Background
Cellspin Soft Inc. (Cellspin) filed an infringement suit against Fitbit Inc. (Fitbit) and ten other defendants in the Northern District of California, asserting U.S. Patent Nos. 8,738,794, 8,892,752, 9,258,698, and 9,749,847. These patents have a common specification and their claims are directed to a data capture device being connected to a mobile device so that captured data can be published to a web site. The defendants moved the District Court to dismiss all counts under Rule 12(b)(6) or 12(c), alleging that the patents did not meet the eligibility requirements of 35 U.S.C.§ 101. Ultimately, the District Court not only granted this motion, but also awarded the defendants attorney fees under § 285. Cellspin appealed.
In Alice Corp. v. CLS Bank Int'l, the Supreme Court set forth a two-part test to determine whether claims are directed to patent-eligible subject matter under § 101. One must first decide whether the claim at hand involves a judicially-excluded law of nature, a natural phenomenon, or an abstract idea. If so, then one must further decide whether any element or combination of elements in the claim is sufficient to ensure that the claim amounts to significantly more than the judicial exclusion. But elements or combinations of elements that are well-understood, routine, and conventional will not lift the claim over the § 101 hurdle. While this inquiry is generally carried out as a matter of law, factual issues can come into play when determining whether something is well-understood, routine, and conventional.
The Claimed Inventions
As a representative example of the claimed inventions, the '794 patent "teaches a way to transfer and upload data automatically or with minimal user intervention using a data capture device and a mobile device." Notably, a client application on the mobile device wirelessly receives data from the data capture device and then publishes this data to one or more websites. Such a procedure takes place "automatically or with minimal user intervention."
Claim 1 of this patent recites:
A method for acquiring and transferring data from a Bluetooth enabled data capture device to one or more web services via a Bluetooth enabled mobile device, the method comprising:
providing a software module on the Bluetooth enabled data capture device;
providing a software module on the Bluetooth enabled mobile device;
establishing a paired connection between the Bluetooth enabled data capture device and the Bluetooth enabled mobile device;
acquiring new data in the Bluetooth enabled data capture device, wherein new data is data acquired after the paired connection is established;
detecting and signaling the new data for transfer to the Bluetooth enabled mobile device, wherein detecting and signaling the new data for transfer comprises:
determining the existence of new data for transfer, by the software module on the Bluetooth enabled data capture device; and
sending a data signal to the Bluetooth enabled mobile device, corresponding to existence of new data, by the software module on the Bluetooth enabled data capture device automatically, over the established paired Bluetooth connection, wherein the software module on the Bluetooth enabled mobile device listens for the data signal sent from the Bluetooth enabled data capture device, wherein if permitted by the software module on the Bluetooth enabled data capture device, the data signal sent to the Bluetooth enabled mobile device comprises a data signal and one or more portions of the new data;
transferring the new data from the Bluetooth enabled data capture device to the Bluetooth enabled mobile device automatically over the paired Bluetooth connection by the software module on the Bluetooth enabled data capture device;
receiving, at the Bluetooth enabled mobile device, the new data from the Bluetooth enabled data capture device;
applying, using the software module on the Bluetooth enabled mobile device, a user identifier to the new data for each destination web service, wherein each user identifier uniquely identifies a particular user of the web service;
transferring the new data received by the Bluetooth enabled mobile device along with a user identifier to the one or more web services, using the software module on the Blue-tooth enabled mobile device;
receiving, at the one or more web services, the new data and user identifier from the Bluetooth enabled mobile device, wherein the one or more web services receive the transferred new data corresponding to a user identifier; and
making available, at the one or more web services, the new data received from the Bluetooth enabled mobile device for public or private consumption over the internet, wherein one or more portions of the new data correspond to a particular user identifier.
The other asserted claims are substantially similar, though they recite further variations including: (1) a polling mechanism through which the mobile device checks for and then pulls data from the data capture device, (2) establishing a connection between the mobile device and the data capture device using encryption, (3) the mobile device using the hypertext transfer protocol (HTTP) to transfer the captured data to the web sites, and (4) broader embodiments that do not use Bluetooth.
District Court Proceedings
One month after the defendants filed the motion to dismiss, Cellspin filed a notice of supplemental authority. The notice cited the recently-decided Aatrix Software, Inc. v. Green Shades Software, Inc. and Berkheimer v. HP Inc., two cases that established the contours of the factual analysis in the Alice test's second part. Cellspin also amended its complaints to allege that the combination of elements recited by the claims was unconventional at the time the patents were filed.
Applying part one of the Alice test, the District Court found that the claims were directed to the abstract idea of "acquiring, transferring, and publishing data and multimedia content on one or more websites." The District Court noted that "Cellspin failed to show that the data acquisition, transfer, and publication described in the '794 patent represents something more than a simple automation of a conventional (manual) process."
Moving on the part two, the District Court "concluded that the various claim elements, e.g., the data capture device and Bluetooth enabled mobile device, represent generic computer components performing as expected according to their ordinary use." The District Court acknowledged that there was a factual dispute between the parties regarding whether the combination of these elements was well-understood, routine, and conventional. But the District Court declined to take this factual dispute into account because, in the District Court's view, Berkheimer only applied to the summary judgment stage, and also because Cellspin did not identify where the specification described the unconventional aspects of the claimed inventions as alleged in the amended complaint. Thus, all claims were found invalid under § 101.
A number of the defendants moved the District Court for attorney fees. The District Court found that the case met the definition of "exceptional" under § 285 because the "claims were manifestly directed to an abstract idea" and "exceptionally meritless." Further, the District Court determined that Cellspin litigated aggressively, noting that Cellspin amended "its complaint only three days prior to the hearing on the motions to dismiss."
The District Court further admonished Cellspin for "a refusal to analyze its patents critically before filing suit," noting that "Cellspin could have litigated a test case but instead chose to file and pursue aggressively fourteen lawsuits simultaneously." The District Court recommended this approach because "Cellspin's patents are not presumed eligible under Section 101."
Based on these factors, the District Court awarded attorney fees to the defendants.
Appeal to the Federal Circuit
On appeal, the Federal Circuit re-applied the Alice test and also considered the attorney fees award.
Particularly, the Court found that, under part one of Alice, the claims were indeed directed to an abstract idea. The Court determined that this outcome was required given the similarities between Cellspin's claims and those held abstract in In re TLI Communications LLC Patent Litigation ("claims reciting recording . . . transmitting . . . and storing digital images were directed to an abstract idea") and Elec. Power Grp., LLC v. Alstom S.A. ("claims reciting collecting information, analyzing it, and displaying certain results" are typically abstract in nature).
Moving on to part two of Alice, the Court looked to Cellspin's amended complaint for allegations that its claims are unconventional. There, it found Cellspin's argument that "prior art devices included a capture device with built in mobile wireless Internet," and that "at the time of the patent priority date . . . the combined apparatus was bulky, expensive in terms of hardware, and expensive in terms of requiring a user to purchase an extra and/or separate cellular service for the data capture device." Cellspin further argued that "it was unconventional to separate the steps of capturing and publishing data so that each step would be performed by a different device linked via a wireless, paired connection" and that doing so "allows data capture devices to be smaller and cheaper to build." Additionally, Cellspin asserted that the ordering of the claimed elements was also unconventional, as prior art devices "forwarded data to a mobile device as captured," whereas the claims involve "establishing a paired connection between the mobile device and the data capture device before data is transmitted." According to Cellspin, this has the advantage of data only being transmitted "if the mobile device is capable of receiving it."
As noted above, the District Court faulted Cellspin for not citing to support in the specification for these allegations. But the Federal Circuit disagreed that this was required, noting that under Aatrix, "allegations in the complaint [are sufficient] to conclude that the disputed claims were potentially inventive." The Court went on:
While we do not read Aatrix to say that any allegation about inventiveness, wholly divorced from the claims or the specification, defeats a motion to dismiss, plausible and specific factual allegations that aspects of the claims are inventive are sufficient. As long as what makes the claims inventive is recited by the claims, the specification need not expressly list all the reasons why this claimed structure is unconventional. In this case, Cellspin made specific, plausible factual allegations about why aspects of its claimed inventions were not conventional, e.g., its two-step, two-device structure requiring a connection before data is transmitted. The district court erred by not accepting those allegations as true.
The Court also made it clear that Aatrix "expressly stated that patentees who adequately allege their claims contain inventive concepts survive a § 101 eligibility analysis under Rule 12(b)(6)." Thus, the District Court's reliance on Berkheimer to discount Cellspin's allegations was misplaced.
Putting this all together, the Court stated "accepting the allegations stated above as true, we cannot conclude that the asserted claims lack an inventive concept . . . we have no basis, at the pleadings stage, to say that these claimed techniques, among others, were well-known or conventional as a matter of law." A major factor that led the Court toward this conclusion was that "Cellspin did more than simply label [the claimed] techniques as inventive . . . [i]t pointed to evidence suggesting that these techniques had not been implemented in a similar way." Thus, based on the allegations, the claims "recite a specific, plausibly inventive way of arranging devices and using protocols rather than the general idea of capturing, transferring, and publishing data," and cannot be found ineligible at this point in the case.
As the District Court's opinion was vacated, the attorney fees award was necessarily vacated as well. To that point, the Federal Circuit clarified the principle that an issued patent has a presumption of validity:
This presumption reflects the fact that the Patent and Trademark Office has already examined whether the patent satisfies the prerequisites for issuance of a patent, including § 101. While an alleged infringer may attempt to prove that the patent never should have issued in the first place, i.e., challenge its validity, the alleged infringer must prove that the patent does not satisfy these prerequisites before the patent loses its presumption of validity. To the extent the district court departed from this principle by concluding that issued patents are presumed valid but not presumed patent eligible, it was wrong to do so.
The Court also found that the District Court erred when admonishing Cellspin for amending its complaints so close to the hearing thereon. Looking to the record, the Court observed that "Cellspin's amendment was timely based on a scheduling order entered by the district court just three days before Cellspin's amendment," and that "Cellspin's decision to amend was also justified in light of Berkheimer and Aatrix, decided just a few weeks earlier."
Thus, both issues of patent eligibility and attorney fees were remanded to the District Court for further review.
Cellspin Soft, Inc. v. Fitbit, Inc. (Fed. Cir. 2019)
Panel: Circuit Judges Loruie, O'Malley, and Taranto
Opinion by Circuit Judge O'Malley
