Federal Circuit Remands District Court's "Cursory" Section 101 Analysis for Further Review
Realtime Data filed suit in the U.S. District Court for the District of Delaware against a number of defendants alleging infringement of various combinations of claims from five different patents. The asserted patents had been widely litigated prior to these lawsuits and had survived multiple patent-eligibility challenges. Despite this, the defendants argued to the district court that all of the 159 claims of the asserted patents were ineligible under Section 101.
The district court requested that each party submit a letter to the court identifying which Supreme Court or Federal Circuit cases were most similar to the challenged claims. Following submission of those letters, the district court heard oral argument that lasted more than two hours. Following oral argument, the district court ruled on the pending motions, explained that it would "not be issuing written opinions," and that the transcript would function as the ruling. At that time, the court declared that all 159 claims of the asserted patents were patent ineligible under Section 101.
Following the district court's ruling, Realtime Data asked for a ruling on its pending request for leave to amend its complaints. The court denied that request and entered final judgment.
The Federal Circuit's Discussion
The U.S. Court of Appeals for the Federal Circuit began its opinion with a Judge Learned Hand quote, where he called the court-created "invention requirement" the most baffling concept in all of patent law. Judge Kathleen O'Malley stated that Judge Hand "would likely save that characterization for the court-created exceptions to what constitutes patentable subject matter" under Section 101.
With that introduction, the Federal Circuit reminded us that while it does have de novo review for this issue, it is not a court of first review. The Federal Circuit remains a court of appeal and does not resolve complex legal issues, like patent eligibility, without a district court opinion or reasoned analysis.
Turning to the matter at hand, the Federal Circuit found that it was missing reasoned analysis from the lower court. "Unfortunately, this is exactly the type of improper justification the district court proffered in this case." The court pointed to four shortcomings with the district court's process:
- The transcript from the argument reveals a potential improper focus on factual questions that are unsuitable for resolution at the pleading stag.
- The district court's resolution of the "directed to" question of Alice step 1 was unclear and its conclusion questionable.
- The district court failed to address, or even acknowledge, the earlier Section 101 decisions where the asserted patents survived similar challenges.
- Although the district court requested the cases most relevant to the asserted patents, the court did not address or distinguish those cases.
The Federal Circuit walked through each of the four points. For the first two, the discussion from the transcript leaves it "unclear as to the true basis for the district court's decision." Specifically for Alice step 1, "to the extent the court purported to answer the question, it is unclear that it did so correctly."
On point three, the Federal Circuit reasoned that "the district court should have, at a minimum, provided a considered explanation as to why" the earlier decisions regarding the asserted patents and patent eligibility were wrong. The Federal Circuit stated that such an analysis would not even need to be explicit. "The analysis could have been implied; the court could have analyzed the arguments for eligibility in such a way that the reasons for the differing conclusions are apparent." Here, however, the Federal Circuit said the district court failed to perform that analysis.
Finally, the district court's failed to mention, "much less distinguish," Realtime Data's most supportive cases. While the Federal Circuit did not opine on the merits of Realtime Data's contentions, it "merely noted that, by not addressing even the one case held out as most comparable by Realtime, the district court did not do enough."
The appellate court ended its opinion with one clarifying point: it did not hold that a written order is always necessary. It has seen and affirmed many oral orders in the past. This case, however, was unique because of the lack of analysis and the fact that it "eviscerated five of Realtime Data's patents and completely resolved four separate district court actions." Accordingly, the Federal Circuit vacated and remanded the decision for further proceedings.
Judge Taranto's Concurring Opinion
Federal Circuit Judge Richard Taranto wrote separately, concurring with the decision. Judge Taranto specifically noted that the district court erred at the foundational stage of its Section 101 analysis because the lower court disregarded the claim language. "The Section 101 inquiries demand close attention to the specific contention of the patent claims at issue; the specifics matter under the growing body of precedents that provide both significant analytical distinctions and fact-specific judgments important to the assessment of later-litigated facts."
Judge Taranto noted that some patent claims "lead quickly, and without need for extensive discussion," to the conclusion that they merely elaborate on an abstract idea, despite the length of the patent claim. That, however, was not the case here. "The claims, on their face and understood in light of the specifications, purport to solve engineering problems in the transfer of data." Without weighing on the merits, Judge Taranto stated that more extensive analysis was required, and a remand "will allow the district court to characterize the claims more accurately and, on that new basis, to consider relevant precedents" including a number of recent precedents that "provide clarifying guidance concerning the inquires pertinent to the analysis in cases like the ones before us."
The case is Realtime Data LLC v. Reduxio Sys., Inc., No. 2019-2198, 2020 WL 6228818 (Fed. Cir. Oct. 23, 2020).
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