35 U.S.C. § 101 Practice in the Eastern District of Texas

It is well-known that judges in the Eastern District of Texas have been inundated with motions regarding Section 101 invalidity in the wake of the Supreme Court's decisions in Mayo[i] and Alice.[ii] Amid this wave of motion practice, two recent decisions in the District stand out as potential benchmarks for Section 101 practice in the District at the Motion to Dismiss and Summary Judgment stages.

Section 101 Invalidity Via Motions to Dismiss

On March 3, 2015, in the consolidated action Clear with Computers, LLC v. Altec Industries, Inc., Judge Gilstrap granted defendants motion to dismiss due to the invalidity of the asserted patents under Section 101.[iii] In Clear with Computers, the asserted patents generally claimed a computer implemented method of generating a customized sales proposal for a particular customer. In particular, the claims recited a computer implement method consisting of (1) presenting questions to, and receiving answers from, a customer; (2) based on one answer, selecting a picture of a product, a picture of a product environment, and a text regarding that product; and (3) putting the pictures and text together into a customized sales proposal.

Based on the simplicity of the claims the Court found that "[t]he steps performed by the claimed computer elements are functional in nature and could easily be performed by a human. The claims essentially propose that, instead of a human salesman asking customers about their preferences and then creating a brochure from a binder of product pictures and text . . . a generic computer can perform those functions." Furthermore, the Court found that there were no meaningful limitations in the claim that would prevent the asserted patents from obtaining a monopoly over the abstract idea, and that any computer involvement was merely conventional or generic. Accordingly, the asserted patents failed both steps of the Alice framework—they (1) were directed to an abstract idea, and (2) contained no additional elements that transformed the claims into a patent eligible application.

In granting defendants' motion to dismiss, however, the Court carefully limited the precedential impact of the opinion by holding that:

• while Section 101 analyses are a question of law, they "may contain underlying factual issues," but that no such material issues were present in this particular case; and

• this particular case presented claim language that was "relatively simple" and that the parties had not identified any claim construction disputes.

To that end, the Court explicitly stated that "the Court does not hold that all claims in software-based patents are directed to an abstract idea. Indeed, the contours are often unclear between those inventions that are directed to an abstract idea and those that are not. . . .However, the claims in this particular case plainly fall within the category of claims that, without some additional inventive concept, are directed to abstract ideas which are ineligible for patent protection."

Indeed, to further limit the impact of its ruling in this case, the Court in the following weeks instituted a new procedure governing Section 101 motions. Docket Control Orders in Marshall Division (or in Tyler Division cases assigned to Judges Gilstrap or Payne) now contain the following procedure for Section 101 motions:

Motions under 35 U.S.C. § 101:

Parties seeking to file dispositive motions under 35 U.S.C. § 101 before the Court's Claim Construction Order has issued may do so only upon a grant of leave from the Court after a showing of good cause, which shall be presented through the letter briefing process described above. Parties may file dispositive motions under 35 U.S.C. § 101 without leave from the Court within two weeks of the issuance of the Court's Claim Construction Order without use of the Court's letter briefing process described above.[iv]

Under this new procedure, the Court's immediately preceding holding in Clear with Computers may serve as a benchmark for cases subject to pre-Markman resolution under Section 101. Cases similar to Clear with Computers (i.e., relatively simple claim language, little to no material facts in dispute, and little to no claim construction disputes identified) may be ripe for pre-Markman resolution. More complicated cases and patent claims, however, may need to await the Court's Markman ruling.

Section 101 Invalidity Via Summary Judgment
More recently, on May 29, 2015, in Kroy IP Holdings, LLC v. Safeway, Inc., Circuit Judge Bryson (sitting by designation) granted defendant's summary judgment under Section 101.[v]

In Kroy, the asserted patents generally claimed a program-based system for providing incentive awards to consumers. More specifically, the claims recited an incentive program in which a host computer contained (1) a database of awards in communication with an inventory management system of a provider company, (2) the ability for a sponsor company to select customer awards tailored to the demographic and psychographic preferences of customers selected by the sponsor, and (3) the ability for the sponsor company to select the geographic location where the awards can be redeemed. The patentee, however, also took the position that the provider and sponsor could be the same company.

Even though the claim language at issue used relatively abstract terms to describe the functionality above (e.g., "automated award fulfillment application program," "code adapted to provide a sponsor-selected specific award unit item," and "code adapted to provide a sponsor-selected geographic location for fulfillment), the Court found that the extra limitations of the claims "beyond the use of a computer would be satisfied if the greengrocer detected a surplus of avocados on his shelf, decided to reduce his inventory of avocados, and offered avocado aficionados a free avocado for every three avocados they buy at the store."

Perhaps most importantly, the Court discounted the fact that the claims could also read on complicated systems "with hundreds of awards, thousands of customers, and sophisticated inventory management systems." Such complex applications in the eyes of the Court amounted to "complexity in the application" rather than "complexity in the invention." Because the invention itself was at its core "very simple and can fairly be described as embodying nothing more than an abstract idea implemented on a generic computer," it was invalid under Section 101.

The above holding regarding application vs. invention together with the overall breadth of Judge Bryson's 51 page opinion, which includes detailed analyses of the Supreme Court's Bilski, Mayo, and Alice opinions, six recent Federal Circuit opinions applying these precedents, and a number of district court opinions applying the same, makes it a must read for litigants in the District as well as a potential benchmark for future Section 101 summary judgment motions in the District.

Fish & Richardson is the industry leader for patent litigation within the Eastern District of Texas. Together with twelve former law clerks from the District and former Chief Judge Leonard Davis, Fish & Richardson has litigated more patent cases in the District from 2006-present than any of its competitors.

[i] Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289 (2012).

[ii] Alice Corp. Pty. Ltd. v. CLS Bank Int'l, 134 S. Ct. 2347 (2014).

[iii] Clear with Computers, LLC v. Altec Indus., Inc., Case No. 6:14-cv-89, Dkt. No. 24 (E.D. Tex. Mar. 3, 2015).

[iv] http://www.txed.uscourts.gov/cgi-bin/view_document.cgi?document=22241

[v] Kroy IP Holdings, LLC v. Safeway, Inc., Case No. 2:12-cv-800, Dkt. No. 226 (E.D. Tex. May 29, 2015).