Judge Yvonne Gonzalez Rogers (Photo: Jason Doiy/ALM)

Some Northern District of California judges may have to rethink their approach to patent eligibility, judging from a U.S. Court of Appeals for the Federal Circuit decision Tuesday involving Fitbit Inc. and a handful of other tech companies.

The D.C.-based appellate court threw out an order from U.S. District Judge Yvonne Gonzalez Rogers that found claims from four patents ineligible—and that awarded about $560,000 in attorneys' fees for the patent owner's “exceptionally meritless” claims.

Judge Kathleen O'Malley wrote for a unanimous panel that nonpracticing entity CellSpin Soft Inc. made “specific, plausible factual allegations about why aspects of its claimed inventions were not conventional” and therefore patent-eligible. “The district court erred by not accepting those allegations as true,” O'Malley wrote in CellSpin Soft v. Fitbit.

CellSpin is a nonpracticing entity that sued Fitbit, Moov, Nike, Fossil Group, Canon, GoPro and several others, alleging infringement of patented technology that automatically transfers data from a digital camera or other “capture device” to Bluetooth-enabled mobile devices. CellSpin Soft says its technology eliminates the need for cables and almost any human intervention.

Gonzalez Rogers ruled that CellSpin had patented the abstract idea of capturing and transmitting data. She found the patents so weak, she awarded attorneys fees to six of the accused infringers. She found that while CellSpin had not acted in bad faith, it “litigated its exceptionally meritless claims aggressively” by refusing to stay discovery and amending its complaint just three days before the Section 101 hearing.

It turns out Collins, Edmonds & Schlather shareholder John Edmonds had good reason for amending the complaint. The Federal Circuit had just a few weeks earlier ruled in Berkheimer v. HP and Aatrix v. Green Shades Software that patent eligibility often poses fact issues that can't be resolved on the pleadings. So CellSpin had amended the complaint to allege that it was unconventional at the time of patenting to separate the steps of capturing and publishing data, and that doing so via a wireless connection improved the efficiency of the capture devices.

Gonzalez Rogers had dismissed the amended allegations, saying they found no support in the patent specifications.

At an April hearing before the Federal Circuit, DLA Piper partner Stanley Panikowski and Fish & Richardson associate Ricardo Bonilla argued that CellSpin had dressed up conclusory arguments as factual allegations. “Aatrix is not a license to rewrite the patent,” Bonilla told the court.

O'Malley made clear that she believed Rogers had snubbed the Federal Circuit's rulings. “Why don't we just send it back and you can make those arguments there, under the correct law—under Berkheimer and Aatrix, as we have dictated?” she asked Panikowski.

On Tuesday, O'Malley wrote for the panel that a patent owner doesn't have to tie its allegations to the patent claim specification, as Gonzalez Rogers had suggested. “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,” O'Malley wrote. “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.”

That doomed the judgment of dismissal and the fee award. And just to make it sting a little more, O'Malley pointed out a few errors in the exceptional case determination—even though attorneys fees now seem off the table.

CellSpin and Edmonds had argued that they reasonably relied on the presumption of validity, but Gonzalez Rogers had corrected them. “Although issued patents are presumed valid, they are not presumed eligible under Section 101,” she wrote, citing Federal Circuit Judge Bob Mayer's concurrence in Ultramercial v. Hulu (“Second, no presumption of eligibility attends the section 101 inquiry,” Mayer had written.)

O'Malley pointed out at the April hearing that the full Federal Circuit has “never said that” and followed up in Tuesday's opinion. “To the extent the district court departed from [the presumption of validity] by concluding that issued patents are presumed valid but not presumed patent eligible, it was wrong to do so,” she wrote.

CellSpin's motion to amend its complaint was timely under Gonzalez Rogers' own scheduling order, and reasonable in light of the Federal Circuit's new case law, she added. “The district court's finding that the timing of Cellspin's amendment contributed to making the case exceptional is therefore clearly erroneous,” O'Malley wrote.

Judges Alan Lourie and Richard Taranto concurred.