Supreme Court’s Alice decision provided good cause to amend invalidity contentions to include a Section 101 defense

Mortgage Grader, Inc. v. First Choice Loan Services Inc., NYLX, Inc., No. 2015-1415 (Fed. Cir. Jan. 20, 2016)

The patentee claimed infringement of two patents directed to systems and methods for assisting borrowers to anonymously shop for loans from different lenders. The alleged infringer’s initial invalidity contentions did not assert that the patent was invalid for including patent-ineligible matter under 35 USC § 101 (Section 101). While the case was pending, the Supreme Court decided Alice, explaining the scope of patent-ineligible subject matter under Section 101. In response to the Alice decision, the alleged infringer asserted in its final invalidity contentions that the patent claimed patent-ineligible subject matter under Section 101 and moved for summary judgment on this defense. The district court granted summary judgment, ruling that the claims were patent-ineligible under Section 101.  

On appeal, the patentee argued that the district court abused its discretion in permitting the alleged infringer to amend its invalidity contentions to include the Section 101 defense. The Federal Circuit held that the district court did not abuse its discretion by allowing the alleged infringer to amend. Amendments to invalidity contentions are permitted for good cause and, generally, good cause requires a showing of diligence. The Supreme Court’s decision in Alice was significant and impacted the rulings on whether a patent claimed patent-eligible subject matter. In this case, the alleged infringer had good cause to amend its invalidity contentions within two months of the Supreme Court’s Alice decision.  

The court then reviewed the two-step framework for determining whether the claims were patent-eligible. In considering the first step, the Federal Circuit agreed with the district court that the asserted “anonymous loan shopping” claims were directed to an abstract idea. In confirming that the claims did not include an “inventive concept” under the second step of the analysis, the court found that the claims only added “generic computer components such as an ‘interface,’ ‘network,’ and ‘database’” and that nothing in the asserted claims “purport[s] to improve the functioning of the computer itself or effect an improvement in any other technology or technical field.” The court further noted that the claims did not solve a problem “unique to the Internet” and were not “adequately tied to ‘a particular machine or apparatus.’” As nothing in the claims was found to add an inventive concept, the district court decision of patent-ineligibility was affirmed.

A copy of the opinion can be found here.