CAFC Declines Trial Court's Request for Help Understanding Section 101

By Peter Schechter

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As we previously reported,[1] United States District Judge Nielson in August 2020 denied an accused infringer’s motion to dismiss the complaint based on the infringer’s defense of patent subject matter ineligibility under 35 U.S.C. Section 101.  Judge Nielson also certified his order upholding patent validity for immediate interlocutory appeal to the Court of Appeals for the Federal Circuit (“CAFC”), stating: “if this court’s ruling is erroneous, it would welcome reversal by the” CAFC.[2]  An immediate appeal would have had the potential effect of saving the trial court and litigants the time and expense of discovery and trial, in the event the CAFC decided that patent was, in fact, invalid for subject matter ineligibility under 35 U.S.C. Section 101. 

As we predicted would happen, the CAFC has now declined Judge Nielson’s request for help understanding the currently unclear, confusing, and often contradictory CAFC case law precedent interpreting and applying the U.S. Supreme Court’s Alice Corp. Pty. Ltd. v. CLS Bank Intern’l (“Alice”)[3] decision.[4]  The CAFC’s Order merely recites the statutory standard for 28 U.S.C. Section 1292(b) permissive appeals and then, “[i]n this case, we conclude that we should not permit an interlocutory appeal,” without any explanation for that conclusion.

As a result, the time and money of the parties and the precious resources of the district court may now be wasted litigating a case in which presiding Judge Nielson has already expressed his lack of confidence in validity of the patent under Section 101, should the CAFC subsequently conclude that the patent-in-suit is, indeed, invalid on that basis. 

A U.S. district judge who doubts validity of a plaintiff’s patent under Section 101 and Alice is now best advised to grant the defendant’s motion to dismiss the complaint due to the patent claiming patent-ineligible subject matter, as a matter of course and even at the risk of reversal on appeal to the CAFC.  Such grant of the motion to dismiss would yield an automatically appealable final judgment in the case.  By doing so, the trial judge would at least ensure that he spends the court’s time and resources presiding over a case in which a 3-judge panel of the CAFC has already determined, on appeal, that the patent claims are not invalid under Section 101.

However, the U.S. district judge must explain the reasons why the patent is invalid in sufficient detail to permit meaningful appellate review, as another recent decision illustrates.  In Realtime Data LLC, dba IXO, v. Reduxio Sys., Inc.,[5] U.S. District Judge Connolly in Delaware also tried to enlist the aid of the CAFC in deciding the patent eligibility issue.  Rather than deny the motions to invalidate the patents as District Judge Nielson in Colorado had done, Judge Connolly granted the motions and held invalid all 159 claims of the five patents-in-suit as being patent ineligible under Section 101. 

Apparently with no written analysis and after only a few minutes of oral argument on the issue, Judge Connolly stated that “reasonable people can disagree” on the patent eligibility question, ruled that all of the patent claims were invalid, and concluded: “I think you can take your issues up with the Federal Circuit, and if I’m wrong, I’m wrong.”  The Judge continued, “maybe Realtime is right and the Federal Circuit panel will say differently and will have that opportunity to do that.”  Once again, these are astonishing words said by a United States District Judge.  However, they reflect the reality facing all trial judges, patent lawyers, and clients working in the United States patent system at this time – understanding and then logically applying the CAFC’s confused, confusing, inconsistent, contradictory, and seemingly arbitrary precedent since the Supreme Court’s Alice decision is impossible, as a practical matter.

The CAFC expressed little sympathy and held “that the district court’s short analysis is insufficient to facilitate meaningful appellate review.”  In a concurring opinion, Circuit Judge Taranto wrote:

Judge Taranto is clearly isolated from the current realities of the jurisprudential and practical nightmare facing U.S. patent owners and accused infringers, if he actually believes that the either the CAFC’s pre- or post-July 2019 decisions “provide clarifying guidance” on the issue of patent eligibility under 35 U.S.C. Section 101.