Albright Calls SCOTUS Test ‘Confusing Abyss of Patent Eligibility Law’, Denies Motion to Dismiss

Judge Albright acknowledged that tests handed down by the Supreme Court for subject matter eligibility have created a confusing abyss of patent eligibility law before affirming the validity of Mirror Imaging’s patents on both steps of the Alice test.

Albright referred to SCOTUS' test as a Confusing Abyss of Patent Eligibility Law

Judge Alan Albright

Just over one week ago, U.S. District Judge Alan D. Albright of the Western District of Texas entered a ruling denying PNC Bank’s motion to dismiss patent infringement claims asserted by financial record retrieval tech developer Mirror Imaging. In affirming the validity of Mirror Imaging’s patents under Section 101 at the motion to dismiss stage, Judge Albright acknowledged that tests handed down by the Supreme Court for subject matter eligibility have created a confusing abyss of patent eligibility law before affirming the validity of Mirror Imaging’s patents on both steps of the Alice test.

Alleged Infringers ‘Face an Uphill Scrabble’ To Invalidate Claims on MTD

At the outset, Judge Albright noted that alleged infringers “face an uphill scrabble” when trying to invoke Section 101 to invalidate patents on a Rule 12(b)(6) motion to dismiss for failure to state a claim upon which relief can be granted. This is largely due to the U.S. Court of Appeals for the Federal Circuit’s 2018 decision in Aatrix Software v. Green Shades Software, in which the Federal Circuit ruled that factual issues undergird the Section 101 analysis such that it’s typically inappropriate to invalidate patent claims under Section 101 at the motion to dismiss stage prior to discovery, especially when a plaintiff makes concrete allegations in the complaint that the claimed invention improves the underlying functionality of a computer and the individual claim elements do not constitute well-understood, routine or conventional activity.

PNC Bank had argued to Judge Albright that Mirror Imaging’s patents cover nothing more than the idea of automating a bank teller using generic computer systems. While Judge Albright noted the existence of a string of cases at the Federal Circuit invalidating patents claiming the collection, manipulation, classification and storing of data and images, Mirror Imaging’s patent claims include the use of a “direct interlinked interface” for obtaining electronically-stored financial documents from multiple storage systems. As pled by Mirror Imaging, Judge Albright found the patent claims to improve the functionality of financial document retrieval systems, surviving the Alice inquiry at step one.

Although it wasn’t necessary to do so, Judge Albright went on to explain why Mirror Imaging’s patent claims also survived step two of Alice at the motion to dismiss stage:

As noted in Plaintiff’s Complaint, as of the priority date, ‘providers in the financial services industry were configured in such a way that archived documents were stored in either on-site or off-site facilities in one of “microfiche, microfilm, digitally, or by some other electronic storage means…” The concept of interlinking multiple data storage facilities via an electronic interface to accomplish record retrieval without the substantial backoffice effort was unconventional as of the date of the invention.’

Because PNC Bank’s motion was filed at the motion to dismiss stage, the proper legal standard required Judge Albright to accept Mirror Imaging’s pleadings in its complaint as the truth. At multiple points, Judge Albright also noted that Section 101 analysis for subject matter patentability is typically inappropriate before the court has ruled on claim construction following the Markman hearing phase of the infringement trial. Still, Judge Albright’s analysis of both prongs of Section 101, especially the analysis of Alice’s second step, which was technically unnecessary to rule on for the motion to dismiss, sends a strong message that Judge Albright has a great interest in vetting the patent law issues raised before him both fairly and thoroughly under the proper legal standard.

No Collateral Estoppel After Federal Circuit Vacated CBM Reviews Invalidating Claims

In denying PNC Bank’s Rule 12(b)(6) motion to dismiss, Judge Albright also struck down the defendant’s argument that Mirror Imaging was collaterally estopped from asserting that the patents-in-suit were valid. PNC Bank’s argument on collateral estoppel was centered on the fact that Mirror Imaging’s asserted patents were each continuations from parent patents that were invalidated in covered business method (CBM) review proceedings at the Patent Trial and Appeal Board (PTAB). In four CBM reviews, the PTAB found those parent patents to be directed to ineligible subject matter under Section 101. However, those four CBM reviews were appealed to the Federal Circuit, which vacated the underlying rulings under the appellate court’s decision in Arthrex v. Smith & Nephew. Because those final written decisions from the PTAB were vacated and new decisions weren’t reached by the PTAB on remand, Judge Albright ruled that there was no valid judgment on Section 101 eligibility that estopped Mirror Imaging from arguing the validity of its asserted patent claims.

PNC Bank had also argued that the patent claims asserted against it by Mirror Imaging in district court were substantially similar to those invalidated by the PTAB. However, Judge Albright found that it would be premature to so rule at this stage of the trial, again noting that the trial had not yet reached claim construction. Therefore, it would be “imprudent” to assess whether the challenged claims are substantially similar to those invalidated by the PTAB “[w]ithout a full understanding of the claimed subject matter and the real significances of the apparent differences between the claim languages.”

As one of the many patent owners who have run the gauntlet of CBM review at the PTAB, Mirror Imaging has long had to fight an uphill battle defending its patent rights in the face of that “confusing abyss” of Section 101 patent eligibility. Back in January 2019, the PTAB entered an order granting Mirror Imaging’s request for additional briefing on Section 101 in the four CBM reviews referenced in the PNC Bank case. That briefing was ordered just a few days after the U.S. Patent and Trademark Office under former Director Andrei Iancu released the 2019 Revised Patent Subject Matter Eligibility Guidelines in an attempt to harmonize Section 101 analyses employed during CBM reviews at the PTAB with subject matter eligibility analysis conducted during patent examination.

While those CBM reviews would later end in final written decisions invalidating Mirror Imaging’s patent claims under Section 101, at the time of the PTAB’s grant of additional briefing on Section 101, many thought leaders following the case had hopes that the PTAB’s order meant that Director Iancu was achieving his goals of bringing additional clarity to patent eligibility rulings at the USPTO. The recent ruling by Judge Albright confirms that Mirror Imaging has been meeting greater success on Section 101 arguments in recent days.

 

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12 comments so far.

  • [Avatar for B]
    B
    February 10, 2022 01:34 pm

    @ Anon

    The great thing about Albright’s analysis is that he skewers the CAFC.

    “At this point, it is trite to comment on the confusing abyss of patent eligibility law.”

    “confusing abyss of patent eligibility law” :: Fact check = true

    Anyway, Albright could have cited Investpic, American Axle, or any of the legion of brain-dead Alice-Mayo decisions, but he chose the Judge Moore/Newman side, not the Taranto/Reyna/Hughes/Stoll/Dyk side.

    Albright also made other common sense judgments, i.e., he demanded some actual claim construction, cited the law on collateral estoppel, etc. but most importantly he just didn’t assume facts not in evidence or accept idiotic over-generalizations that is the bread-and-butter of the PTAB and CAFC

  • [Avatar for Anon]
    Anon
    February 10, 2022 08:46 am

    B and Curious,

    Stroud has shown himself to be a rather disappointing lemming with the “anti-software” kool-aid stains of only registering confirmation-bias “reasonings” into his thought process.

    Shrugging away (if they even dawned on him in a first instance) the reasons why the scoreboard is broken fits the “Ends justify the Means” of a certain desired narrative.

    Kudos to you both for providing your own cogent counter points.

  • [Avatar for Curious]
    Curious
    February 9, 2022 02:57 pm

    This ruling is ridiculous, on its face.
    I suggest you read the case law regarding 12b6. Ignore the Federal Circuit — rather read the case law from all the other circuits as well as the Supreme Court (e.g., Iqbal and Twombly). A 12b6 motion is about a failure to state a claim — not a backdoor attempt to invalidate a patent (by clear and convincing evidence) prior to evidence being admitted. Albright’s ruling is consistent with how every circuit works — except the Federal Circuit, which has gone off the deep end (as usual). Actually, Albright’s ruling is consistent with Berkheimer and Aatrix (decisions that the Federal Circuit has already forgotten about).

    The patents this family issued from later were previously ruled unpatentable under 101 by the office and reversed for unrelated issues on appeal.
    Every claim of every patent stands on its own. You know that. A smart applicant always keeps a continuation (or two or three) going to fix problems that may arise in litigation. As such, the problems that may befall one patent may be corrected in subsequent patents. While it may be convenient for an accused infringer (and lazy judges) to handwave away all patents in a patent family based upon the results of a single patent in that family, the law doesn’t work that way. Different patents generally involves different issues that need to be separately addressed.

    I’m no fan of the tortured jurisprudence here but it doesn’t take reading any case other than Alice to know the subject matter and claims here are ineligible after Alice, just as the agency already found.
    Alice was an awful decision that gave us little to work with. This is what we have to work with from Alice:
    On their face, the claims before us are drawn to the concept of intermediated settlement, i.e., the use of a third party to mitigate settlement risk. Like the risk hedging in Bilski, the concept of intermediated settlement is “ ‘a fundamental economic practice long prevalent in our system of commerce.’”
    I didn’t look at the 4 separate patents at issue in this ruling, but I did look at claim 1 of the ‘275 Patent. Not a pretty claim. However, it appears to be directed to some type of an automated electronic image retrieval. This is not “a fundamental economic practice long prevalent in our system of commerce.” If you want to invoke Alice, you need to do better than that.

    I also note that the 4 separate patents at issue were all issued within the last 4 years (or at least 5 years since Alice was decided). As such, one has to assume that these were examined with Alice in mind.

    By comparison, I’m looking at the patents that were at issue in the CBM hearing. These patents were 6,973,866, 7,552,118, 7,836,067, and 9,141,612. The last one was issued in September of 2015 (i.e., a little over a year after Alice). Clearly, the claims in these patents were not written with Alice in mind. Different patents, different results — nothing ridiculous about that.

    I’m not so sure what you are so worried about. The patent invalidation business requires patents to be a threat. People don’t have a great need to pay for “protection” when patents are invalidated at a drop of a hat.

  • [Avatar for B]
    B
    February 9, 2022 02:20 pm

    @ J Stroud “This ruling is ridiculous, on its face. The patents this family issued from later were previously ruled unpatentable under 101 by the office and reversed for unrelated issues on appeal[.]”

    Respctfully, I’m 100% that’s not how collateral estoppel or res judicata works.

    Plus, the PTO doesn’t exactly adhere to this thing called “due process under the Fifth Amendment.”

    Yeah, yeah, the CAFC will overlook vapid and facially apparent violations of due process from the PTAB (I know this first-hand), and when it comes to Alice-Mayo the CAFC is more than willing to violate statutes, due process, and any decision the CAFC made earlier that day (I also know this first-hand) . . .

    . . . but Judge Albright isn’t the CAFC.

    Soooo, let PNC appeal and have the CAFC being clarity to Alice-Mayo . . . aaaaaaaahahahahahahahaaaaaaghhh (unhindered laughter) – like that will ever happen

    I really need to pull the dist. ct. records on this case and do a post-mortem. I wonder if there was some James Hanrath-level brilliance on this one.

  • [Avatar for Jonathan R Stroud]
    Jonathan R Stroud
    February 8, 2022 07:43 pm

    This ruling is ridiculous, on its face. The patents this family issued from later were previously ruled unpatentable under 101 by the office and reversed for unrelated issues on appeal; on appeal the parties settled and so it was as if the ruling never happened. I’m no fan of the tortured jurisprudence here but it doesn’t take reading any case other than Alice to know the subject matter and claims here are ineligible after Alice, just as the agency already found.

  • [Avatar for Anon]
    Anon
    February 8, 2022 07:27 am

    Sadly Pro Say, that disparity is often driven by the client’s loose control over litigation counsel (and the propensity of such non-true patent attorneys (lacking registration with the patent office and/or appreciation of prosecution and innovation protection).

    You may witness such lack of appreciation often on these boards from litigation attorneys.

  • [Avatar for Pro Say]
    Pro Say
    February 7, 2022 04:28 pm

    “Judge Albright has a great interest in vetting the patent law issues raised before him both fairly and thoroughly under the proper legal standard.”

    Oh that all the members of the CAFC would simply do likewise.

    And what of PNC? Infringer hypocrisy, of course.

    Were Mirror’s claims ineligible . . . so, too, would be their own banking patent claims . . . that they’re asserting against USAA.

    Hypocrisy indeed.

  • [Avatar for B]
    B
    February 7, 2022 03:41 pm

    Great article

    Apparently, there’s one judge out there who isn’t mystified by the CAFC’s twisted nonsense.

    However, it is apparent that Judge James Donato, as well as Judges Prost and Taranto, who together killed the claims in Yu under a 12b6 motion, never read Aatrix. Odd since Taranto was on the Aatrix panel.

  • [Avatar for Curious]
    Curious
    February 7, 2022 03:33 pm

    This is largely due to the U.S. Court of Appeals for the Federal Circuit’s 2018 decision in Aatrix Software v. Green Shades Software, in which the Federal Circuit ruled that factual issues undergird the Section 101 analysis such that it’s typically inappropriate to invalidate patent claims under Section 101 at the motion to dismiss stage prior to discovery, especially when a plaintiff makes concrete allegations in the complaint that the claimed invention improves the underlying functionality of a computer and the individual claim elements do not constitute well-understood, routine or conventional activity.
    Albright understands the law of Section 101 and of 12b6. This is why plaintiffs are interested in being in his courtroom.

  • [Avatar for Model 101]
    Model 101
    February 7, 2022 02:40 pm

    Judge Albright is a petunia in an onion patch!

    How do I get him to be my judge?

    I’m stuck in Silicon Valley – the biggest onion patch in the world…full of rotten onions,

  • [Avatar for Anon]
    Anon
    February 7, 2022 09:03 am

    This (my emphasis):

    especially when a plaintiff makes concrete allegations in the complaint that the claimed invention improves the underlying functionality of a computer and the individual claim elements do not constitute well-understood, routine or conventional activity.

    Is a judge written ‘gold-plated’ HYPER requirement that is NOT the actual law written by Congress.

    1) a selective “improving the functionality of a computer” MAY WELL be said of ANY software, seeing as “soft” is merely a design choice of “wares” in the computing arts, and ANY additional capability added by software is — by definition — an improving of the functionality of a computer.

    This reflects my long stated Grand Hall experiment result.

    2) “the individual claim elements do not constitute well-understood, routine or conventional activity” violates the requirement of taking a claim as a whole, and ignores that fact that MANY claims outside of the computing arts do nothing more than put together “individual claim elements [that ONLY] constitute well-understood, routine or conventional activity AT THE INDIIVIDUAL CLAIM ELEMENT level.

    this reflects my long stated Big Box of Electrons, Protons, and Neutrons, that would eliminate ALL asserted inventions in the entire statutory categories of the ‘Hard Goods’ items (seeing as NO ONE has invented a new elementary particle, and the manner of attaching any one particle to another particle has been a LAW OF NATURE and well-understood, routine or conventional activity since the about one second after the Big Bang: See https://astronomy.com/magazine/ask-astro/2018/12/the-first-element