Will Alice Become the New Markman?
Buried amidst the flurry of recent Federal Circuit subject matter eligibility decisions is a question that could significantly change how Section 101 is applied in patent litigation. Specifically, the issue is whether performing Step 2 of the Mayo/Alice test can require a factual inquiry. If upheld, this interpretation of Alice could make patent litigation much more complicated and expensive. In fact, Section 101 inquiries could become convoluted mini-trials in their own right – similar to how Markman hearings are performed today.
Determining whether a patent covers an ineligible concept requires applying the two-step Mayo/Alicetest formulated by the Supreme Court in Mayo v. Prometheus and Alice Corp. v. CLS Bank. This test consists of two steps: 1) determining whether an invention is directed to a patent-ineligible concept (natural law, natural phenomenon, or abstract idea), and if it is, then 2) determining, after considering the elements of each claim both individually and as an “ordered combination,” whether the additional elements “transform the nature of the claim into a patent eligible application.” Step 2 is satisfied when the claim limitations involve more than performance of “well-understood, routine, [or] conventional activities previously known to the industry” (quoting Berkheimer v. HP, decided February 8, 2018). Previous Section 101 inquiries in patent litigation have conducted this process entirely within the preliminary stages of a trial, either during the pleadings or on a summary judgment motion and have treated the matter entirely as a question of law. Parties challenging the validity of a patent could simply assert that some step was routine or conventional without providing any evidence to support this contention. The CAFC’s recent decisions in Berkheimer v. HP, Aatrix v. Green Shades, and Automated Tracking Solutions v. Coca-Cola are the first to posit that whether an element of a claimed invention is ‘inventive’ is “a question of law which may contain underlying facts” (quoting Berkheimer).
In Berkheimer, the validity of a patent ultimately hinged upon whether a particular feature of the claimed invention could be considered inventive. According to the panel, conventionality is determined by what others skilled in the art were doing at the time the invention was made, i.e., a question of fact. Berkheimer argued that summary judgment was not appropriate because genuine issues of material fact remained regarding whether the claimed invention was well-understood, routine, and conventional, a question for which HP had offered no evidence. The court distinguished between what is known and what is “well-understood, routine and conventional.” Judge Moore writes: “Whether a particular technology is well-understood, routine, and conventional goes beyond what was simply known in the prior art. The mere fact that something is disclosed in a piece of prior art, for example, does not mean it was well-understood, routine, and conventional.”
Aatrix, decided February 14, 2018, doubled down on the Berkheimer decision, holding that a factual inquiry had to be performed to establish whether a step was genuinely unconventional. While the case was remanded during the pleadings phase of Aatrix (as opposed to during a summary judgment as in Berkheimer) the reasoning underlying the decision was essentially the same. During pleadings before the district court, Aatrix attempted to file an amended complaint that it claimed contained information relevant for determining the eligibility of the disputed invention. The district court denied the motion to amend. The CAFC ruled that it was necessary for courts to consider any evidence relevant to determining the eligibility of a patent, and therefore, such amendments had to be permitted. In Aatrix, the district court also ruled that the patents in dispute were invalid before claim construction could be performed. The CAFC disagreed: “If there are claim construction disputes at the 12(b)(6) stage . . . either the court must proceed by adopting the non-moving party’s constructions . . . or the court must resolve the disputes to whatever extent is needed to conduct the § 101 analysis, which may well be less than a full, formal claim construction.”
While this fact vs. law debate may seem esoteric and inconsequential, it has strong implications for how Section 101 inquiries are performed. As Judge Reyna points out in his dissent in Aatrix, “[o]ur precedent is clear that the § 101 inquiry is a legal question.” Making the Section 101 inquiry factual “opens the door in both steps of the Alice inquiry for the introduction of an inexhaustible array of extrinsic evidence, such as prior art, publications, other patents, and expert opinion.” Judge Reyna is also concerned that a patent holder “facing a 12(b)(6) motion may simply amend its complaint to allege extrinsic facts that, once alleged, must be taken as true, regardless of its consistency with the intrinsic record.”
Automated Tracking Solutions (“ATS”), decided February 16, 2018 (non-precedential), offers a counter to Judge Reyna’s complaints and may balance the concerns of patent holders and challengers moving forward. In this case, ATS pursued a strategy similar to that warned against by Judge Reyna in Aatrix, claiming that an element of its inventory control system was unconventional in the hopes of transforming Step 2 of Alice into a factual dispute. However, ATS was unable to point to any individual component or combination of components in its system that was novel, and the specification described the invention as depending upon standard technology. Lacking any supporting evidence, the court concluded that there was no genuine factual dispute and thus no reason to perform a factual inquiry.
Troubling questions continue to emanate from the factual vs legal question debate. Will other panels support this view of Step 2 of Alice? To date, all supporting decisions have been penned by Judge Moore. Additionally, HP has filed a petition for an en banc review. If upheld, it is unclear what level of evidence would be required for a court to conclude that a factual inquiry is necessary. Based on Berkheimer, it appears that if a specification describes a claimed feature as novel and that feature is eligible for consideration as an inventive concept, this may suffice to establish a genuine issue of material fact. It is unclear how such a factual inquiry would proceed, however, or what kind of evidence and how much of it would be required to establish that a claimed element is ‘inventive.’ Regardless of how these inquiries are eventually performed, if upheld, treating Step 2 of Alice as a legal question with factual underpinnings will undoubtedly complicate Section 101 inquiries.
Mike Hinrichsen received his Ph.D. in Molecular Biophysics and Biochemistry at Yale University. His thesis research was focused on using protein design to develop novel methods for imaging proteins and genomic loci in living cells. Prior to attending Yale, Mike graduated with a B. S. in Chemistry from the College of New Jersey.
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