Defendants in patent infringement cases filed in the United States by non-practicing entities (commonly known as "patent trolls") typically move to dismiss such cases pursuant to Federal Rule of Civil Procedure 12 on patent eligibility grounds. The recent decision from the Federal Circuit in Hawk Technology Systems, LLC v. Castle Retail, LLC, No. 22-1222 (Fed. Cir. Feb. 17, 2023), confirms that the question of patent eligibility under 35 U.S.C. § 101 (section 101) remains an issue of law suitable for resolution on a motion to dismiss. And although patent trolls may argue that the section 101 inquiry may implicate underlying factual questions in some cases, it is generally the case that section 101 determination does not actually involve genuine disputes over underlying facts material to the section 101 inquiry.
In the United States, an inventor may obtain a patent for "any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof." 35 US Code § 101. The US Supreme Court's Alice Corp. v. CLS Bank Int'l, 573 US 208, 216 (2014), decision addressed the scope of patent eligibility under section 101, setting forth a two-part test. At step one, a court decides whether the claims are directed to an abstract idea, by considering "the focus of the claimed advance over the prior art." Affinity Labs of Tex., LLC v. DIRECTV LLC, 838 F.3d 1253, 1257 (Fed. Cir. 2016). If the claims' focus is an abstract idea, the court then determines, at step two, whether the claims contain an "inventive concept"—an element or a combination of elements that "'transform[s] the nature of the claim' into a patent-eligible application." Alice, 573 US at 217-218. A claim that fails both steps is invalid under section 101 for ineligible subject matter.
Following the Supreme Court's Alice decision, there has been an increase in the number of motions—specifically motions to dismiss under Rule 12 based on subject matter eligibility under section 101—filed during the pleadings stage in US district courts. Hawk vs. Castle is one illustrative example. In an opinion issued in February 2023, a Federal Circuit panel recently rejected Hawk's bid to revive its patent, finding that Hawk cannot stake a claim on the abstract idea of storing and displaying video.
In particular, a three-judge panel agreed in a precedential opinion with the district court's finding that Hawk's asserted US Patent No. 10,499,091 is invalid under the two-part Alice test. By way of background, this case originated in Tennessee federal court in October 2020 when Hawk filed a patent infringement suit against Castle Retail for allegedly infringing Hawk's patent on video monitoring technology. In response, Castle Retail filed a motion to dismiss Hawk's Complaint, asserting that Hawk's claims reflect "nothing more than the abstract idea of collecting, analyzing, manipulating, and displaying data." The district court agreed and dismissed the case, finding the asserted claims ineligible on their face. On appeal the Federal Circuit affirmed.
Specifically, the Federal Circuit analyzed the claims of Hawk's patent under the two-step Alice framework. Under Alice step one, the Federal Circuit agreed that the asserted patent was directed to the abstract idea of "video storage and display." Under Alice step two, the Federal Circuit confirmed that Hawk's asserted claims merely recited the performance of an abstract idea using conventional computers and broadband networks, and thus did not transform the abstract idea into a patent-eligible invention. The Federal Circuit also rejected Hawk's argument that the motion was procedurally premature and that the district court erred in considering external evidence in connection with the motion.
This case illustrates that Alice motions remain an efficient means for addressing the invalidity of US patents directed to patent-ineligible concepts, such as abstract ideas, in early stages of patent litigation, providing an effective way of resolving patent litigation without involving significant litigation time and expense.
"We are very pleased with Federal Circuit's complete affirmance of U.S. District Judge Jon McCalla's well-reasoned judgment in the favor of our client, Castle. In our view, the Federal Circuit decision correctly applies the US Supreme Court's Alice decision that no one may patent "abstract ideas," such as "a fundamental [] practice long prevalent in" our society."
Originally printed in The Patent Lawyer on March 21, 2023.
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