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The Patent-Eligibility Question: Aatrix, Berkheimer and Beyond

Two cases decided by the Federal Circuit in 2018, Aatrix Software, Inc. v. Green Shades Software, Inc., 882 F.3d 1121, en banc rehearing denied, 890 F.3d 1354 and Berkheimer v. HP Inc., 881 F.3d 1360, en banc rehearing denied, 890 F.3d 1369, address what qualifies as patent-eligible subject matter under 35 U.S.C. § 101 and how courts should resolve that question.  These cases expose divisions within the court on § 101 issues, however, and leave uncertainty in their wake.  Many stakeholders, including judges, are therefore calling for guidance from the Supreme Court as to how to resolve such issues or seeking the aid of Congress.

In the denial of rehearing in Berkheimer, Federal Circuit Judge Alan Lourie, joined by Judge Pauline Newman, called on Congress to resolve “what so many in the innovation field consider are § 101 problems.”  890 F.3d 1369, 1374 (Fed. Cir. 2018).  Judges Lourie and Newman expressed concern that “an increasing amount of inventive research is no longer subject to patent,” including such vitally important work as isolating and purifying natural products for possible use in new antibiotics.  Id. at 1375-76.

Senators Chris Coons (D-Del.) and Thom Tillis (R-N.C.) held a closed-door session with business stakeholders and intellectual property organizations last week to discuss the prospect of new patent-eligibility legislation.  And as of this week, briefing of HP’s certiorari petition in Berkheimer is now closed, and the Supreme Court will soon decide whether to take on the question of “whether patent eligibility is a question of law for the court based on the scope of the claims or a question of fact for the jury based on the state of the art at the time of the patent.” 

In view of these developments, this post reviews the current patent-eligibility standard under § 101 and its application in Aatrix and Berkheimer, and looks ahead to the possible judicial or legislative resolution of patent-eligibility questions raised in those cases.

Patent Eligibility under 35 U.S.C. § 101

Under 35 U.S.C. § 101, “any new and useful process, machine, manufacture, or composition of matter” is eligible for a patent.  In assessing the question of patent eligibility under § 101, courts apply a two-step test propounded in Mayo Collaborative Servs. v. Prometheus Labs., Inc., 566 U.S. 66 (2012) and expanded in Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014). At the first step, the court must “determine whether the claims at issue are directed to a patent-ineligible concept [laws of nature, natural phenomena, or abstract ideas].” Alice, 134 S. Ct. at 2355.  If the claims are directed to an ineligible concept, then, the court moves to step two, and “determine[s] whether the additional elements transform the nature of the claim into a patent-eligible application.” Id.

Aatrix and Berkheimer address whether step two of the patent-eligibility inquiry is a question of law or a question of fact and, relatedly, whether factual inquiries prevent resolution of § 101 issues in a motion to dismiss or for summary judgment.

Aatrix

Aatrix involved a patent on a “data processing system for designing, creating, and importing data into, a viewable form viewable by the user of the data processing system.” 882 F.3d at 1123.  The defendant moved to dismiss under Rule 12(b)(6), arguing that all of the claims “in the asserted patents were ineligible under § 101.”  Id. at 1124.  The district court agreed, granted the motion to dismiss, and held every claim ineligible under § 101 because the claims were either “not directed to any tangible embodiment” or were “directed to the abstract idea of collecting, organizing, and performing calculations on data to fill out forms . . . [and] do not supply an inventive concept.”  Id.  Plaintiff “moved to modify and vacate the judgment, for reconsideration, and for leave to amend the complaint.”  Id.  The court denied those motions.

On appeal, the Federal Circuit determined that Aatrix was “not a case where patent ineligibility was properly adjudicated with finality at the Rule 12(b)(6) stage.”  882 F.3d at 1125.  The majority held that the district court had “err[ed] when it denied leave to amend without claim construction and in the face of factual allegations, spelled out in the proposed second amended complaint, that, if accepted as true, establish that the claimed combination contains inventive components and improves the workings of the computer.”  Id.  The court further elaborated on patent eligibility under § 101, explaining that “[w]hile the ultimate determination . . . is a question of law, like many legal questions, there can be subsidiary fact questions which must be resolved en route to the ultimate legal determination.”  882 F.3d at 1128.  At least in Aatrix, the court reasoned, the second step of the Alice/Mayo test “cannot be answered adversely to the patentee based on the sources properly considered on a motion to dismiss, such as the complaint, the patent, and materials subject to judicial notice.”  Id

Judge Reyna, concurring-in-part and dissenting-in-part, cautioned that “the majority opinion attempts to shift the character of the § 101 inquiry from a legal question to a predominately factual inquiry.”  Id. at 1130.

Berkheimer

Berkheimer involved claims to “digitally processing and archiving files in a digital asset management system.”  Berkheimer, 881 F.3d at 1362.  Following a Markman hearing, the district court granted defendants’ motion for summary judgment of patent ineligibility under § 101, finding that the claims were “directed to the abstract idea of using a generic computer to collect, organize, compare, and present data for reconciliation prior to archiving.” Id. at 1366.

On appeal, the Federal Circuit agreed that the claims were directed to an abstract idea.  Id. at 1366-67.  But, in analyzing step two of the Alice/Mayo test (whether additional elements transform the claim into a patent-eligible application), the majority explained 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,” which “must be proven by clear and convincing evidence.”  Id. at 1368.  Thus, the Federal Circuit concluded, “[w]hether a claim recites patent eligible subject matter is a question of law which may contain disputes over underlying facts.”  Id.  Under this reasoning, the Federal Circuit vacated the district court’s grant of summary judgment under § 101 for several of the claims.

Denial of Rehearing en banc in Aatrix and Berkheimer

The Federal Circuit denied rehearing en banc in both Aatrix and Berkheimer.  Given the overlapping issues, the judges affixed the same two concurrences and one dissent to both decisions.

Concurring with the denials of rehearing, Judge Moore, joined by Judges Dyk, O’Malley, Taranto, and Stoll, wrote that “Berkheimer and Aatrix stand for the unremarkable proposition that whether a claim element or combination of elements would have been well-understood, routine, or conventional to a skilled artisan in the relevant field at a particular point in time is a question of fact.” Berkheimer, 890 F.3d at 1370; Aatrix, 890 F.3d at 1355 (same).  Judge Moore reiterated that “[w]hile the ultimate question of patent eligibility is one of law, it is not surprising that it may contain underlying issues of fact.” Berkheimer, 890 F.3d at 1370.  She further explained that Aatrix and Berkheimer should not be viewed as “casting doubt on the propriety of our previous cases resolving patent eligibility on motions to dismiss or summary judgment.”  Id. at 1373.  Rather, these decisions are “narrow: to the extent it is at issue in the case, whether a claim element or combination is well-understood, routine, and conventional is a question of fact.” Id. at 1373.

Judge Lourie, joined by Judge Newman, opined in the same concurrence for both cases that “clarification by higher authority, perhaps by Congress” was needed on the question of patent eligibility.  Id. at 1374; Aatrix, 890 F.3d at 1361 (same).  The concurrence criticized the Supreme Court’s Mayo decision for having “whittled away at the § 101 statute . . . by analyzing abstract ideas and natural phenomena with a two-step test, including looking for an ‘inventive concept’ at step two, thereby bringing aspects of §§ 102 and 103 into the eligibility analysis.”  Berkheimer, 890 F.3d at 1375.  According to Judges Lourie and Newman, “[w]e now are interpreting what began, when it rarely arose, as a simple § 101 analysis, as a complicated multiple-step consideration of inventiveness.”  Id.

Judge Reyna, who had dissented from the original Aatrix decision, dissented from the denial of rehearing en banc for both Aatrix and Berkheimer.  He wrote that “the two cases present questions of exceptional importance that [the Federal Circuit] should address and not avoid.” Berkheimer, 890 F.3d at 1377.  In particular, Judge Reyna contended that “there is no precedent that the § 101 inquiry is a question of fact.”  Id.  He emphasized that the “inventive concept determination [Alice/Mayo step two] is limited to the ‘additional elements’ of the claim to determine whether these additional elements transform the nature of the claim into a patent-eligible application.”  Id.  According to Judge Reyna, the “inventive concept cannot merely be alleged: rather, ‘the claim ha[s] to supply a “new and useful” application of the idea in order to be patent eligible.’” Id. (citing Alice).  Ultimately, in Judge Reyna’s view: “if the inventive concept is not evident in the claims, the court should not be precluded from holding the claims patent ineligible under § 101 at the pleadings stage.  If such claimed improvements are absent from the face of the asserted patent . . . there is no inventive concept sufficient to save an otherwise ineligible patent.” Id. at 1381.

Aatrix and Berkheimer have exposed the divisions among the Federal Circuit judges concerning § 101 patent-eligibility issues.  Indeed, Judge Plager now too has gone “on record as joining [his] colleagues who have recently expressed similar views about the current state of our patent eligibility jurisprudence.”  Interval Licensing LLC v. AOL, Inc., 896 F.3d 1335, 1353 (Fed. Cir. 2018) (concurrence-in-part and dissent-in-part). For his part, Judge Plager observed that “[t]here is almost universal criticism among commentators and academicians that the ‘abstract idea’ idea has created havoc in the patent law.” Id. at 1353-54.  He too calls on either the Supreme Court or Congress to intervene.  Id. at 1355.  “In the interim,” Judge Plager suggests, “a district court in an appropriate case might choose to exercise control over its docket by instructing a defendant who raises an ‘abstract ideas’ § 101 defense that the court will defer addressing that defense until first having the issues in §§ 102, 103, and 112 addressed.”  Id.

Answers Ahead?  HP’s Berkheimer Cert Petition and Possible Legislative Action

In September, HP filed a petition for a writ of certiorari asking the Supreme Court to reverse the Federal Circuit and “reaffirm that patent eligibility is a question of law based on the scope of the claims.”  Cert. Pet. at 3, HP Inc. v. Berkheimer, No. 18-415.  In November, six amicus briefs were filed by technology companies and industry groups in support of HP’s petition.  Berkheimer’s opposition brief, filed this month, contends that the Federal Circuit was correct to hold that “whether a claim recites patent eligible subject matter is a question of law which may contain underlying facts.”  Opp. Br. at 1, HP Inc. v. Berkheimer, No. 18-415.  In particular, Berkheimer argues that there may well be a factual dispute at step two of the Alice/Mayo test as to whether the “additional steps” in the claim are sufficient to transform the claim into patent-eligible material or are instead “well known in the art.”  Id. at 2.

In the meantime, lawmakers are considering the potential need for legislative reform.  IP law organizations, life sciences industry groups, and tech industry groups alike, with widely divergent views on whether and how the patent-eligibility provisions of the Patent Act should be changed, have the attention of Senators Coons and Tillis. 

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