Eastern District of Texas Implements New Local Rules for Challenging Patent Eligibility
District courts use local rules as a means to manage their case docket. In particular, local rules are a series of case management orders based on a court’s inherent power to enforce its rules, orders, and procedures. Accordingly, courts may impose appropriate sanctions on parties who fail to comply with their local rules.[1] While a court’s local rules generally apply to all lawsuits filed with that court, some courts have additional local rules for managing patent lawsuits. In the Eastern District of Texas, for example, special patent rules designate the time when a patent holder must identify to the court and all parties which patent claims are being asserted and which products allegedly infringe those patent claims (i.e., “infringement contentions”).[2] After designating these infringement contentions, the patent rules further specify when the accused infringers must disclose their invalidity contentions regarding the asserted patent claims. Under the Eastern District’s rules, these invalidity contentions should identify each item of prior art forming the basis for a challenge to a patent claim, the motivation to combine multiple prior art references for rendering a patent claim obvious, and any grounds of invalidity based on indefiniteness, enablement, written description, etc. To be valid, local patent rules must be consistent with both acts of Congress, the Federal Rules of Civil Procedure that govern U.S. federal courts, and the U.S. Constitution’s due process requirements.[3]
On July 25, 2019, the Chief District Judge of the Eastern District of Texas Rodney Gilstrap issued a new order specifying new local rules for patent cases assigned to his docket.[4] These new rules establish additional procedures for a party asserting that a patent claim does not qualify as patent-eligible subject matter. Previously, a party to a court proceeding would file a motion, e.g., a summary judgment motion or a motion to dismiss a complaint, in order to challenge a patent claim as being directed to ineligible subject matter under Alice Corp. v. CLS Bank Int’l, 573 U.S. 208 (2014). Now, the new rules require patent challengers in Judge Gilstrap’s court to serve eligibility contentions on all parties at the same time as the invalidity contentions.
Under the new rules for eligibility contentions, a party challenging patent eligibility must now provide one chart identifying each judicial exception to eligibility (e.g., abstract idea, law of nature, or a natural phenomenon) as well as whether any challenged claim is representative of any other challenged claim. If a party has no plans on challenging patent eligibility, the party can likely provide eligibility contentions that merely state “none” or “not applicable in this case” to provide notice that no patent-eligibility challenges will be made during the court proceeding. It is important to note that eligibility contentions may be admissible as evidence to the extent an eligibility contention includes a disclosure that is permitted as evidence under the Federal Rules of Evidence.[5]
Keeping with the new rules, the challenging party must also provide a second chart identifying a description of the industry for a challenged claim. More specifically, the second chart should indicate the factual and legal basis why the challenged claim is alleged to be well understood, routine, and conventional at the relevant time in the relevant industry. This second chart must also include a description how each element in a challenged claim, both individually and in combination with other elements of that claim, is well understood, routine, and conventional.
The challenging party should further provide a third chart if any other factual or legal basis is being asserted for why an asserted patent claim is otherwise ineligible for patent protection. For example, this chart may include a non-Alice basis for challenging patent eligibility, such as the asserted patent claim does not qualify as a “process, machine, manufacture, or composition of matter” under 35 U.S.C. § 101, or the asserted patent claim lacks a specific, substantial, and credible utility.
Furthermore, the new rules also require the challenging party to produce or make available for inspection and copying all materials upon which that party seeks to rely for challenging patent eligibility. In regard to these materials, the challenging party must identify patents by number, country of origin, and date of issues. The new rules also require the challenging party to provide identifying information for publications and evidence of public usage or sales that will relate to a patent-eligibility challenge. Likewise, the new rules also require the challenging party to provide English translations where any such relied upon portions of the materials are not in English.
Once a party serves their eligibility contentions, the eligibility contentions are deemed to be final contentions that cannot be further modified with only a few exceptions. Under the new rules, a party may only modify their eligibility contentions for one of the following reasons: (1) a party asserting patent infringement has amended their infringement contentions; (2) a party believes in good faith that a claim construction ruling requires changes to their eligibility contentions; and (3) a party provides a showing of good cause to the court. For example, the good cause exception may be based on a new Federal Circuit precedential decision issued after serving the original eligibility contentions that is relevant to patent eligibility for one or more of the asserted patent claims. Similarly, a new U.S. Supreme Court decision affecting patent eligibility would certainly be good cause for changing a party’s eligibility contentions.
On analysis, the new rules are a definite benefit for patent owners who enforce their patent rights in the Eastern District of Texas. However, the new rules also create additional burdens for alleged infringers. Making the eligibility contentions due concurrently with invalidity contentions should greatly increase the workload on the alleged infringers’ legal counsel. Under the Eastern District’s local patent rules, a 45 day window is designated between serving infringement contentions and when invalidity contentions are due. Therefore, this tight window will now encompass eligibility contentions as well. On a positive note, early disclosure of eligibility contentions may promote early settlement prior to filing dispositive motions on patent-eligibility issues.
[1] See Flaksa v. Little River Marine Const. Co., 389 F.2d 885, 887 n. 3 (5th Cir. 1968).
[2] Appendix B: Patent Rules available at http://www.txed.uscourts.gov/?q=patent-rules.
[3] See O2 Micro Int’l Ltd. v. Monolithic Power Sys., Inc., 467 F.3d 1355, 1364 (Fed. Cir. 2006); In re Katz Interactive Call Processing Patent Litigation, 639 F.3d 1303, 1311-1313 (Fed. Cir. 2011) (upholding the district court’s claim selection procedure that the patent holder only asserts a specific number of claims, which would be further narrowed after discovery).
[4] “Standing Order Regarding Subject Matter Eligibility Contentions Applicable to All Patent Infringement Cases Assigned to Chief District Judge Rodney Gilstrap,” available at http://www.txed.uscourts.gov/sites/default/files/judgeFiles/EDTX%20Standing%20Order%20Re%20Subject%20Matter%20Eligibility%20Contentions%20.pdf.
[5] Eastern District of Texas, Patent Rule 2-4 Admissibility of Disclosures
