The Software IP Report

District Court Considers Challenges of Section 101 Eligibility on the Pleadings, Highlights Need for Factual Record: Slyce Acquisition, Inc. v. Syte-Visual Conception, Ltd.

Should eligibility under 35 U.S.C. § 101 ever be decided on the pleadings? The Western District of Texas says that such decisions should be rare because of the deep factual requirements for a proper § 101 analysis. Slyce Acquisition, Inc. v. Syte-Visual Conception, Ltd., W-19-cv-00257-ADA (W.D. Tex. Jan. 10, 2020).

Plaintiff Slyce sued Defendants for infringement of U.S. Patent No. 9,152,624. The ‘624 patent is directed to uploading images and searching for recognized objects in the images without text labels. Defendant initially filed a motion to dismiss under 12(b)(6), alleging that claim 1 of the ‘624 patent is invalid under 35 U.S.C. § 101. The motion was denied, briefly noting that, in light of MyMail, Ltd. v. ooVoo, LLC, the Court would wait until claim construction to consider eligibility on § 101. No. 2018-1758 (Fed. Cir. 2019). Surprisingly, the Court “takes no position on whether there are any factual disputes that preclude dismissal at the pleadings stage.” At the very least, this is unusual because courts typically find a factual dispute in the pleadings as justification to deny motions to dismiss, but the Court did not explore the specific claim language at all.

Defendants filed a motion for reconsideration, arguing that determining patent eligibility under § 101 is appropriate at the pleadings stage prior to claim construction. Rather than analyzing the claims under the two-part Alice test for eligibility under § 101, the Court noted that the presumption of validity of a granted patent, the factual record resulting from claim construction, and the subsequent fact discovery favored waiting to determine eligibility. On the presumption of validity, the Court noted that, to succeed on a motion to dismiss, “the movant needs to overcome both a factual deck stacked against it and a heightened burden of proof [that] may be insurmountable.” Based on the presumption of validity and the clear and convincing evidence required to prove invalidity, the Court considered a Rule 12(b) motion as “a procedurally awkward place for a court [to] resolve a patent’s § 101 eligibility.

For claim construction, the Court cited several cases in which the Federal Circuit and other courts noted that claim construction should be resolved before determining eligibility under § 101. Claim construction can provide the Court with a better understanding of the claims, which “in most cases, will affect a court’s § 101 eligibility analysis,” and the eligibility analysis may be more efficient after claim construction is completed. In addition to claim construction, fact discovery can affect whether a recitation is well-understood, routine, and conventional in the art. The Court particularly noted that dependent claims benefit from fact discovery because the additional each limitation in the dependent claims may provide the inventive concept lacking in the independent claim.

The Court then expressed its concerns with the plain difficulties of a § 101 analysis: “Alice is a difficult test to apply and yields inconsistent results. This lack of predictability and consistency is widely known and extremely problematic.” The Court noted that “courts have struggled to determine what qualifies as an abstract idea” and “analogies are often unhelpful because they abstract away important technical details…and/or are contrived, reverse-engineered analogies.” Rather than rush into an invalidity determination, “this Court believes that a court stands a better chance of making the correct § 101 eligibility decision by delaying that decision in order to spend more time understanding the patents and [their] nuances, as well as technology in general, and what was well-understood, routine, and conventional activities previously known to the industry.”

Lessons for Practice

The Court’s concern and frustration are understandable. Many courts have struggled with the Section 101 analysis, and an early trend to determine eligibility on the pleadings has shifted to delaying the decision until a better factual record is established. With legislative reform stalling in Congress, eligibility will likely remain a challenge in the foreseeable future. And some courts may embrace delaying eligibility decisions as the new normal. Indeed, the Court here has already denied a motion to dismiss on § 101 eligibility, citing Slyce and seemingly setting a standard that, at least in this Court, eligibility decisions on the pleadings will be rare.