Patent Riffs and Links – Aatrix Software v. Greenshades

AATRIX SOFTWARE, INC v. GREEN SHADES SOFTWARE, INC [OPINION] | CAFC.USCOURTS.GOV Aatrix Software, Inc v. Greenshades Software, Inc

Militating Against Early Or Summary § 101 Determinations | LEXOLOGY
Procedural posture:“In this case, Aatrix sued Green Shades in the District Court for the Middle District of Florida, alleging that Green Shades infringed U.S. Patents Nos. 7,171,615 and 8,984,393, which are directed to systems and methods for designing, creating, and importing data into a viewable form on a computer. Green Shades moved to dismiss Aatrix’s complaint under Fed. R. Civ. P. 12(b)(6), arguing that all claims of the patents were ineligible under § 101. The district court granted the motion to dismiss and held every claim ineligible under § 101. Aatrix in turn moved to modify and vacate the judgment, for reconsideration, and for leave to file a second amended complaint, which Aatrix argued supplied additional allegations and evidence that would have precluded dismissal under § 101. The district court denied Aatrix’s motions. Aatrix appealed…In a February 14, 2018 decision by Judges Moore, Reyna, and Taranto, the Federal Circuit vacated the district court’s grant of the motion to dismiss, reversed the denial of Aatrix’s motion for leave to file a second amended complaint, and remanded for further proceedings.”

Aatrix Software, Inc. v. Green Shades Software, Inc. (Fed. Cir. 2018) | PATENTDOCS.ORG
Erred… “While the case law has long held that claims directed to nothing more than signals or data structures do not fall into any of the four categories of patentable subject matter, Aatrix’s system claim ‘requires a computer operating software, a means for viewing and changing data, and a means for viewing forms and reports.’ Thus, the system is tangible.

The District Court also erred in denying Aatrix the opportunity to amend its complaint. The District Court did so without explanation. But the Federal Circuit viewed the second amended complaint as including factual allegations that ‘if accepted as true, establish that the claimed combination contains inventive components and improves the workings of the computer.’ Notably, the second amended complaint included specific allegations regarding the technical improvements of, and problems solved by, the claimed inventions. If accepted as true, they would ‘contradict the district court’s conclusion that the claimed combination was conventional or routine.’ As a consequence, the District Court’s dismissal was an abuse of discretion, and premature.”

Pair of Federal Circuit Decisions May Impact Early Section 101 Challenges in Patent Litigation | NATLAWREVIEW
“In Aatrix, the court held that the district court erred in denying the patent owner leave to amend its complaint, finding the allegations in the proposed amended complaint, if taken to be true, raised factual disputes underlying the Section 101 analysis. Aatrix Software, Inc., slip op. at 8-9. Judge Moore, writing for the panel majority, focused on specific allegations that the claimed inventions were an improvement over the prior art that provided increased processing efficiency. Id. at 10. The court found that these allegations ‘suggest that the claimed invention is directed to an improvement in the computer technology itself,’ contradicting the lower court’s conclusion that the claimed combination was routine and conventional. Id. at 10-11. As in Berkheimer, the court observed that ‘[w]hether the claim elements or the claimed combination are well-understood, routine, conventional is a question of fact,’ ultimately concluding that, in the case at hand, the ‘question cannot be answered adversely to the patentee based on the sources properly considered on a motion to dismiss.’ Id. at 11-12. Judge Reyna dissented-in-part and questioned the role of factual evidence in Section 101 challenges. Id., Dissent slip op. at 2. Judge Reyna expressed concern that the majority opinion effectively converts a motion to dismiss on Section 101 grounds into ‘full blown factual inquiry,’ welcoming ‘an inexhaustible array of extrinsic evidence, such as prior art, publications, other patents, and expert opinion.’ Id.”

Factual Questions May Preclude Early Resolution of Invalidity under Section 101 | ANDREWSKURTH
Sounds familiar? “Echoing the views expressed in Berkheimer, the majority opinion in Aatrix states that ‘while the ultimate determination of eligibility under §101 is a question of law, like many legal questions, there can be subsidiary fact questions which must be resolved en route to the ultimate legal determination. The Court also repeated the proposition from Berkheimer that ‘whether the claim elements or the claimed combination are well-understood, routine, conventional is a question of fact. After reviewing the allegations of the parties, the Court held that ‘in light of the allegations made by Aatrix, the district court could not conclude at the Rule 12(b)(6) state that the claimed elements were well-understood, routine, or conventional and, therefore, vacated the district court’s dismissal…

As in Berkheimer, the majority opinion in Aatrix was written by J. Moore and joined by J. Taranto. J. Reyna, the third member of the Aatrix panel (who was not on the Berkheimer panel), joined the majority with respect to the error made by the district court regarding the ‘tangible element issue, but dissented with respect to the broader holding of the majority. In particular, J. Reyna criticized the majority opinion for its ‘attempt[] to shift the character of the §101 inquiry from a legal question to a predominantly factual inquiry and for imposing broad obligations on the district court to engage in ‘claim construction where the meaning of a claim term is placed in controversy, even where, as here, proposed constructions are not presented to the court. J. Reyna warns that ‘one effect of this approach is that a plaintiff facing a 12(b)(6) motion may simply amend its complaint to allege extrinsic facts that, once alleged, much be taken as true, regardless of its consistency with the intrinsic record.”

Aatrix Software v. Green Shades Software: Pleading must be taken as true on 101 motion to dismiss | IPWATCHDOG
Dissent: “Dissenting in part from the majority opinion was Circuit Judge Jimmie Reyna, who agreed with the majority’s decision to vacate the ruling and remand proceedings to the district court on the motion to dismiss. However, Judge Reyna disagreed with the majority on the role of factual evidence in a Section 101 inquiry and felt that the court should have only decided on the issue of Aatrix’s leave to file a second amended complaint. ‘The problem is that the 12(b)(6) procedure is converted into a full blown factual inquiry on the level of § 102, § 103, and § 112 inquiries, Judge Reyna writes. ‘Despite the majority’s attempt to cabin its opinion to 12(b)(6), I see little to prevent argument that these notions extend also to summary judgment proceedings. Reyna also notes that the new allegations and evidence discussed by the majority were not presented at the district court. ‘As an appellate court, we should not pass judgment on matters not addressed by the district court, he writes.”

Is there a Light at the End of the Alice Tunnel? | IPWATCHDOG
Meredith Addy: “In analyzing the dismissal, the Court noted that Rule 12 dismissal is only applicable ‘when there are no [non-movant] factual allegations taken as true. If there are claim construction disputes, the Court continues, the district court must adopt the ‘non-moving party’s constructions or resolve the dispute to the extent needed to conduct the § 101 analysis. Based on these premises, district court erred when it denied leave to amend without claim construction and in the face of factual allegations which were spelled out in the proposed second amended complaint. Slip op 6. The Court remanded to allow Aatrix to file its second amended complaint…I am thrilled to see this recognition by the Court… Hopefully, however, this is the beginning of a recognition of the underlying facts and the procedure required for proper Rule 12 dismissal, and not just a blip in the Alice carnage.”

Eligibility Analysis and its Underlying Facts: A Roadmap for Surviving Dismissal on the Pleadings | PATENTLYO
Future? “Following the majority opinion, some plaintiffs will now look to the patentee’s proposed proposed amended complaint as one roadmap establishing a factual dispute sufficient for a patentee to overcome a motion on the pleadings. In particular, the complaint alleges a novel data importation scheme that is database independent and that ‘eliminat[es] the need for hand typing in the values. Further, the complaint alleges that the result is ‘increased the efficiencies of computers processing tax forms and ‘saved storage space on the computers.

Although not proven, Judge Moore suggests that – if proven – these allegations would leave the asserted claims patent eligible since they are ‘directed to an improvement in the computer technology itself and not directed to generic components performing conventional activities. Judge Moore then goes on to explain that these allegations are factual allegations rather than conclusory legal allegations and must be given due process according to the rules of our legal system. The majority opinion also claims the following: ‘Whether the claim elements or the claimed combination are well-understood, routine, conventional is a question of fact. And in this case, that question cannot be answered adversely to the patentee based on the sources properly considered on a motion to dismiss, such as the complaint, the patent, and materials subject to judicial notice.’ This quote sets-up the potential en banc case…”

Federal Circuit Reverses Rule 12(b)(6) Dismissal on Section 101 Grounds Due to Factual Allegations | NATLAWREVIEW
More future… “[P]laintiffs may benefit from including Section 101–related factual allegations in a complaint to defend against subject-matter eligibility challenges at the pleading stage. Such allegations may include that the claimed invention is ‘not well-understood, routine, or conventional activity, as in Aatrix. Other potential ‘subsidiary fact questions for Section 101 may include (1) whether the claims ‘solve a technological problem, (2) whether the claimed method is implemented with generic computer technology, or (3) whether a proposed new application or computer-implemented function is ‘an improvement to the capability of the system as a whole.”