Charles Everingham IV, partner at Ward, Smith & Hill in Longview, Texas. (Courtesy Photo)

A pair of 2018 decisions from the Federal Circuit have resulted in the deferral of many patent eligibility issues through summary judgment and even to jury trials. Practitioners confronted with eligibility issues should pay close attention to disclosure requirements and the development of proof, as it is becoming more likely that Section 101 issues will be submitted to the jury for resolution.

Under prevailing Supreme Court precedent, a two-part test governs patent eligibility. Under Step 1, the court considers whether the patent claims are directed to patent ineligible subject matter, such as an abstract idea. If not, the inquiry ends, and the Section 101 challenge fails. However, if the claims are directed to ineligible subject matter, then under Step 2 the court reviews the claims to determine whether the limitations, considered both individually and as an ordered combination, disclose an inventive concept. So viewed, if the limitations do not involve more than well-understood, routine, and conventional activity, they do not transform the otherwise patent-ineligible concept into a patentable invention, and the claims are invalid.

After the Supreme Court's decision in Alice v. CLS Bank, Rule 12 motions became the predominant way to challenge eligibility. In 2018, however, the Federal Circuit decided two cases–Aatrix v. Green Shades and Berkheimer v. HP, which prompted courts to defer Section 101 issues until later in the case. Although the ultimate question of patent eligibility is a question of law, these cases hold that the inquiry under Step 2 of Alice involves the consideration of subsidiary factual issues relevant to the eligibility issue.

Following Aatrix and Berkheimer, at least two cases from the Eastern District of Texas have resulted in jury verdicts on the issue of patent eligibility. The cases, Maxell v. ZTE and PPS Data v. Jack Henry and Associates, tried to Judge Robert Schroeder and Chief Judge Rodney Gilstrap, respectively, are the natural result of the Federal Circuit's 2018 decisions. In both cases, the court submitted the Step 2 question to the jury, and framed the issue to the jury as whether the claims, viewed from the perspective of a person of ordinary skill in the art, involved activity that was well-understood, routine, and conventional. And, based on the evidence at trial, both juries found for the defendant on the eligibility issues submitted to it.

The Supreme Court recently denied certiorari in Berkheimer. Parties should therefore continue to anticipate that these issues will be deferred beyond the motion to dismiss stage and potentially tried to a jury. As a result, practitioners should be mindful of local requirements governing the preservation of the defenses and the development of proof both supporting and opposing these issues. Depending on the venue, disclosure of the Section 101 defense through invalidity contentions may be required.

The Local Patent Rules for the Northern District of California and the Northern District of Texas, for example, require limited disclosures of grounds for invalidity under Section 101. Beyond disclosure required by local patent rules, in the Eastern District of Texas, Chief Judge Gilstrap has issued a standing order which requires pointed disclosures of a party's Section 101 contentions and the evidence supporting them. If local rules or orders do not require contentions, parties defending against eligibility challenges should serve discovery into the facts supporting their opponents' Section 101 contentions.

A party's contentions, either disclosed pursuant to local rule requirements or in response to discovery requests, frame the development of the proof to be offered at trial. In general, contentions are intended to provide fair notice of the theories of invalidity on which the party's expert will opine. Deficient contentions or discovery responses may not provide fair notice of an expert's later opinion, subjecting it to exclusion. Similarly, a plaintiff may need to challenge vague or generic contentions to ensure it understands the full breadth of an eligibility challenge.

The legal standard governing the inventive concept inquiry should guide the development of (and challenges to) factual proof and expert testimony. It should be remembered that simply because a limitation is disclosed somewhere in the prior art does not make that feature well-understood, routine, and conventional. As a result, anticipation and obviousness disclosures may not be sufficient to serve as a disclosure that a feature was well-understood, routine, and conventional.

Aside from extrinsic sources of evidence, practitioners also should be mindful that the patent specification can be a compelling source of proof on these issues. In Berkheimer, the Federal Circuit carefully considered statements directed to inventive concept in the specification and concluded that they created a fact issue on the issue with respect to claims directed to those improvements. Statements in the patent are intrinsic and, as a result, may command greater weight than proof coming from extrinsic sources, including experts.

In short, jury trials on Section 101 issues are likely to increase in the wake of the Federal Circuit's decisions in Aatrix and Berkheimer. Litigants should take care to ensure their pretrial case development accounts for the development of facts and theories relevant to eligibility, as they would with respect to other issues of invalidity, such as anticipation or obviousness.

Charles Everingham IV, former magistrate judge in the Eastern District of Texas, with one of the busiest patent litigation courts in the nation, returned to private practice in 2011 and has litigated a wide variety of intellectual property matters and other business disputes. He currently is a Partner with the East Texas law firm, Ward, Smith & Hill.