On February 8, 2018, the Federal Circuit vacated portions of a decision from the U.S. District Court for the Northern District of Illinois in Berkheimer v. HP Inc., No. 2017-1437, 2018 U.S. App. LEXIS 3040 (Fed. Cir. Feb. 8, 2018). The Federal Circuit’s decision is instructive for its determination that granting a motion for summary judgment is improper when the motion presents factual questions stemming from the patent specification. Id. at *22-23.
The patent-at-issue is entitled “System and Method for Archiving and Outputting Documents or Graphical Items.” U.S. Patent No. 7,447,713. The patented system purports to parse files, identify objects and compare the newly identified objects to archived objects to determine if variations exist, thus eliminating “redundant storage of common text and graphical elements, which improves system operating efficiency and reduces storage costs.” Berkheimer, at *2. Following the district court’s Markman hearing, HP moved for summary judgment on the grounds that Claim 10 is invalid as indefinite under 35 U.S.C. § 112 and that Claims 1-7 and 9 are patent-ineligible under 35 U.S.C. § 101. Id. HP’s motion for summary judgment was granted by the district court and an appeal was brought before the Federal Circuit.
The Federal Circuit’s decision began by swiftly disposing of the indefiniteness argument, noting that, under 35 U.S.C. § 112, patent claims “must ‘particularly point out and distinctly claim the subject matter’ regarded as the invention. A lack of definiteness renders the claims invalid.” Id. at *3 (quoting Nautilus, Inc. V. Biosig Instruments, Inc., 134 S. Ct. 2120, 2125 (2014). Focusing on the term “minimal redundancy” contained within Claim 10 and relying on a declaration from HP’s expert, the Court held that the district court’s indefiniteness determination was not clearly erroneous because the term is highly subjective, and that an ordinary skilled artisan would not have known the meaning of that term. Id. at *3-4. The Court then turned to the patent-eligibility inquiry pursuant to 35 U.S.C. § 101.
The Court began its § 101 analysis by setting forth the legal standard for summary judgment motions noting that, under the Federal Rules of Civil Procedure, “[s]ummary judgment is appropriate when ‘there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.'” Berkheimer, at *7 (quoting FED. R. CIV. P. 56(a)). The Court then stated that “[p]atent eligibility under 35 U.S.C. § 101 is ultimately an issue of law . . . .” Id. at *7-8 (quoting Intellectual Ventures I LLC v. Capital One Fin. Corp., 850 F.3d 1332, 1338 (Fed. Cir. 2017)). The Court further stated that the patent eligibility inquiry “may contain underlying issues of fact.” Id. at *7-8 (quoting Mortg. Grader, Inc. v. First Choice Loan Servs. Inc., 811 F.3d 1314, 1325 (Fed. Cir. 2016)).
Applying the now familiar two-step Alice1 test for determining patent eligibility under § 101, the Court stated: “[f]irst, we determine whether the claims at issue are directed to a patent-ineligible concept. If so, we 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. at *10 (internal citation and quotations omitted). Applying step one of Alice, the Court determined that the claims-at-issue are directed to the abstract idea of “parsing and comparing data” and “parsing, comparing, storing and editing data.” Id. at *12. Relying on prior precedent, the Court found these functions to be conventional computer components. See In re TLI Commc’ns LLC Patent Litig., 823 F.3d 607, 613 (Fed. Cir. 2016); Content Extraction & Transmission LLC v. Wells Fargo Bank, Nat’l Ass’n, 776 F.3d 1343, 1347 (Fed Cir 2014). As a final Alice step one question, the Court considered “‘whether the claims are directed to an improvement to computer functionality versus being directed to an abstract idea.'” Berkheimer, at *14 (quoting Visual Memory LLC v. NVIDIA Corp., 867 F.3d 1253, 1258 (Fed. Cir. 2017)). Yet, based upon the lack of evidence in the record and Mr. Berkheimer’s own admission that parsers have existed for years, the Court concluded that the claims are directed to an abstract idea and proceeded to step two of the Alice inquiry. Id. at *14-15.
Under step two of the Alice analysis, the Court considered if the claim elements either individually or as an ordered combination transform the nature of the claims into patent-eligible subject matter because the “claim limitations involve more than performance of well-understood, routine, [and] conventional activities previously known to the industry.” Id. at *15 (internal citation and quotations omitted). Prior to reaching a determination, the Court clearly compared indefiniteness, enablement, and obviousness, all questions of law, to “[t]he § 101 inquiry that may contain underlying factual issues.” Id. at *16 (emphasis in original) (internal citation and quotations omitted). The Court further noted that the Supreme Court has also recognized that in “making the § 101 determination, the inquiry ‘might sometimes overlap’ with other fact-intensive inquiries like novelty under § 102.” Id. at *16 (quoting Mayo Collaborative Servs. v. Prometheus Labs., Inc., 566 U.S. 66, 90 (2012)). With this foundational landscape, the Court concluded that the district court erred in concluding there were no underlying factual questions to the § 101 inquiry. Id. at *23. The Court reasoned that “whether something is well-understood, routine and conventional to a skilled artisan at the time of the patent is a factual determination . . .” that “goes beyond what was simply known in the prior art.” Berkheimer, at *17-18. The Court concluded that, at this stage of the case, “[w]hether claims 4-7 perform well-understood, routine, and conventional activities to a skilled artisan is a genuine issue of material fact making summary judgment inappropriate with respect to these claims.” Id. at *23.
In our view, the Federal Circuit’s Alice step two analysis in Berkheimer represents a notable reminder that district courts should address all factual issues before finding patent-ineligible subject matter pursuant to 35 U.S.C. § 101.