Ever since the U.S. Supreme Court’s decisions in Alice Corp. Pty. Ltd. v. CLS Bank Intern., 573 U.S. 208 (2014) and Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U.S. 66 (2012), defendants have relied on these decisions to invalidate patents under 35 U.S.C. § 101. To establish the invalidity of a patent under Alice and Mayo, a defendant must meet a two-step test. First, it must show the claims at issue are directed to a patent-ineligible concept, such as a law of nature, abstract phenomenon, or abstract idea. Alice, 573 U.S. at 217-18. Second, the defendant must show the claims contain no “inventive concept.” Id. Under this second step, Alice directs trial courts to examine whether the claim limitations involve more than the performance of “well-understood, routine, [and] conventional activities previously known to the industry.” Id. at 225.
In 2018, the Federal Circuit addressed this second step in Berkheimer v. HP Inc., 881 F.3d 1360, 1363 (Fed. Cir. 2018). In Berkheimer, the Federal Circuit held that whether a claimed invention is “well-understood, routine, and conventional” under the second Alice step is a question of fact, as opposed to a question of law. Id. at 1368. Almost immediately, commentators predicted that Berkheimer would make it more challenging for defendants to invalidate patents under Section 101.
Since Berkheimer was decided, trial courts—and defendants—nationwide have grappled with its impact, particularly in the context of early pleading challenges, where the plaintiff’s factual allegations are taken as true. This article looks at Berkheimer’s practical effects several years out, and offers a brief overview of some recent cases in key jurisdictions. It also provides guidance on issues to watch out for from the standpoint of both plaintiffs and defendants litigating eligibility.
Post-Berkheimer Orders on Motions to Dismiss
I. Northern District of California
One common way for defendants to challenge patents they believe to be ineligible under 35 U.S.C. § 101 is via a motion for judgment on the pleadings under Rule 12(c). Similar to motions under Rule 12(b)(6), courts deciding motions under this Rule must determine “whether the facts alleged in the complaint, taken as true, entitle the plaintiff to a legal remedy.” Cellspin Soft, Inc. v. Fitbit, Inc., 927 F.3d 1306, 1314 (Fed. Cir. 2019).
Notwithstanding Berkheimer, Judge Koh in the Northern District of California granted an Alice motion under Rule 12(c) in MyMail, Ltd. v. OoVoo, LLC, 17-CV-04487-LHK, 2020 WL 2219036 (N.D. Cal. May 7, 2020). The technology at-issue in that case related to modifying a toolbar on a user internet device. Id. at *8. The patentee had alleged in its briefing—but critically not its pleading—that specific methods of updating or changing the toolbar were inventive, such as via a “Pinger process” or “MOT script.” Id. at *21. In granting the motion to dismiss, Judge Koh distinguished Berkheimer on three grounds. First, she explained that both the complaint and the specifications failed to identify these specific methods as inventive. Second, she described Berkheimer as having identified “concrete inventive concepts.” Id. By contrast, MyMail had failed to identify precisely how the toolbar’s ability to be updated via a Pinger process or MOT script “improve[d] the toolbar update process or solve[d] any problem in the prior art.” Id. Third, she concluded that MyMail’s allegations as to the two methods merely involved using generic components, such as a “server” and various “databases,” in a routine manner. The court specifically noted that the specifications did not identify any of these generic components as “unique to the invention” or further “identify any functions as an inventive concept.” Id. Given these facts, Berkheimer was no impediment to granting the defendants’ motion.
In another post-Berkheimer case, Judge Koh explained that patents must describe how to achieve the claimed inventive concepts to survive an early Alice motion. Voip-Pal.Com, Inc. v. Apple Inc., 411 F. Supp. 3d 926 (N.D. Cal. 2019), aff'd, 828 Fed. Appx. 717 (Fed. Cir. 2020). In Voip-Pal, the patents related to routing Internet Protocol (“IP”) based communications, such as between private IP-based networks and external networks (e.g., the Public Switched Telephone Network). Id. at 930. The court accepted as true that specific allegations were “significant and unconventional improvements upon prior technology,” including: user-specific handling; transparent routing; resiliency; and communication blocking. Id. at 974. But Judge Koh explained that Alice required more: the plaintiff must be able to show from the specification precisely “how the desired result is achieved.” Id. at 974. The plaintiff in Voip-Pal failed to do so: “because neither the claims nor the specification provided the critical how,” the improvements could not be attributed to the claimed invention. Id. (emphasis added). As in MyMail, Judge Koh granted the motion to dismiss. Id.
More recently, the Federal Circuit affirmed a dismissal under Rule 12(b)(6) from Judge Chhabria in the Northern District of California. Boom! Payments Inc. v. Stripe Inc., 2021 WL 116545 (Fed. Cir. Jan. 13, 2021). There, the patents were related to the process of confirming that a transaction has been completed before releasing electronic payment. Id. at *1. The Federal Circuit explained that under Alice step two, the plaintiff’s complaint contained only “conclusory statements” that its claimed subject matter was not routine or conventional at the time of invention. Id. at *4. Because the plaintiff had failed to provide “plausible factual assertions” to assert its arguments as to patentability, the Federal Circuit held that dismissal was justified. Id.
II. District of Delaware
Since Berkheimer was decided, Delaware judges, like their peers in the Northern District of California, have shown a willingness to grant motions to dismiss when the asserted patent and complaint failed to describe any technological improvement from the claimed inventions.
For example, in WhitServe LLC v. Donuts Inc., 390 F. Supp. 3d 571 (D. Del. 2019), aff'd, 809 Fed. Appx. 929 (Fed. Cir. 2020) (unpublished), cert. denied, 20-325, 2020 WL 6701095 (U.S. Nov. 16, 2020), Judge Connolly determined under Alice step one that the asserted patents were directed to the abstract idea of sending and receiving responses to due-date reminders. Id. at 577. Specifically, the patents explained that professionals, such as attorneys, had long relied on a docketing system for determining when certain items were due for their clients. Id. at 574. The patents purported to solve the problem of spending time eliciting approvals from clients by disclosing an automated system for obtaining these authorizations. Id. But under Alice step two, similar to MyMail above, the WhitServe court explained that the patents described “improving the speed and efficiency with which humans deliver professional services by automating that practice through the use of generic computer components performing routine functions.” Id. at 581 (emphasis added). Accordingly, the court agreed with the defendant and granted the motion to dismiss under Fed. R. Civ. P. 12(b)(6).
III. Southern District of New York
In the Southern District of New York, defendants have faced more of a challenge on their early motions. For instance, in July 2020, Judge Woods decided Netflix’s Rule 12(c) motion in Personalized Media Commun., LLC v. Netflix Inc., 475 F. Supp. 3d 289 (S.D.N.Y. 2020) (“PMC”), finding that PMC had plausibly alleged that the challenged patents included inventive concepts. Netflix argued that the one of the challenged patents was directed to the same subject matter as another PMC patent that had been invalidated under Alice in a pre-Berkheimer case—Personalized Media Commun., LLC v. Amazon.Com, Inc., 161 F. Supp. 3d 325, 329 (D. Del. 2015) (“Amazon”)—and should be held ineligible for similar reasons. Id. at 302. But Judge Woods found Amazon unavailing because that decision did not address the sufficiency of PMC’s pleading allegations. Id. (“Most importantly, that decision does not discuss allegations in the complaint. . . . Relatedly, Amazon was decided before Aatrix and Berkheimer, which clarified this area of law.”). According to the court, even if remote programming were an abstract idea (satisfying Alice step one), PMC had plausibly alleged that combining remote programming with radio or television was sufficiently inventive under Alice step two to qualify as a significant advancement over the prior art. Id. at 302. Because PMC had made “plausible and specific factual allegations that aspects of the claims are inventive” and the patent specification did not contradict those allegations, the court denied the motion. Id. at 303.
IV. Western District of Texas
Since Judge Albright was appointed to the federal bench in 2018, plaintiffs have filed cases in his court at a rapidly increasing rate. He has generally shown a hesitancy to grant early motions to dismiss under Alice following Berkheimer. For example, in Slyce Acq. Inc. v. Syte - Visual Conception Ltd., W-19-CV-00257-ADA, 2020 WL 278481 (W.D. Tex. Jan. 10, 2020), Judge Albright was faced with whether to grant such a motion under Rule 12(b)(6). Citing to Berkheimer, Judge Albright explained that he would need fact discovery to rule on the asserted claims. Id. at 6. (Notably, in Judge Albright’s court, fact discovery does not begin until after the Markman hearing.) The court further explained that the difficulty of applying the Alice test also weighed towards delay: the court noted that the lack of predictability and consistency for outcomes of Alice motions was “widely known and extremely problematic.” Id. at *7. Judge Albright concluded that additional time would permit him to “spend more time understanding the patents and its nuances” for the purpose of correctly determining what was “well-understood, routine, and conventional activities previously known to the industry.” Id. (quoting Berkheimer).
Judge Albright has since relied upon his ruling in Slyce to deny other motions to dismiss as well, explaining that only “rare cases” will merit an early dismissal under Alice: “In light of the Court’s order in Slyce, the Court does not believe this is one of the rare cases where it is appropriate to resolve the Section 101 eligibility of the patents-in-suit as a Rule 12(b) motion to dismiss.” Aeritas, LLC v. Sonic Corp., No. 6:20-CV-103 (W.D. Tex. Mar. 14, 2020) (internal citations omitted) (Order denying Motion to dismiss).
V. Eastern District of Texas
Since Berkheimer, defendants have generally faced an uphill battle to win their Alice motions in Judge Gilstrap’s court, especially when raising a challenge to the pleadings. For example, in Luminati Networks Ltd. v. Teso LT, UAB, 2:19-CV-00395-JRG, 2020 WL 6803256 (E.D. Tex. July 15, 2020), Judge Gilstrap denied a motion to dismiss under Rule 12(b)(6), explaining that the analysis would benefit from claim construction. Id. at *3. Similar to those in Judge Albright’s court, defendants in Judge Gilstrap’s court may want to consider waiting to file any Alice motion until after Markman has concluded, unless the circumstances for a challenge are ideal.
Post-Berkheimer Summary Judgment
Unsurprisingly, Berkheimer’s holding as to Alice step two has provided patent plaintiffs with a potent weapon at their disposal to create a disputed issue of fact and thus avoid summary judgment on the issue of eligibility.
In Vaporstream, Inc. v. Snap Inc., 2020 WL 136591 (C.D. Cal. Jan. 13, 2020), for example, defendant Snap sought to invalidate the patents-in-suit on a motion for summary judgment under Section 101. Id. at *8. The disputed technology related to reducing the “traceability” of electronic messages. Id. at *2. Judge Huff specifically noted two reasons for denying Snap’s motion under Berkheimer. Id. First, each side had presented competing expert testimony as to whether particular claim elements were well-understood, routine, and conventional, thereby presenting a factual dispute inappropriate for resolution on summary judgment. Id. Second, contrary to Berkheimer—which directs courts to analyze elements of a claim both individually and as an ordered combination—Snap and its expert only analyzed the individual claim elements at issue. Snap thus failed to show that the elements as an ordered combination likewise failed under Alice step two. Id.
This decision, among numerous others, indicate that Berkheimer can be just as much of an impediment to invalidating a patent under § 101 at the motion for summary judgment stage as in the context of an early motion to dismiss. A defendant’s failure to fully address the second step of Alice—including whether the claimed inventions are “well-understood, routine, [and] conventional activities previously known to the industry”—in expert reports can be fatal to an otherwise meritorious motion. On the other hand, plaintiffs hoping to get to trial would do well to develop a strong factual and testimonial record supporting the unconventional and inventive nature of their claims.
In sum, the past four years of decisions have shown that the early predictions about Berkheimer were not far off: Berkheimer’s holding has made it somewhat more difficult to win patent eligibility challenges. It is also clear, however, that all hope is not lost for defendants. Even under Berkheimer, successful challenges are still possible, including at the motion to dismiss stage. With the aforementioned cases as guidance, litigants should be mindful of the following when considering the impact Berkheimer may have on their cases: