While sitting in designation in the Eastern District of Texas, Judge Bryson of the Federal Circuit ruled in favor of summary judgment for the defendant based on an invalidity defense despite the defendant’s failed inter partesreview (IPR) institution regarding the same patent.

The defendant, Safeway, attempted to institute the IPR after the plaintiff, Kroy, sued Safeway and several other grocery stores for infringing its patented smart rewards card technology. The Patent Trial and Appeal Board (PTAB) declined to institute the IPR, finding that Safeway failed to show that the patent was likely invalid as anticipated and obvious based on the asserted prior art (two patents). Later, at the district court, Safeway relied on two different patents in a motion for summary judgment of invalidity, again arguing that the asserted patent was anticipated and obvious. Safeway also filed a separate motion for summary judgment of invalidity based on ineligible subject matter under section 101, based on the Supreme Court’s decisions in Alice Corp. Pty. Ltd. v. CLS Bank International, 134 S. Ct. 2347 (2014).

In granting the summary judgment based on ineligible subject matter, Judge Bryson reiterated the position of the Supreme Court in Alice that abstract ideas do not become patentable simply by implementing the idea with a computer. Noting that the “core idea” of Kroy’s patent, an incentive-based rewards program, is “plainly an unpatentable abstract idea,” Bryson held that “[u]sing a computer and a computer-based network to provide and operate such [a program] does not render the idea any less abstract or any more patentable.” Bryson rejected Krol’s argument that the patent itself pertains to the mass rewards card system, finding that the patent’s claims do not support this theory.

Remarkably, in a separate opinion, Bryson also granted a separate motion for summary judgment based on anticipation and obviousness. While the Alice invalidity defense is unavailable in IPR proceedings, Safeway had already asserted section 102 and 103 defenses to the PTAB. Under section 315(e)(2), “the petitioner in an inter partes review of a claim in a patent under this chapter that results in a final written decision . . . may not assert . . . in a civil action . . . that the claim is invalid on any ground that the petitioner raised . . . during that inter partes review” (emphasis added). Thus, at first glance section 315 estopped Safeway from asserting anticipation and obviousness again. However, since the PTAB denied institution based on a lack of reasonable likelihood that Safeway would prove invalidity, the review process did not reach the final determination phase and, thus the claim did not “result in a final written decision.” Thus, Safeway was able to present an invalidity defense that was adopted by the trial court.

Kroy IP Holdings, LLC. v. Safeway, Inc., No. 2:12-cv-800-WCB (E.D. Tex.).