Setting a new course with respect to 35 USC § 101 litigation issues, the US Court of Appeals for the Federal Circuit held that the issue of whether a claim recites patent eligible subject matter—a traditional question of law—may also contain disputes over underlying facts sufficient to prevent a court from granting summary judgment. Berkheimer v. HP Inc., Case No. 17-1437 (Fed. Cir., Feb. 8, 2018) (Moore, J). The underlying factual disputes in Berkheimer involved step two of the Alice analysis (IP Update, Vol. 17, No. 7) as decided by the district court on summary judgment. Here, the Federal Circuit vacated the grant of summary judgment with respect to some of the disputed claims.

Less than a week later, the Federal Circuit again vacated a district court’s grant of a motion to dismiss claims for patent ineligibility based on similar reasoning. Aatrix Software, Inc. v. Green Shades Software, Inc., Case No. 17-1452 (Fed. Cir., Feb. 14, 2018) (Moore, J) (Reyna, J, concurring in part, dissenting in part). In each of these decisions, the Federal Circuit emphasized the factual disputes underlying the § 101 analysis.

Berkheimer

According to the Supreme Court of the United States, the second step in an Alice analysis (whether the claims require an “inventive step”) is satisfied when the claim limitations “involve more than the performance of well-understood, routine, [and] conventional activities previously known to the industry.” To date, the patent eligibility analysis under Alice (both step one and two) has been considered a question of law and has often been decided on the basis of early motions, such as a motion to dismiss for failure to state a claim or summary judgment. The decision in Berkheimer upends that analysis because the Federal Circuit has now explained that whether a claim element or combination of elements is “well-understood, routine and conventional to a skilled artisan in the relevant field” is itself a question of fact. Thus, even though the issue of whether a claim recites patent eligible subject matter remains a question of law, the underlying facts may give rise to disputes that prevent the issue from being decided on summary judgment or early motions practice.

In its analysis, the Federal Circuit looked to the specification of Berkheimer’s patent to determine whether it included anything that could create a factual dispute as to whether the invention described “well-understood, routine and conventional activities.” The Court found that the specification described an inventive feature of storing parsed data “in a purportedly unconventional manner.” Further, the specification noted that the disclosed system “eliminates redundancies, improves system efficiency, [and] reduces storage requirements,” among other things.

To create a factual dispute, however, the purported inventive features of the specification must be “captured in the claims.” The Federal Circuit analyzed the asserted claims to determine whether they captured the recited improvements found in the specification. The Court concluded that the broader claims did not “recite an inventive concept sufficient to transform the abstract idea [parsing, comparing and storing data] into a patent eligible application.” However, some of the narrower claims included limitations directed to the “arguably unconventional inventive concept described in the specification.” Thus, the Court vacated grant of summary judgment with respect to several claims so that the district court could determine whether, under Alice step two, there was a genuine issue of material fact as to whether those claims performed “well-understood, routine and conventional activities,” making summary judgment improper.

The Federal Circuit also addressed the issue of claim indefiniteness with respect to the term “minimal redundancy” in the context of a claimed archive that exhibits minimal redundancy. The Court affirmed the district court’s holding that the term was indefinite because “[t]he specification contains no point of comparison for skilled artisans to determine an objective boundary of ‘minimal’ when the archive includes some redundancies.” According to the Court, neither the claims and specification nor the prosecution history provided an objective boundary or specific examples to inform a skilled artisan what was meant by “minimal redundancy” with reasonable certainty. The Court emphasized that not all terms of degree are indefinite. Rather, it is the lack of any objective boundary found in the intrinsic claim construction materials that renders the term indefinite.

Aatrix Software

In Aatrix Software, the Federal Circuit decided an appeal of the district court’s dismissal under Fed. R. Civ. P. 12(b)(6) concerning claims of two patents the district court deemed invalid as being directed to patent-ineligible subject matter under § 101. The Court found that the district court erred in not allowing Aatrix to amend its complaint (after the motion to dismiss was granted) to provide additional allegations and evidence that Aatrix argued would have precluded a dismissal under § 101 at the Rule 12(b)(6) stage. According to the Federal Circuit, such factual allegations, if accepted as true, would have contradicted the district court’s conclusion that the claimed combination was conventional or routine. For example, the Court found that the allegations in the proposed amended complaint, such as whether the claim term “data file” constitutes an inventive concept, alone or in combination with other elements, would have been sufficient to survive an adverse Alice ruling at the Rule 12(b)(6) stage.

Judge Reyna dissented from the majority with respect to the role of factual evidence in a § 101 inquiry. According to Reyna, shifting the character of the analysis to a predominately factual inquiry risks “open[ing] the door in both steps of the Alice inquiry for the introduction of an inexhaustible array of extrinsic evidence.”

Practice Note: These pro-patentee decisions will likely serve as guideposts for patent owners and patent drafters to strengthen patent specifications and claims, and for patent owners to provide self-serving factual allegations in their complaint, to avoid early dismissals in litigation.

On March 15, 2018, in Intellectual Ventures LLC et al. v. Symantec Corp. et al., Case Nos. 17-1814: -1858 (non-precedential), Judge O’Malley affirmed a summary judgment grant of patent ineligibility under § 101, distinguishing Berkheimer and noting that the district court in Intellectual Ventures “found that IV failed to offer evidence to show that the order of the steps was unconventional. . . . IV also acknowledged at oral argument that it did not offer expert testimony to show the lack of conventionality of its components.” (Slip Op at N.1)

HP has requested en banc review in Berkheimer, so we may not yet have the final word on the possibility of raising a factual dispute to defeat an early Alice-based motion to dismiss or motion for summary judgment. If the holdings and associated reasoning of Berkheimer and Aatrix stand after any further appellate review, practitioners should take note of their likely effects. For patent owners, these decisions provide another argument strategy to keep a case alive against an early motion under Rule 12(b)(6) or summary judgment. If patent owners can point to one or more inventive concepts in the specification and connect them to the elements of the claims, patent owners may be able to provoke enough of a factual dispute regarding Alice step two to prevent a dispositive motion from rendering the claims ineligible. Consequently, defense counsel will need to minimize the effect of any purported improvements over the prior art disclosed in the specification and divorce any such improvements from the language of the claims. For patent drafters, these decisions encourage the recitation of the purported improvements throughout the specification. And as always, practitioners should be mindful of the recited improvements to the underlying technology when drafting claims.