The Software IP Report

Attorney Fees Awarded for Post-Alice Patent Litigation

The Federal Circuit has affirmed an award of attorney fees under 35 USC § 285 against a patent owner that pursued its case alleging infringement of a business method patent after the US Supreme Court decided Alice Corp. v. CLS Bank Int’l. in June 2014. Inventor Holdings, LLC v. Bed Bath & Beyond Inc., No. 2016-2442 ( Fed. Cir. Dec. 8 2017) (opinion by Judge Chen, joined by Judges Wallach and Stoll; precedential). Claims of US Patent No. 6,381,582 recite methods for processing payments for the sale of goods. The court agreed that, “following the Alice decision, [the patent owner’s] claims were objectively without merit.” A fee award was therefore justified.

The District Court had granted the defendant’s motion for judgment on the pleadings based on patent-ineligibility under 35 USC § 101 in August 2015; and the Federal Circuit affirmed this decision in April 2016. Once that appeal was complete, the District Court ruled on the defendant’s pending motion for an award of fees under Section 285, agreeing that the patent owner’s continuation of its case after Alice made the case “exceptional” under Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014).

The Federal Circuit reasoned that “[u]nder [the first step of the patent-eligibility test set forth in] Alice, the claims of the ’582 patent are manifestly directed to an abstract idea.” The second prong of the Alice test (inventive concept) could not help the patent owner, because the specification only unambiguously disclosed conventional components “for implement in the asserted method claims.”

The District Court had denied other defendants’ patent-eligibility motions before Alice, but the court rejected the patent owner’s argument as “meritless” that it was fair to continue because Alice did not significantly change the law.  As the Federal Circuit explained in Mortgage Grader, Inc. v. First Choice Loan Services Inc., “a § 101 defense previously lacking in merit may be meritorious after Alice.” The court here did agree with the patent owner “as a general matter that it was and is sometimes difficult to analyze patent eligibility” under the Mayo/Alice test.  Nonetheless, there was no uncertainty in the present case that “applying the principles set out in Alice” meant “that the ’582 patent’s claims are ineligible.” The “asserted claims were plainly invalid in view of Alice and its reasoning.”

Plaintiffs are responsible for reassessing their cases “in view of new controlling law.” It was therefore not an abuse of discretion to award fees here (including appellate fees).