Federal Circuit En Banc Denials Confirm Fact Issues Implicated by Patent-Eligibility Inquiry

June 08, 2018

The United States Court of Appeals for the Federal Circuit refused rehearing en banc of two significant decisions regarding patent-eligibility under § 101 (Aatrix and Berkheimer) on May 31, with a majority of active judges on the court affirming that the patent-eligibility inquiry, though a question of law, implicates subsidiary questions of fact. The effect of these cases will be to make it substantially more difficult to invalidate patents as being directed to patent ineligible abstract ideas or natural laws before trial. There was substantial uncertainty as to whether the earlier panel decisions would be adopted by the full Federal Circuit, but that uncertainty has now been partly resolved.

Background – Patent-Eligibility Challenges Under Alice 

In 2014, the Supreme Court established a two-prong test for determining whether a patented invention claims patent-eligible subject matter under 35 U.S.C. § 101: first, courts ask whether the claim is directed to a patent-ineligible concept—i.e., a law of nature, natural phenomenon, or abstract idea; and if it is, they then search the claim for an “inventive concept” that is “sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself.” Alice Corp. v. CLS Bank, Int’l, 134 S. Ct. 2347, 2355 (2014). Under the second prong, if the limitations of the claim only involve “‘well-understood, routine, conventional activit[ies]’ previously known to the industry,” it lacks the required “inventive concept.” Id. at 2359. Since Alice, district courts have been invalidating an unprecedented number of patents on § 101 grounds at the pleadings stage or on summary judgment. 

The two panel decisions, Aatrix Software, Inc. v. Green Shades Software, Inc., 882 F.3d 1121 (Fed. Cir. 2018), and Berkheimer v. HP Inc., 881 F.3d 1360 (Fed. Cir. 2018) significantly raised the bar for accused infringers to invalidate patents on § 101 grounds before trial. In each of those cases, the court held that “[t]he question of whether a claim element or combination of elements is well-understood, routine and conventional to a skilled artisan in the relevant field is a question of fact.” See, e.g., Berkheimer, 881 F.3d at 1368. The decisions were both penned by Judge Moore, with a vigorous dissent from Judge Reyna in the Aatrix case. Aatrix, 882 F.3d at 1130-31. Given the significance of these rulings, practitioners were left wondering whether the Federal Circuit would consider the issue en banc, and if so, what rule the full court would adopt. 

Recent Opinions Signal Majority Agreement

That Patent Eligibility is an Issue of Fact That question has been partially answered by the opinions concurring in the denial of rehearing en banc. In each case, a five-judge plurality endorsed the rule that whether the invention is “well-understood, routine, and conventional to a skilled artisan in the relevant field” is a question of fact. See, e.g., Aatrix Software, Inc. v. Green Shades Software, Inc., No. 2017-1452, 2018 WL 2436813, *1 (Fed. Cir. May 31, 2018). In a separate concurring opinion, Judges Lourie and Newman agreed that “there is plausibility to the panel holding that there are fact issues potentially involved in this case concerning the abstract idea exception to patent eligibility.” See, e.g., id., at *4. The result is that a seven-member majority of the twelve active judges on the Federal Circuit have now concurred that patent eligibility under § 101 is based on questions of fact. 

In an unusual step, Judges Lourie and Newman took the opportunity to lament the “problems and uncertainties” in the current state of patent-eligibility law and to criticize the Supreme Court for “looking for an ‘inventive concept’ at step two [of the Alice test], thereby bringing aspects of §§ 102 and 103 into the eligibility analysis.” Berkheimer v. HP Inc., No. 2017-1437, 2018 WL 2437140, *5 (Fed. Cir. May 31, 2018). They called for help from “a higher authority, perhaps . . . Congress,” to fix those problems by eliminating the two-part test of Alice entirely and allowing novel and nonobvious processes that utilize abstract ideas or natural phenomena, albeit not the abstract ideas and natural phenomena themselves, to be patentable. Id., at *4-5.

Key Takeaways 

The key holding of the earlier Aatrix and Berkheimer decision – that patent-eligibility under § 101 rests on questions of fact – has now been endorsed by a majority of judges on the Federal Circuit. Thus, that rule can be expected to stand unless and until the issue is taken up again by the Supreme Court. 

Accused infringers can still cite numerous Federal Circuit cases affirming the invalidation of patents at the pleadings or summary judgment stage, and the court has stated that it casts no doubt on the propriety of those cases. See, e.g., Berkheimer II, 2018 WL 2437140, at *3. However, the Berkheimer and Aatrix line of decisions give patentees a powerful tool to fight against invalidation of their patents before trial.

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