Alice Corp. Reaches the Northern District: Judge Donato Grants Motion to Dismiss Software Patent Claims Under Section 101

Order Granting Defendant’s Motion to Dismiss Infringement Claims for Invalidity, Open Text S.A., v. Alfresco Software LTD, et al., Case No. 13-cv-04843-JD

Thanks to the Supreme Court, Defendants may have gained a powerful pre-Markman procedural tool to attack the validity of certain kinds of patents (particularly business method and software patents) that arguably embody abstract ideas. Last week, Judge James Donato granted a Rule 12(b)(6) motion in advance of claim construction and issued the first reported decision in the Northern District invalidating patent claims pursuant to 35 U.S.C. Section 101 under the Supreme Court’s new standard for patentability announced last term in Alice Corp. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014). Both the substantive and procedural aspects of the case show that Alice may have significantly impacted the role Section 101 plays in patent litigation.

In particular, in Open Text S.A. v. Alfresco Software Ltd., the defendants Alfresco Software Ltd., Alfresco Software, Inc., and Carahsoft Technology Corp. (collectively the “defendants”) moved pursuant to Rule 12(b)(6) to dismiss two of the nine patent infringement claims asserted by plaintiff Open Text, S.A. for invalidity. The software patents describe an alleged method and technological implementation for interacting with customers and gaining marketing feedback through online communications, including email. For example, the software could be used to identify a subset of customers and ask them “How was your order?” Customers who responded positively would receive a “Thank You” while customers who responded negatively would receive, “I’m sorry, what can we do better?” Two of the relevant claims from one of these patents reviewed by Judge Donato read as follows:

37. A computer readable storage medium for facilitating a network based dialogue, comprising instructions translatable for:

assembling a set of first corresponding participants, wherein assembling the first set of corresponding participants comprises executing a first instruction of a first program in conjunction with each of the first corresponding participants, wherein the first instruction is operable to determine the occurrence of a first specified event in conjunction with each of the first corresponding participants;

assembling a set of second corresponding participants, wherein

each of the set of second corresponding participants is in the set of first corresponding participants; and

executing a second instruction in conjunction with each of the second set of corresponding participants, wherein the second instruction is associated with a first action to be performed in conjunction with each of the set of second corresponding participants.

38. The computer readable storage medium of claim 37, wherein the first specified event is an interaction with a web site.

Likewise, two of the other relevant system claims from the second patent analyzed by Judge Donato read:

21. An electronic dialog system comprising:

a data storage location;

a dialog computer interfaced with the data storage location and a communications channel, the dialog computer comprising a processor and a tangible computer readable medium storing instructions executable to:

obtain a set of first corresponding participants;

execute a first instruction of a program, wherein the program is associated with each of the first corresponding participants, wherein the first instruction causes the dialog computer to communicate with the communications channel to prompt the communications channel to send a first communication to the set of first corresponding participants;

determine that a specified event has occurred for a set of second corresponding participants, wherein the set of second corresponding participants is in the set of first corresponding participants;

execute a second instruction of the program to cause the dialog computer to take a first action in conjunction with each of the corresponding participants; and

store a set of data at the data storage location that tracks the state of a dialog.

22. The electronic dialog system of claim 21, further comprising an email server coupled to the dialog computer, and wherein the dialog computer communicating with the first communications channel further comprises communicating with the email server to cause the email server to send a first email to the set of first corresponding participants.

In ruling on the motion to dismiss directed at the patentability of these claims, Judge Donato first found he could address validity under Section 101 at the motion to dismiss stage before any claim construction briefing because the parties had not sought construction of any terms in the course of the motion to dismiss briefing. After finding it procedurally proper to rule on the motion at this early stage of the proceedings, Judge Donato moved to the substantive task of determining whether the claims at issue were patent eligible, finding that they were not. In so ruling, he relied heavily on the recent Supreme Court opinions in Mayo Collaborative Services v. Prometheus Labs, Inc. 566 U.S. 10 (2012) and Alice Corp. v. CLS Bank Int’l. These opinions lay out a two-part test for determining patent invalidity in this context: (1) determining whether the claims at issue are directed to one of three patent-ineligible concepts: laws of nature, natural phenomena, or abstract ideas; and (2) determining whether the elements of the claim contain an “inventive concept” sufficient to make that claim in practice describe more than one of the three ineligible concepts.

Turning to the first inquiry, Judge Donato found the claims at issue merely amounted to abstract ideas. He found that “[t]hey recited a very simple computer-driven method to engage in the commonplace and time-honored practice of interacting with customers to promote marketing and sales.” He further found that the claims described “the most basic and widely-understood principal of marketing,” namely seeking customer feedback to improve customer experience. This finding, however, did not settle the issue. Even though the claims were directed to an abstract idea, Judge Donato had to move to the second inquiry and examine the elements of the claims, individually and in combination, to determine whether there was an “inventive concept” that transformed the abstract ideas into patent-eligible inventions. Judge Donato found that under Alice Corp., the asserted claims failed. The Supreme Court in Alice Corp. held that a claim directed to an abstract idea did not become patent eligible by “merely requir[ing] generic computer implementation.” Similarly, Judge Donato found that “[t]he asserted claims in both patents implement the basic marketing scheme on a generic computer system without any meaningful limitations.” For example, he found that the recitations of a “computer readable storage medium” or an “email server coupled to the dialog computer” were not inventive components, but rather were generic computer technology that did not sufficiently limit the nature of the abstract ideas. Thus, he found the claims invalid and granted defendants’ motion to dismiss.

While this is the first post-Alice decision to invalidate software patents under Section 101 in the Northern District of California, other courts have already fallen in line with Alice and ruled the same – many also via Rule 12 mechanisms. Indeed, Federal Circuit Judge Bryson, sitting as a District Judge by designation in the Eastern District of Texas, issued such a ruling earlier this month in Loyalty Conversion Systems v. American Airlines, Inc., No. 2:13-cv-655 (E.D. Tex. Sep. 3, 2014), and Judge Donato cited that fact when concluding that it was appropriate to rule on the patent eligibility issue based on the pleadings, with no claim construction.

As a result of the Alice decision, entities looking to patent their software must now be careful to ensure that either the function of the software, or the manner in which it utilizes computers, are sufficiently inventive. If the software uses generic computer and Internet technology to carry-out an idea like obtaining customer feedback, it may not be patentable post-Alice.