Aatrix Software, Inc. v. Green Shades Software, Inc., Appeal No. 2017-1452 (Fed. Cir. Feb. 14, 2018)

In Aatrix Software, Inc. v. Green Shades Software, Inc., the Federal Circuit vacated a district court’s 12(b)(6) ruling that asserted claims were patent-ineligible under 35 U.S.C. § 101, and reversed its denial of plaintiff’s motion to file a second amended complaint.  Aatrix Software marks the second time in a week that the Federal Circuit has remanded a decision finding patent claims ineligible under Section 101, a departure from its typical deference to such rulings since the Supreme Court’s decision in Alice Corp. Pty. Ltd. v. CLS Bank Intern., 134 S. Ct. 2347 (2014).  See Berkheimer v. HP Inc., Appeal No. 2017-1437 (Fed. Cir. Feb. 8, 2018), and our summary of that decision here.

In Aatrix, the Federal Circuit panel found that the district court erred in several respects.  First, the panel found error in the district court’s ruling that one claim directed to “[a] data processing system” was ineligible for being directed to an intangible embodiment.  The panel explained that while claims to pure data or transitory signals are directed to ineligible subject matter, the claim at issue claimed “a data processing system which clearly requires a computer operating software, a means for viewing and changing data, and a means for viewing forms and reports.”  The panel found that, notwithstanding the absence of limitations expressly requiring the presence of computer hardware—which were present in other claims of the asserted patents—“[t]his is very much a tangible system.”

The panel further found that the district court erred in denying appellant’s motion for leave to file a second amended complaint.  The majority admonished that while it is possible to determine Section 101 eligibility at the Rule 12(b)(6) stage, there must be no factual allegations that, taken as true, prevent resolving the eligibility question as a matter of law.  The majority found that the proposed second amended complaint contained numerous such factual allegations, and that amendment thus would not have been futile.  These included descriptions of the development of the claimed invention; how it specifically addressed identifiable problems in the prior art; and allegations of experimental data showing that it improved computer efficiency in performing certain tasks.  The majority found that, taken as true, these allegations suggested that the invention is directed to an improvement in the computer technology itself–rather than generic components performing conventional activities—and is thus eligible for patent protection.

While not formally assigning error, the majority also questioned the propriety of ruling on the two motions without resolving claim construction questions that may have affected the outcomes, and directed the district court to resolve those issues as necessary on remand.  The majority admonished that in the event of claim construction disputes at the Rule 12(b)(6) stage, a district court is bound to either resolve the disputes to the extent necessary to perform a Section 101 analysis, or otherwise to proceed by adopting the non-movant’s constructions.

Judge Reyna filed a separate opinion, concurring with the majority’s holdings, but disagreeing with their “attempt[] to shoehorn a significant factual component” into the legal question of Section 101 eligibility under Alice.  Procedurally, Judge Reyna also took issue with the majority’s statements that the allegations of the proposed second amended complaint precluded dismissal, as no motion to dismiss that proposed complaint was before either the panel or the district court.

Decision available here.

ALSO THIS WEEK

In re Hodges, Appeal No. 2017-1434 (Fed. Cir. Feb. 12, 2018)

In an appeal from an examination, the Federal Circuit reversed the examiner’s findings, affirmed by the PTAB, that two prior art references anticipated patent claims drawn to certain structures of valves.  The Federal Circuit also vacated the PTAB’s obviousness analysis combining the two pieces of prior art, finding that the PTAB’s “single paragraph” analysis failed to sufficiently apply the legal standard for obviousness, or explain its factual conclusions.  The Court remanded to allow the patent office to provide further factual findings and explanations of its obviousness conclusion.

Decision available here.