The Software IP Report

Suit Tossed on Alice Grounds Does Not Merit Attorneys Fees Under Octane Fitness

A California district court recently considered the intersection between the patent-eligibility law of Alice and the fee award standard of Octane Fitness, set against the backdrop of a (mostly) successful challenge to the patent-in-suit’s claims before the Patent Trial and Appeal Board.  In Credit Acceptance Corp. v. Westlake Servs., LLC, No. CV 13-01523 SJO (MRWx) (C.D. Cal. Nov. 2, 2015), Plaintiff sued Defendants alleging infringement of U.S. Patent No. 6,950,807, entitled “System and Method for Providing Financing.”

One of the Defendants filed a Covered Business Method (CBM) petition seeking post-grant review of all of the ‘807 patent.  The Defendant argued that the claims were either unpatentable or invalid under 35 U.S.C. §§ 101, 112 ¶ 1 and 112 ¶ 2.  Shortly thereafter, the Defendants moved to stay the district court case.

The court granted the stay motion.  At the time, the Supreme Court had granted certiorari to review the Federal Circuit’s decision in Alice, but hadn’t issued an opinion on the matter.  While the court acknowledged that the law on patentability under 35 U.S.C. § 101 was in flux, “the possibility of guidance lies on the horizon.”

The PTAB granted the Defendant’s petition to review some but not all of the ‘807 patent’s claims.  Plaintiff moved the court to set aside the stay for the claims the PTAB declined to review.  But the court refused, noting that it would “reconsider the issue after the Supreme Court releases a decision in Alice Corp.”  Ultimately, the PTAB determined that the ‘807 patent claims that were reviewed were unpatentable under 35 U.S.C. § 101.

Following that, Plaintiff filed a motion to voluntarily dismiss the district court complaint, which included a covenant not to sue.  In response, the Defendants filed a motion to recover their attorney fees under 35 U.S.C. § 285 and Octane Fitness.  According to the Defendants, the case was exceptional because the Plaintiff did not abandon the lawsuit immediately after the Supreme Court issued its decision in Alice.

The court denied the motion.  Among other things, the court reasoned that Alice was not the model of clarity the Defendants’ motion suggested.  On the contrary, the court noted “the opacity of Alice,” and the difficulties courts have had in defining the boundaries of software patentability.  Accordingly, the court declined to read Octane Fitness so broadly as to require patent owners with patents “similar to” those found unpatentable under Alice to forego their rights of enforcement, or pay attorney fees.