Eligibility Analysis and its Underlying Facts: A Roadmap for Surviving Dismissal on the Pleadings
by Dennis Crouch
Following upon its February 8 decision in Berkheimer, the Federal Circuit has again sided with the Patentee on eligibility grounds – holding here that the lower court’s judgment on the pleadings failed to consider disputed issues of material fact. Prior to this pair of cases, it was unclear whether eligibility analysis involved factual questions. Although pair of cases indicate a precedential sea-change, both opinions were written by Judge Moore and joined by Judge Taranto (Berkheimer was also joined by Judge Stoll). Here, Judge Reyna dissented, writing:
I respectfully disagree with the majority’s broad statements on the role of factual evidence in a § 101 inquiry. Our precedent is clear that the § 101 inquiry is a legal question. In a manner contrary to that standard, the majority opinion attempts to shoehorn a significant factual component into the Alice § 101 analysis.
Reyna in dissent.
The divide among the court is now quite clear — what is needed is an en banc consideration of the issues. Failing that, we will continue to muddle and err.
Going back to the majority opinion, the court explained the setup:
- Plaintiff filed complaint alleging patent infringement;
- Defendant motioned for dismissal on the pleadings — asking the court to declare the asserted patent ineligible as a matter of law;
- Plaintiff filed a motion to amend its complaint to add specific allegations of fact directed to step-two of the Alice/Mayo inquiry — attempting to setup a material factual dispute that could not be resolved on the pleadings;
- District Court found the patent claims ineligible; refused to allow the amended complaint; according to the court the amendment would not have made any difference – would not have manufactured a factual dispute – since eligibility is a pure question of law.
- On appeal here, the Federal Circuit has vacated the judgment — holding that the complaint raises factual disputes that must be resolved prior to ruling on the eligibility issue.
The majority writes here:
[The Federal Circuit has previously] held that patent eligibility can be determined at the Rule 12(b)(6) stage. This is true only when there are no factual allegations that, taken as true, prevent resolving the eligibility question as a matter of law.
. . .
The district court granted this Rule 12(b)(6) motion without claim construction. We have some doubt about the propriety of doing so
in this case, but need not reach that issue because it did err 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.
Moore majority opinion.
Following the majority opinion, some plaintiffs will now look to the patentee’s proposed proposed amended complaint as one roadmap establishing a factual dispute sufficient for a patentee to overcome a motion on the pleadings. In particular, the complaint alleges a novel data importation scheme that is database independent and that “eliminat[es] the need for hand typing in the values.” Further, the complaint alleges that the result is “increased the efficiencies of computers processing tax forms” and “saved storage space” on the computers.
Although not proven, Judge Moore suggests that – if proven – these allegations would leave the asserted claims patent eligible since they are “directed to an improvement in the computer technology itself and not directed to generic components performing conventional activities.” Judge Moore then goes on to explain that these allegations are factual allegations rather than conclusory legal allegations and must be given due process according to the rules of our legal system. The majority opinion also claims the following:
Whether the claim elements or the claimed combination are well-understood, routine, conventional is a question of fact. And in this case, that question 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.
This quote sets-up the potential en banc case: To what extent does eligibility involved factual disputes; to what extent should extrinsic evidence be available to prove those facts? For patent litigators, these questions look strikingly similar to the decades old dispute over the proper approach to patent claim construction. It is easy to see eligibility following in the same line of reasoning seen in Teva and Phillips that allows for full judicial but opens the door to potential (but often not required) factual findings regarding extrinsic evidence.
Last note here — The claims at issue are claims 1, 2, and 22 of U.S. Patent No. 7,171,615 (“’615 patent”) and claims 1, 13, and 17 of U.S. Patent No.
8,984,393. These patents cover really simple tax prep forms that I expect the Supreme Court would eat for lunch.