5.
The litigants in Priceplay.com are not alone. Over the past two years, the success rate of motions for judgment on the pleadings and motions to dismiss for failure to state a claim have risen noticeably. In 2013, 45% (five of eleven) of pleadings-stage motions to dismiss based on § 101 were granted and none were partially granted. In 2014, the success rate grew to 54% granted (thirteen of twenty-four) and 12% partially granted (three of twenty-four). As of April, 2015 is continuing the trend, as district courts have granted 56% (fourteen of twenty-five) of the decided pleadings-stage § 101 motions and partially granted another 8% (two of twenty-five).
Not only are district courts more likely to grant pleadings-stage § 101 motions, accused infringers have heard the news and are filing such motions in record numbers. In 2013, district courts decided eleven such motions. In 2014, twenty-four such motions were decided -- five more than were decided from 2008 to 2012 combined. Specifically, in the first half of 2014, before Alice, district courts decided only six pleadings-stage § 101 motions. After Alice, the courts decided eighteen during the remainder of 2014. 2015 has seen this trend continue even further. Indeed, if the current trend persists for the rest of the year, we can expect to see roughly seventy-seven decisions on pleadings-stage § 101 motions in 2015 alone, forty-three of them granted and six partially granted.
Beyond the nationwide numerical trends, the likelihood of success of any given pleadings-stage § 101 motion is dependent upon the jurisdiction in which it is filed. For instance, since Alice, the three district courts that have most often denied such motions are E.D. Tex. (four), C.D. Cal. (two), and M.D. Fla. (two). In contrast, the four district courts that have most often granted (not including partially granted) such motions are D. Del. (six), C.D. Cal. (five), N.D. Cal. (four), and E.D. Va. (four).
In sum, district courts are applying the Alice test to pre-claim-construction motions alleging invalidity under § 101, which has resulted in a rising death toll of patent claims directed to “abstract ideas.” At least for the time being, patentees asserting claims arguably directed towards abstract ideas can expect to defend against pleadings-stage § 101 motions more often. Correspondingly, accused infringers have noticed the rising popularity and success of such motions and are increasingly incorporating them into their litigation strategy.