Inventor Holdings, LLC v. Bed Bath & Beyond, Inc.
876 F.3d 1372 (Fed. Cir. 2017)
Authored by Elizabeth LoPresti
Statement of Facts: Inventor Holdings, LLC (“Inventor Holdings”) was assigned U.S. Patent No. 6,381,582 (“the ’582 patent”) as part of a corporate restructuring in September 2013. Compl. ¶ 11. The ’582 patent concerns remote payment processing; it describes a method for allowing consumers to pay locally for goods purchased remotely. The ’582 patent describes a system where a remote seller is connected to a local point-of-sale (“POS”) system through an internet connection, which allows customers to purchase goods from a remote seller and pay for those goods at a local retailer. That is, the ’582 patent provides a method for allowing consumers to place orders online, receive an order code, and take the order code in-store to complete the purchase without entering credit card information online or over telephone.
In April 2014, Inventor Holdings sued Bed, Bath & Beyond, Inc. (“Bed, Bath & Beyond”) alleging its “order online Pick Up In A Store” purchase option infringed the ’582 patent. Two months later, the United States Supreme Court issued its decision in Alice Corp. v. CLS Bank International, 134 S. Ct. 2347 (2014). Alice stands for the proposition that a patent-ineligible concept, such as an abstract idea, cannot transform into a patent-eligible invention merely by requiring generic computer implementation. 134 S. Ct. at 2357. Bed, Bath & Beyond successfully argued in the district court and on appeal that the ’582 patent described only an abstract idea implemented through generic computer technology and was therefore invalid under 35 U.S.C. § 101.
Bed, Bath & Beyond’s subsequent motion to recover attorney fees pursuant to 35 U.S.C. § 285 forms the basis of this appeal.
Procedural History: On April 8, 2014, Inventor Holdings filed a complaint against Bed, Bath & Beyond in the United States District Court for the District of Delaware alleging infringement of the ’582 patent. Appellant’s Opening Br. 1, 4. Bed, Bath & Beyond filed a motion for judgement on the pleadings pursuant to Fed. R. Civ. P. 12(c), arguing that the Supreme Court’s decision in Alice made clear that the ’582 patent was invalid under 35 U.S.C. § 101 because its claims were directed to an abstract idea. The district court found that the ’582 patent was analogous to that invalidated in Alice and granted Bed, Bath & Beyond’s § 101 motion on August 21, 2015.
Bed, Bath & Beyond then moved for an award of attorney’s fees under 35 U.S.C. § 285, which provides that the “court in exceptional cases may award reasonable attorney fees to the prevailing party.” Inventor Holdings argued that this case is not exceptional because § 101 is an evolving area of law, making patent-eligibility analyses difficult and uncertain. However, the district court found that this was an exceptional case because Inventor Holdings had an obligation to re-evaluate its case post-Alice, recognize the ’582 patent was objectively patent-ineligible, and move to dismiss the case. The district court granted the fees motion and awarded Bed, Bath & Beyond $931,903.45 for fees incurred after the Alice decision was handed down on June 19, 2014. This appeal timely followed.
Questions Presented: First, whether the district court abused its discretion by granting Bed, Bath & Beyond’s § 285 motion for attorney fees when fee awards are authorized only in exceptional cases. Second, whether Alice worked a significant change in § 101 law.
Holding: First, no. The district court acted within the scope of its discretion. Second, yes. As applied to the particular facts of this case, Alice worked a significant change to § 101 law. The Federal Circuit affirms the district court.
Reasoning: The Federal Circuit first declared that granting attorney fees in this case was not an abuse of discretion because weakness of litigation position and the need to deter wasteful future litigation, the grounds relied upon by the district court, can render a case exceptional under § 285. The Federal Circuit then analyzed the strength of Inventor Holdings’ patent infringement claim in light of Alice.
The Federal Circuit articulated the standard for exceptional cases under § 285. In Octane Fitness, LLC v. Icon Health & Fitness, Inc., 134 S. Ct. 1749 (2014), the Court explained that an exceptional case under § 285 is “simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.” 134 S. Ct. at 1756. The district court based its fee award entirely on the weakness of Inventor Holdings’ argument post-Alice and the need to deter wasteful litigation on similarly weak arguments in the future. The Federal Circuit held that the district court did not abuse its discretion by relying on these grounds to award attorney fees and proceeded to demonstrate the weakness of Inventor Holdings’ § 101 claims post-Alice.
The Federal Circuit applied the two-step Alice test for patent eligibility to the ’582 patent. The Alice test first asks what abstract idea is represented in the patent’s claims, then whether the claims add significantly more to transform the abstract idea into a patent-eligible invention. The Federal Circuit held that the district court correctly found that the claims of the ’582 patent are directed to an abstract idea, that is, “local processing of payments for remotely purchased goods.” The Federal Circuit then held that the remaining claims of the ’582 patent contained only generic computer implementation of that abstract idea and therefore lacked the requisite inventive concept to rescue the patent under § 101.
The Federal Circuit dispensed with Inventor Holdings remaining arguments. Inventor Holdings argued that Alice did not work a fundamental change on § 101 jurisprudence so as to render the ’582 patent clearly invalid. However, the Federal Circuit disagreed. The court found that Alice explained a previously “less than clear” area of computer-implemented business transaction inventions and that the ’582 patent was “plainly invalid in view of Alice and its reasoning.” 876 F.3d at 1379. The Federal Circuit held that it is the plaintiff’s responsibility to continually reassess its case in light of new precedent and, because Inventor Holdings failed to reassess the weakness of its case in light of Alice, the district court did not abuse its discretion in awarding Bed, Bath & Beyond attorney fees accrued post-Alice.