Pleading Patent Ineligibility

With the issuance of the Supreme Court’s opinion in Alice v. CLS Bank, 134 S. Ct. 2347, 189 L. Ed. 296 (2014), there has been a flood of preliminary motions based on the patent ineligibility of the subject matter of the claims.

These motions have taken a variety of forms including Motions to Dismiss for Failure to State a Claim (see e.g. Glory Licensing LLC v. Toys R Us Inc., No. 09-4252, 2011 U.S. Dist. LEXIS 51888, at *18-19 (D.N.J. May 16, 2011); Cardpool Inc. v. Plastic Jungle Inc., No. 12-4182, 2013 U.S. Dist. LEXIS 9280 (N.D. Cal. Jan. 22, 2013) (affirmed by the Federal Circuit without deci­sion); Content Extraction & Transmission LLC v. Wells Fargo Bank, 2013 U.S. Dist. LEXIS 107184 (D.N.J. July 31, 2013)); Motion for Judgment on the Pleadings (see e.g. Essociate, Inc. v. 4355768 Canada Inc., 2015 U.S. Dist. LEXIS 18570 ), and Motions for Summary Judgment (see e.g. CyberFone Sys. LLC v. CNN Interactive Group Inc., 2014 U.S. App. LEXIS 3599 (Fed. Cir. Feb. 26, 2014); KomBea Corp. v. Noguar L.C., 2014 U.S. Dist. LEXIS 177186 (D. Utah Dec. 23, 2014)).

Each motion has its own limitations and advantages that should be weighed early in the litigation process.

A motion to dismiss for failure to state a claim under Rule 12(b)(6) is advantageous because in most jurisdictions it will automatically stay the need to answer the Complaint until the motion is decided. This can be of particular benefit for small clients who wish to avoid the cost of discovery prior to obtaining a decision under section 101. Submission of evidence outside the pleadings, however, converts the motion into a motion for summary judgment (see FRCP 12(d)). In most cases, one will want to submit evidence outside the pleadings, if only to prove that the claim is attempting to monopolize a well-known business practice.

A summary judgment motion has the advantage that evidence outside of the pleadings can be used to support the motion. Thus, declarations about well-known business practices, statements made during prosecution, and other patents can be submitted for consideration by the judge. One downside is that a summary judgment can be delayed by a motion under Rule 56(d). Another downside of a summary judgment motion is that in many jurisdictions you only get to assert it once. If you do not convince the court that the claims cover patent ineligible subject matter as part of the summary judgment motion, you might not get another chance until trial to address the issue. Still another disadvantage may be that discovery is usually not stayed pending a decision for summary judgment.

A motion for judgment on the pleadings, in contrast, is preferred in some jurisdictions. At a recent CLE in Utah, several members of the bench suggested that the motion for judgment on the pleadings was the preferred vehicle for raising section 101 objections to the claims. However, a motion for judgment on the pleadings also has a limitation in that it is limited to the pleadings. In Stoneeagle Services, Inc. v. Pay-Plus Solutions, Inc., Case No. 8:13-CV-2240 (M.D. Fla. Feb. 9, 20150) (J. Covington) the court denied the motion for being premature.

Upon careful consideration of the parties’ filings, Defendant’s Motion for Judgment on the Pleadings is denied, as premature. As an initial matter, both Defendants and Plaintiff cite to matters outside of the pleadings, in support of their respective positions, including the prosecution history of a “parent” patent, an expert report prepared by Robert Allen (Plaintiff’s Chairman and CEO), and a declaration submitted by Mr. Allen. However, discovery is still ongoing, and the record is thus not “fully developed.” Jozwiak, 2010 U.S. Dist. LEXIS 17221, 2010 WL 743834 at *4. Due to the deficiency of the available record, the Court declines to convert Defendant’s Rule 12(c) motion into a motion for summary judgment.

One solution to the four corners of the pleadings rule is to think well ahead when filing your answer. If you are going to make a challenge under section 101, you might want to have a specific counterclaim for invalidity under section 101. Specific allegations could be made and supported by exhibits as part of the pleadings, such as evidence of know business practices, prior art and affidavits showing facts that support subject matter invalidity. Those documents could then be used as they are part of the pleadings.

Section 101 can be a powerful tool for invalidating claims, but the strategy for using it should be carefully planned out as early as possible in the case.