Patent enforcement by Texas-based DataTreasury Corp. (“DataTreasury”) was a key motivation for the creation of Covered Business Method Review (“CBM”) proceedings. Senator Charles Schumer of New York, referring to DataTreasury, explained that “one company has made a cottage industry out of extracting legal settlements by exploiting a fuzzy part of the law on patents.”[1] To address this concern, Schumer inserted the provision that created CBM proceedings into the America Invents Act (“AIA”).[2]
Once Congress enacted the AIA, the Patent Trial and Appeal Board (“PTAB”) instituted CBM reviews of several DataTreasury patents and invalidated them under 35 U.S.C. § 101.[3] The Federal Circuit affirmed the PTAB’s decisions without opinion.[4] DataTreasury then petitioned the Supreme Court, claiming that it had developed “some of the most valuable and thoroughly validated patents in the United States,” which had generated “hundreds of millions of dollars in license fees” before the PTAB found that they were directed to ineligible subject matter.[5]
DataTreasury argued that the PTAB and the Federal Circuit erred by treating objective evidence of a patent claim’s non-obviousness as irrelevant to patent eligibility.[6] DataTreasury’s petition focused on evidence offered to show “secondary considerations” of non-obviousness for its claimed inventions, including commercial success, long-felt need, failure of others, and unexpected results. According to the petition, such evidence is relevant to show whether a patent claim is “drawn to ‘well-understood, routine, conventional activities’ previously known to the industry.”[7] The Supreme Court ultimately declined to review DataTreasury’s case, and thus passed up an opportunity to clarify the role of evidence in patent eligibility rulings.[8]
A Question of Law with Underlying Questions of Fact
Patent owners like DataTreasury are often unsuccessful in their attempts to show eligibility using evidence outside of their asserted patents. To limit the consideration of evidence, accused infringers emphasize that patent eligibility is a question of law and argue that extrinsic evidence is not relevant. However, obviousness under Section 103 is a question of law also, and it is well-established that many types of evidence are relevant and admissible to prove or disprove obviousness. Like obviousness, patent eligibility involves underlying questions of fact, so evidence should have some role to play—however limited it may be. An understanding of that role begins with the governing legal standard.
The Supreme Court’s framework for determining patent eligibility has two steps. First, the Court determines whether the claim is directed to an ineligible concept such as an abstract idea or law of nature.[9] Second, the Court determines whether any additional claim limitations beyond the abstract idea provide an inventive contribution, which is “sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself.”[10] Added limitations that are merely “well-understood, routine, [or] conventional” do not supply an inventive contribution.[11] If the claim is directed to an ineligible concept without an inventive contribution, it is not patentable.
Whether claim limitations are well-understood, routine, or conventional is a question of fact.[12] Accordingly, evidence should be admissible in at least some circumstances to answer this question. Yet courts routinely resolve patent eligibility at the pleading stage of litigation, before a detailed evidentiary record has developed.[13] Many patent owners therefore argue that determining patent eligibility on the pleadings is premature, and some offer evidence (such as an expert declaration) to show that they should prevail or that the record should be developed further. Evidence may also be offered to support patent eligibility during initial patent examination or post-grant proceedings.
Pitfalls for Eligibility Evidence
Courts that invalidate patents at the pleading stage do not always acknowledge the role of underlying factual issues or address those issues explicitly. However, there are several rationales that may explain these early decisions. Patent owners attempting to show that their claims are patent-eligible should offer evidence that is not susceptible to rejection based on these rationales.
In some cases, the patent owner may focus on the first step of the eligibility analysis without devoting significant argument to the second step. For example, the patent owner may argue that a claim contains no abstract idea at all. The court may find an abstract idea in the claim by analogy to the case law (without the need for a factual inquiry), and regard the second step as essentially undisputed based on the focus of the patent owner’s argument.
In other cases, the patent owner may argue that a certain inventive contribution renders the claims patent eligible, but the patent itself may contradict that alleged inventiveness. For example, the inventive contribution may simply be absent from the claim language, or the specification of the patent may admit that the allegedly inventive contribution was actually well-known. While the patent owner’s allegations are generally taken as true at the pleading stage, courts will not accept allegations that contradict the patent.[14] Nor will courts accept allegations that contradict matters properly subject to judicial notice.[15]
Another possibility is that the patent owner relies on allegations or evidence that simply state a legal conclusion without identifying factual support. For example, a complaint or expert declaration may state that a claim contains an inventive concept, without explaining why the concept is inventive or how it is reflected in the claim limitations. Courts are not required to accept that sort of conclusory assertion.[16]
Even detailed factual assertions are at risk of being disregarded if they do not fit squarely within the Supreme Court’s two-step eligibility framework. For example, a patent owner may offer evidence that a claim was unconventional as a whole, but that evidence may not distinguish between any abstract idea in the claim and the additional limitations beyond that idea. According to the Supreme Court’s opinion in Diamond v. Diehr, the novelty of the entire claim is not relevant to the eligibility analysis.[17] Thus, courts considering evidence or allegations of such novelty may consider them unpersuasive.[18] For similar reasons, courts may also decline to weigh secondary considerations of non-obviousness in their eligibility analysis (as DataTreasury proposed). If an invention is commercially successful, for example, that success could be due to the value of the underlying abstract idea or natural law rather than any unconventional technology used to implement it.[19] Accordingly, courts may not be convinced that such success is probative of patent eligibility.
Some observers perceive tension between the second step of the eligibility framework (where courts must consider whether added claim limitations are inventive or merely routine and conventional) and Diehr’s rejection of novelty as irrelevant. To ensure that any evidence of novelty is considered under the two-step framework and not rejected as irrelevant, patent owners should tie that evidence to specific claim limitations and explain why those limitations are not part of any ineligible concept.
Conclusion
Accused infringers seeking an early finding of ineligibility should be prepared to explain how one or more of the rationales above allow the court to resolve any factual disputes without prolonging the case. Conversely, patent owners should ensure that the facts they rely on cannot be disregarded based on these rationales. Courts seem most likely to be persuaded by facts in favor of eligibility when those facts are explained in a patent’s specification.[20] Thus, patent prosecutors can help their clients prevail against eligibility challenges by explaining in their patent applications how the claims depart from routine and conventional functionality in the prior art. Ultimately, there are still open questions about what evidence will be considered relevant to prove that a claim contains an inventive concept. Practitioners will thus need to continue tuning their strategies as the courts seek to answer these questions.
[1] Edward Wyatt, Banks Turn to Schumer on Patents, N.Y. Times, June 14, 2011 (available at http://www.nytimes.com/2011/06/15/business/15schumer.html)
[2] Id.
[3] Case Nos. CBM2014-00020 and -00021 (P.T.A.B. Apr. 29, 2015)
[4] Case Nos. 2016-1046 and -1048 (Fed. Cir. Oct. 13, 2016)
[5] Petition for Certiorari in DataTreasury Corp. v. Fidelity Nat’l Info. Servs., No. 16-883 (filed Jan. 11, 2017).
[6] Id. at 21-22.
[7] Id.
[8] Case No. 16-883 (Mar. 20, 2017).
[9] Alice Corp. v. CLS Bank Int’l., 134 S. Ct. 2347, 2355 (2014).
[10] Id.
[11] Id.at 2359.
[12] See Bascom, Slip op. at 16 (holding that “[o]n this limited record, this specific method of filtering Internet content cannot be said, as a matter of law, to have been conventional or generic”) (emphasis added).
[13] See, e.g., Affinity Labs of Texas, LLC v. Amazon.com, Inc., 838 F.3d 1266, 1270 (“While Affinity criticizes the magistrate’s making factual findings on a motion for judgment on the pleadings, the practice of taking note of fundamental economic concepts and technological developments in this context is well supported by our precedents.”)
[14] Anderson v. Kimberly-Clark Corp., 570 Fed.Appx. 927, 931-32 (Fed. Cir. 2014), citing Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001).
[15] Id.
[16] Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (explaining that conclusory pleadings are not sufficient to survive a motion to dismiss); see also Sitrick v. Dreamworks, LLC, 516 F.3d 993, 1001 (“Conclusory expert assertions cannot raise triable issues of material fact on summary judgment.”).
[17] Diamond v. Diehr, 450 U.S. 175, 190 (1981) (“The question therefore of whether a particular invention is novel is wholly apart from whether the invention falls into a category of statutory subject matter.”) (internal quotations omitted)
[18] See Affinity Labs, 838 F.3d at 1269-70, n.3 (finding that a district court “properly disregarded [an] expert’s statement” that the claimed technology was novel).
[19] See Ariosa Diagnostics, Inc. v. Sequenom, Inc., 788 F.3d 1371, 1379-80 (Fed. Cir. 2015) (holding patented method ineligible despite agreeing that it was a “positive and valuable contribution to science” that “revolutionized prenatal care”).
[20] See, e.g., Bascom Global Internet Servs., Inc. v. AT&T Mobility LLC, 827 F.3d 1341, 1344 (citing specification for evidence of benefits provided by the patented invention); id. at 1349 (relying on benefits described in the specification to find claims patent-eligible).
