Federal Circuit Reverses “Abstract” Patent Claims Dismissal, Holding Targeted Allegations of an Inventive Concept Can Save Patent

A recent Federal Circuit decision, Cellspin Soft, Inc. v. Fitbit, Inc. (2019), reversed a dismissal of a patent complaint at the pleading stage, based on a finding that the patent claims were “abstract.” Central to the reversal was that complaint allegations were used to bolster the language of the patent claims and explain how they contained an “inventive concept.”

The decision will have a significant impact on companies involved in litigating patents covering business methods and software related patents, which are often asserted by non-practicing entities, the so-called “patent trolls.” One can expect patent trolls to now attempt to bolster questionable patents by allegations in their complaints, in an attempt to come within the holding of Cellspin and avoid dismissal.

In response, parties seeking early dismissal of patent suits will often need to distinguish Cellspin. In that case, the Federal Circuit’s holding rested on the fact the allegations in the pleadings were tied to specific sections of the patent claims and explicated how they contain inventive concepts. Whether the allegations in another case are similarly focused or not will determine whether Cellspin saves the claims from dismissal.

The Patent Act provides that “any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof” may qualify for patent protection. 35 U.S.C. 101. Nevertheless, the Supreme Court has long held that three types of discoveries are excluded: laws of nature, natural phenomena, and abstract ideas.

Since the Supreme Court’s decision in Alice Corp. v. CLS Bank International, 573 U.S. 208 (2014), many business methods and software related patent claims had been dismissed at the pleading stage. This kind of an attack is particularly attractive to defendants because in many cases all that needs to be examined is the language of the patent or patents asserted in the complaint, as well as the complaint allegations. Such arguments accordingly can be advanced through a motion to dismiss – before the often great burden and expense of discovery.

The Supreme Court has adopted a two-step analysis to determine whether patents should be declared ineligible as abstract: First, the court examines whether the patent claim as a whole is directed to a patent ineligible concept, such as an abstract idea. Second, if it is, the court examines whether the claims contain an “inventive concept,” some way of organizing or structuring the product or process beyond merely implementing the abstract idea.

The Cellspin Decision

Cellspin involved several related patents, all directed to technology that allows a data capture device, such as a digital camera, to be connected to a mobile device so that the user can automatically publish content to a website. Most of the patents used established Bluetooth technology to connect hardware to the website.

The district court dismissed all of the patent claims as ineligible abstract ideas under Alice. The Federal Circuit agreed with the district court at the first step of the analysis: the patents were directed to an abstract idea, because they were directed to the idea of capturing and transmitting data from one device to another. “[W]e have consistently held that similar claims reciting the collection, transfer, and publishing of data are directed to an abstract idea.”

But on the second step of the analysis – the inventive concept – the Federal Circuit rejected the dismissal. “An inventive concept reflects something more than the application of an abstract idea using well-understood, routine, and conventional activities previously known to the industry.”

Critically, Cellspin’s complaint allegations identified several ways in which its application of capturing, transferring, and publishing data was unconventional, and improved upon the prior technology.

For example, it alleged that separating the process into two separate steps conducted by separate hardware connected by a wireless paired connection was both unconventional and achieved significant benefits over the prior art. It also alleged that the specific “ordered combination” of steps and devices was inventive.

Since on a motion to dismiss the rule is that factual allegations, if plausible, must be accepted as true, this was enough at the pleading stage to save the patent claims.

Lessons for Future Cases

While the Federal Circuit clearly held that complaint allegations can be used to bolster eligibility of patent claims, it also emphasized that such allegations must be focused on specific parts of the patent claim language and explain how they are inventive:

[W]e do not read [prior case law] to say that any allegation about inventiveness, wholly divorced from the claims or the specification, defeats a motion to dismiss, plausible and specific factual allegations that aspects of the claims are inventive are sufficient. As long as what makes the claims inventive is recited by the claims, the specification need not expressly list all the reasons why this claimed structure is unconventional. In this case, Cellspin made specific, plausible factual allegations about why aspects of its claimed inventions were not conventional, e.g., its two-step, two-device structure requiring a connection before data is transmitted. The district court erred by not accepting those allegations as true.

Parties seeking to assert patents subject to eligibility challenges (and thus opposing motions to dismiss) are well advised to include allegations that assert that the patent contains an inventive concept. And such allegations must be tied to specific portion of the patent claims, and contain specific reasons why they are inventive, not merely conventional application of known technological steps.

Conversely, parties seeking to dismiss such patent claims should closely scrutinize both the patent claims and the complaint allegations to ensure that the latter is closely focused on the former, and specifically explain how the claims contain an inventive concept.

Where the complaint allegations are not so focused, then the Cellspin decision might be distinguished and dismissal at an early stage still achieved.