In the almost four years since the Supreme Court added to its jurisprudence around patentability in Alice Corp v CLS Bank, the Court of Appeals for the Federal Circuit (CAFC) has been steadily filling in the blanks on what exactly constitutes patent eligible subject matter - particularly when it comes to computer-implemented inventions.
The court has tinkered less with the actual process of determining whether an invention is patentable, but in a couple of recent decisions — Stephen E. Berkheimer v HP Inc and then Aatrix Software v Green Shades Software — it has thrown that process into question in a way that looks set to benefit patent owners.
Just how significant might this shift be? Well, Stanford Law School’s Professor Mark Lemley immediately took to Twitter to label the decision in Berkheimer a “blockbuster”. That’s because the three-judge panel in the case ruled that patent eligibility should not simply be viewed as a legal question. “Whether a claim recites patent eligible subject matter is a question of law which may contain disputes over underlying facts,” Judge Moore wrote in the opinion (she also wrote the majority opinion in Aatrix).
That’s significant because it means that district courts may increasingly be forced to consider patentability at trial and not at an earlier stage in summary judgment. In recent years, so-called Alice motions have handed defendants a particularly effective means of knocking out a patent that has been asserted against them. Critics contend that they have become a means for district court judges to clear their dockets of patent disputes and have become representative of how the US system has swung against IP owners.
If those motions become much harder to bring then, theoretically, more patent disputes could get to the courtroom floor; or defendants might have more incentive to settle and agree to take a licence rather than rely on a lengthy and expensive trial.
According to Lemley, it might also mean that Alice loses some of its edge. “If this approach becomes widespread it will be impossible to resolve patentable subject matter before trial, and Alice will become irrelevant as a practical matter,” he says. With that in mind here are some key takeaways from the CAFC’s recent decisions:
A split court?
If you were looking for a clear sign that there is a split brewing on the Federal Circuit over the Berkheimer decision, then Judge Reyna was quick to provide one in his dissent in Aatrix Software v Green Shades Software, a decision handed down in the middle of last week.
“I respectfully disagree with the majority’s broad statements on the role of factual evidence in a §101 inquiry,” Reyna wrote. “Our precedent is clear that the §101 inquiry is a legal question. In a manner contrary to that standard, the majority opinion attempts to shoehorn a significant factual component into the Alice §101 analysis.”
The question now is whether the role of factual evidence in a 101 inquiry will be heard by an en banc Federal Circuit. That will depend on how many of Reyna’s colleagues agree with him; but if his Aatrix dissent is any guide then there are some strong feelings on the court about this one. That makes an en banc hearing more likely, which means that CAFC observers will be left counting votes to determine which way the court’s judges might go. “Ideally, en banc treatment would be preferable, but panel resolution also creates precedent binding later panels and trial judges as long as the holding is clear,” comments former CAFC Chief Judge Paul Michel.
Should the court appear split on the matter, as it was in Alice, then that raises the spectre of the Supreme Court weighing in. In general, SCOTUS likes deference to be shown to district courts, which could mean that the nine justices view any attempt to tinker with how lower courts manage a patent trial with much scepticism.
But America’s highest court also likes consistency in how patent law is applied and might object to questions of eligibility being addressed in summary judgment while issues relating to novelty (section 102 of the US patent statute), obviousness (103) and indefiniteness (112) are tackled at trial.
Either way it is well within the bounds of possibility that a talented appellate lawyer will be able to draft a cert petition that catches the eye of a majority of Supreme Court judges. Whether that’s a good thing probably depends on how you view the court’s original Alice decision, which is seen by some as making patent eligibility far less certain. As Michel points out: “Supreme Court resolution carries risks since they often cloud and complicate the standards, rather than clarify them.”
Greater leverage for patent plaintiffs
If the Berkheimer decision does cut down significantly on the number of early 101 challenges then it should hand patent owners some extra leverage in infringement cases. For several years, as US courts have become increasingly defendant friendly thanks to cases such as Alice, accused infringers have had every incentive to litigate rather than pay for a licence.
Supporters of Alice argue that it has provided a relatively quick and cheap way of getting rid of poor quality patents, and has meant that patent owners have less scope to use the sheer cost of patent litigation in the US as a means of driving a settlement. The climate still remains incredibly tough for patent owners in the US but should the Federal Circuit’s decisions stand then they may get their day in court or a favourable pre-trial settlement.
“Horribly inefficient and lengthy US patent disputes will continue to be horribly inefficient and lengthy,” comments Erich Spangenberg, who as the previous CEO and founder of IPNav is only too familiar with exercising leverage in patent litigation.
Of course, that might have knock-on effects beyond America’s courtrooms. The expense and inefficiency of US court cases have been used by a coalition of businesses led by some of the giants of Silicon Valley to push for more patent legislation. Those calls for reform have been more muted of late, but might grow in volume if more deep-pocketed defendants with sophisticated DC-lobbying arms find themselves snarled in a familiar web of patent disputes. Plus ça change, plus c'est la même chose.
A rush to the PTAB?
Even in the age of the Patent Trial and Appeal Board (PTAB), launching an early validity challenge under 101 has become perhaps the most efficient way for defendants to knock out out a plaintiff’s patent. If, as seems likely, Berkheimer greatly reduces a defendant’s chances of mounting a 101 challenge through summary judgment, leaving questions around patent eligibility to be dealt with in a full trial, then defendants could turn in even greater numbers to the PTAB to launch an inter partes review (IPR).
IPRs have already proved to be wildly popular, particularly with giants of the high-tech world such as Apple and Samsung, and might come to represent the only way of mounting a relatively quick validity challenge.
It’s also conceivable that we’ll see a bump in the number of post-grant reviews (PGR), a still relatively little-used form of review by which petitioners can challenge a patent within nine months of its issuance. The fact that a PGR can be brought on 101 grounds — unlike an IPR where petitioners have to bring challenges based on sections 102 and 103 — may increase their appeal following the Berkheimer decision.