Fed. Cir. Affirms Award of Attorney’s Fees, Finding Claims to Remote Ordering Clearly Ineligible for Patenting
The U.S. Court of Appeals for the Federal Circuit upheld a Delaware District Court’s award of attorney’s fees because the patent owner should have known its claims were objectively ineligible for patent protection under § 101 in Inventor Holdings, LLC v. Bed Bath & Beyond, Inc., No. 2016-2442, 2017 U.S. App. LEXIS 24781 (Fed. Cir. Dec. 8, 2017). The claims at issue related to processing payment, and specifically required processing remote orders at a local point of sale terminal. The District Court initially denied a motion to dismiss on subject-matter ineligibility grounds.
After that motion, the Supreme Court issued the Alice decision signaling that simply performing a known business practice on a computer would not be patentable, and Bed Bath & Beyond moved for judgment on the pleadings based on that decision. The motion was granted, and the Federal Circuit previously affirmed that ruling. Subsequently, Bed Bath & Beyond requested that IH be required to pay its attorneys’ fees, arguing that the case was exceptional under 35 U.S.C. § 285. IH argued that it had a reasonable basis to proceed because the District Court had issued mixed rulings on the issue of patent-eligibility and the area of law was unclear and still evolving after Alice.
The Federal Circuit found both arguments “meritless.” It stated that the patent-eligibility of IH’s claims was dubious even before Alice, and IH had an ongoing duty to reevaluate the reasonability of its positions after Alice. Recognizing that it can be difficult to determine whether a claimed invention is eligible for patent protection under § 101, the Court held that the claims in this case were clearly ineligible because they presented a fundamental business practice implemented by admittedly conventional computer hardware. As a result, it concluded that the District Court had not abused its discretion when awarding fees.
When accused of infringing claims that only require implementing a pre-Internet practice on computer hardware, business owners now have increased incentive to fight because the bulk of the cost of litigation can be imposed on a patent owner when the patent owner’s claims are likely not patent-eligible in view of Alice. This may, in turn, reduce suits by so-called “patent trolls” because they may be less able to extract nuisance payments from accused infringers. However, the decision may not be as useful as some commentators may hope, because it may be difficult to collect large awards of attrorneys’ fees from the kinds of shell companies that tend to operate in patent troll lawsuits. In addition, accused infringers may not be able to secure an award of attorneys’ fees when the asserted patent claims represent a closer call in terms of their patent-eligibility.
James C. Watson, Registered Patent Attorney
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