RMail v. Amazon.com: Can Invalidity Based on 35 U.S.C. § 101 Be Properly Raised as a Defense in Litigation?*

The America Invents Act (my how I hate that title!) has caused much change and rethinking about how patent law will be practiced in the future, especially patent prosecution in the USPTO.  A slew of new (and in some cases, recast) procedures will be instituted to permit validity challenges, both pre-grant and post-grant.  One of those new procedures is post-grant review which permits (under new 35 U.S.C. § 321(b)) a “request to cancel as unpatentable 1 or more claims of a patent on any ground that could be raised under paragraphs (2) or (3) of section 282 (relating to invalidity of the patent or any claim).”  As those familiar with patent infringement litigation recognize, section 282 (aka, 35 U.S.C. § 282) referred to by new 35 U.S.C. § 321(b) also defines what defenses in may be raised in patent litigation “involving the validity or infringement of a patent”:

(1) Noninfringement, absence of liability for infringement, or unenforceability,

(2) Invalidity of the patent or any claim in suit on any ground specified in part II of this title as a condition for patentability,

(3) Invalidity of the patent or any claim in suit for failure to comply with any requirement of sections 112 or 251 of this title,

(4) Any other fact or act made a defense by this title.

In step with these new procedures authorized by the AIA, the USPTO has promulgated corresponding rule packages at a “fast and furious” pace.  As part of the post-grant review rules package, the USPTO has interpreted what new 35 U.S.C. § 321(b) means in terms “grounds” that may be raised.  See Ken Nigon’s Post Grant Review, Inter Partes Review and Transitional Program for Covered Business Method Patents.  Interestingly, the USPTO post-grant review rules package has interpreted new 35 U.S.C. § 321(b), and more specifically 35 U.S.C. § 282(2), to mean that not only are 35 U.S.C. § 102 (novelty) and 35 U.S.C. § 102 (obviousness) proper grounds for a post-grant review request, but so is 35 U.S.C. § 101 (inventions patentable).

This interpretation by the USPTO that post-grant review requests may include challenges for patent-eligibility under 35 U.S.C. § 101 has caused a “renaissance” of rethinking about what the actual language of 35 U.S.C. § 282(2) says and means.  See Professor Hricik’s post entitled “Are the Courts Correct in Their Assumption that a Patent Issued on Non-patentable Subject Matter is Invalid?” on Patently-O.  By its literal words, 35 U.S.C. § 282(2) says that the invalidity of the patent or claim may be based on “any ground specified in part II of this title [i.e., Title 35] as a condition for patentability (emphasis added).”  So what is a “condition for patentability” under part II of Title 35?  Ah, that’s the rub.  The only sections of part II that are specifically characterized (by their headings) as “conditions for patentability” are 35 U.S.C. § 102 and 35 U.S.C. § 103.  By contrast, 35 U.S.C. § 101 is not characterized as a “condition for patentability.”  (I might also add that 35 U.S.C. § 101 at the end says that it is “subject to the conditions and requirements of this title” which may subtly suggest that this section is not a “condition for patentability.”)

With this new rethinking about what are “conditions for patentability” in the post-grant review context, it was just a matter of time before this “elephant” would poke its “nose” into the patent litigation “tent.”  In the pending case of RMail, Limited v. Amazon.com, Inc., one of the accused infringers (PayPal) moved for partial summary judgment of invalidity of all of the asserted claims of U.S. Pat. No. 6,571,334 (the ‘334 patent) and U.S. Pat. No. 6,182,219 (the ‘219 patent for which the ‘334 patent is the parent) directed to apparatus and methods for authenticating electronic messages (i.e., that a sender has sent certain information via a dispatcher to a recipient) based on patent-ineligibility under 35 U.S.C. § 101.  One of the asserted claims (independent Claim 1 of the ‘334 patent) recites this method for authenticating electronic messages as follows:

A method of authenticating a dispatch and contents of the dispatch transmitted from a sender to a recipient, comprising the steps of:

sending content data representative of the contents of the dispatch, and, a destination of the dispatch associated with said recipient, to an authenticator functioning as a non-interested third party with respect to the sender and the recipient, to be forwarded to said destination;

receiving a representation of authentication data that has been generated by said authenticator, said authentication data comprising a representation of the following set A of information elements: a₁?comprising said content data, and dispatch record data elements a₂, . . . , a_n which includes at least an indicia a₂ relating to a time of the dispatch which is provided in a manner resistant to or indicative of tampering by either of the sender and the recipient, and an indicia a₃ relating to said destination of the dispatch,

wherein at least part of said authentication data is secured against tampering of the sender and the recipient, and

wherein said authentication data includes a set B comprising one or more information elements b₁, . . . ,b_m generated by respectively applying functions F₁, . . . ,F_m to subsets S₁, . . . ,S_m comprising selected portions of said set A, where said functions F₁, . . . ,F_m can be different from one another and said subsets S₁, . . . ,S_m can be different from one another, and wherein said authentication data does not comprise an encrypted representation of said content data and said dispatch record data which is encrypted with a secret key, either symmetric or asymmetric, associated with said recipient.

In opposing this partial summary judgment motion, the patentee (RMail) made the usual responses as to why the asserted claims of the ‘334 patent and ‘219 patent were, in fact, patent-eligible under 35 U.S.C. § 101.  Where RMail’s response gets interesting is in the Part VI argument entitled “CONGRESS DID NOT PERMIT SECTION 101 TO SUPPLY A LITIGATION DEFENSE.”  Recognizing the audaciousness and potential “heresy” of this Part VI argument, RMail acknowledged “that this argument is for the good faith extension or modification of existing caselaw.”  Even so, RMail further boldly stated that the “Courts until now have uniformly overlooked Congressional will on this question.”

RMail’s argument for why patent-eligibility under 35 U.S.C. § 101 is not a proper invalidity defense in litigation is straightforward:

1. Patent defenses are statutory.  Only patent defenses enumerated by Title 35 exist, citing the 2008 Federal Circuit case of Aristocrat Technologies Australia Pty Limited v. International Game Technology.

2. 35 U.S.C. § 282 states what these defenses are.  Only the defenses enumerated in paragraphs (2) and (4) are arguably applicable.

3. Paragraph (2) does not apply because it requires that the ground be specified in part II as a “condition for patentability.”  Only 35 U.S.C. § 102 and 35 U.S.C. § 103 are identified as a “condition for patentability,” as confirmed by their headings.

4. Paragraph (4) does not apply because “the statutory language must clearly demarcate a fact or act as a litigation defense for it to apply.”

Instead, RMail characterized patent-eligibility determinations under 35 U.S.C. § 101 as “appropriate in Patent Office application proceedings,” and asserted that “this Court lacks any statutory basis for analyzing Section 101 issues as a litigation defense.”

So what’s different about ex parte examination by the USPTO of patent-eligibility under 35 U.S.C. § 101?  Well, 35 U.S.C. § 131 governs the ex parte examination of applications by the USPTO (actually the Director of the USPTO but obviously delegated to the patent examiners).  35 U.S.C. § 131 says that the examination of the patent application must determine whether “the applicant is entitled to the patent under the law.”  The requirement under 35 U.S.C. § 101 that the invention be a “new and useful process, machine, manufacture, or composition of matter” (or any “new and useful improvement thereof”) is obviously something “under the law.”  So if what is claimed by the application isn’t in one of the statutory classes specified in 35 U.S.C. § 101, it certainly isn’t entitled to a patent “under the law.”

As pointed out astutely by RMail (and what is also pretty startling once you realize it) is that the Supreme Court jurisprudence on patent-eligibility under 35 U.S.C. § 101 (since its enactment in the 1952 Patent Act) have primarily involved ex parte prosecution appeals from the USPTO:  Gottschalk v. Benson; Parker v. Flook; Diamond v. Diehr; Diamond v. Chakrabarty; and Bilski v. Kappos.  There are only two instances involving patent litigation I’m aware of where the Supreme Court squarely determined patent-eligibility under 35 U.S.C. § 101:  the recent case of Mayo Collaborative Services v. Prometheus Laboratories, Inc. (ruling that the claimed method was patent-ineligible under the “law of nature” doctrine); and the 2001 case of Pioneer Hi-Bred International v. JEM AG Supply (which ruled that sexually reproduced plants qualified as either “manufactures” or “compositions of matter” under 35 U.S.C. § 101).  But as RMail correctly observed “no one seems to have pointed out to the Supreme Court [in Prometheus] this important threshold issue of statutory construction, and statutory limitations on the powers of the federal courts.”  Accordingly, Prometheus “does not bar this Court from issuing a correct ruling in the present adversarial context.”

RMail’s attorneys also did their legal research homework to address “but everyone (including the courts) has assumed beyond question for years that patent-eligibility under 35 U.S.C. § 101 was an invalidity defense in patent infringement litigation.”  As poignantly stated by the RMail, “[e]ven long-term statutory misconstruction will not bar restoring the patent system to its statutory limits.”  In this regard, RMail cited the 1994 Supreme Court case of Central Bank of Denver v. First Interstate Bank of Denver which overruled 60 years of allowing a certain statutory cause of action “because Congress had not expressly provided for that cause of action.”  The selection of the Central Bank of Denver case was also likely very deliberate as 35 U.S.C. § 101 has also now been in existence for 60 years.

One potential “fly” in RMail’s “ointment” that patent-eligibility under 35 U.S.C. § 101 isn’t a proper invalidity defense in patent litigation comes out of the Aristocrat Technologies case.  Judge Linn (writing for the Federal Circuit panel) in Aristocrat Technologies ruled that an alleged improper revival of a patent application for “unintentional delay” could not be raised as an invalidity defense in a patent infringement action.  Judge Linn reviewed 35 U.S.C. § 282, again focusing on what paragraphs (2) and (4) authorized as invalidity defenses.  After that review, Judge Linn concluded that neither paragraph (2), nor paragraph (4) of 35 U.S.C. § 282 recognized an invalidity defense based on improper revival of a patent application for “unintentional delay.”

But that wasn’t all that Judge Linn said in Aristocrat Technologies.  In construing when paragraph (2) of 35 U.S.C. § 282 applied, Judge Linn observed that “[i]t has long been understood that the Patent Act set out the conditions for patentability in three sections:  101, 102, and 103,” citing the seminal 1966 Supreme Court case of Graham v. John Deere Co. which stated the following:

“The [1952 Patent] Act sets out the conditions of patentability in three sections.  An analysis of the structure of these three sections indicates that patentability is dependent upon three explicit conditions: novelty and utility as articulated and defined in § 101 and § 102, and nonobviousness, the new statutory formulation, as set out in § 103.”

Judge Linn went even further in footnote 3 of his Aristocrat Technologies opinion to say:   “Although the Supreme Court in Graham referred only to the utility requirement aspect of section 101, as we often do, it is beyond question that section 101’s requirement, that the invention be directed to patentable subject matter, is also a condition for patentability (emphasis added).”

Judge Linn’s reliance upon Graham for patent-eligibility under 35 U.S.C. § 101 to be a “condition for patentability” for the purposes of 35 U.S.C. § 282(2) is problematic.  When it comes to patent law, the Supreme Court is all too often very long on “rhetoric,” but very short when it comes to rigorously analyzing the language of the patent statutes.  And this citation by Judge Linn from Graham is no exception.  Nowhere do you find in Graham any discussion or analysis of what the Supreme Court’s statutory basis was for treating 35 U.S.C. § 101 as a “condition for patentability” and especially as a “condition for patentability” within the meaning of 35 U.S.C. § 282(2) to make 35 U.S.C. § 101 a proper invalidity defense in patent infringement litigation.  Likewise, “squint as we may,” Prometheus says not one word about the statutory basis that permits 35 U.S.C. § 101 to be asserted as an invalidity defense in patent infringement litigation.

The Federal Circuit is also not immune from glossing over what the patent statutes say and mean.  One Federal Circuit judge who might well consider this question of proper invalidity defenses under 35 U.S.C. § 282(2) to be a highly relevant point is Judge Newman.  Judge Newman is a real stickler for paying attention to what the patent statutes say (and especially what they mean), and I completely agree with her approach.  All too often Judge Newman (in dissent) has scolded her Federal Circuit colleagues about overlooking what the patent statutes say, and especially what they mean.  Witness the 2004 case of Honeywell International Inc. v. Hamilton Sundstrand Corp. where Judge Newman railed against her Federal Circuit colleagues en banc for essentially reading paragraph 4 (“a claim in dependent form shall be construed to incorporate by reference all the limitations of the claim to which it refers”) out of 35 U.S.C. § 112 in the context of prosecution history estoppel.

PayPal’s Reply to RMail’s part VI argument was fairly terse.  Basically, PayPal cited Judge Linn’s quote in footnote 3 of Aristocrat Technologies lock, stock, and barrel.  But RMail didn’t shy away in their Surreply.  First, RMail asserted that PayPal’s Reply agreed that “the answer [to patent-eligibility under 35 U.S.C. § 101 as a proper invalidity defense] turns on whether subject matter eligibility is a ‘condition for patentability.’”  Second, RMail asserted that PayPal reached the “wrong result because they incorrectly rely on Federal Circuit dicta,” i.e., Judge Linn’s quote in footnote 3 of Aristocrat Technologies.  In that regard, RMail is correct that Judge Linn’s quote in footnote 3 of Aristocrat Technologies is dicta (and definitely obiter) because it is completely unnecessary to the holding in that case.

Third, and most significantly, RMail points to the more recent 2012 Federal Circuit case of Myspace, Inc. v. Graphon, Inc. which said that “[t]he two sections of part II that Congress has denominated ‘conditions of patentability’ are § 102 (‘novelty and loss of right to patent’) and § 103 (‘nonobvious subject matter’).  RMail also observed that Graham “at the outmost periphery” had suggested “utility” as a so-called “condition of patentability.”  But RMail also noted that “missing from both Myspace and Graham is any statement that ‘subject matter eligibility’ is a ‘condition for patentability’ as used in Section 282(2).”

So am I saying that RMail is going win on the question of whether patent-eligibility under 35 U.S.C. § 101 is a proper invalidity defense in patent infringement litigation?  Not at all.  But the argument that RMail presents for why patent-eligibility under 35 U.S.C. § 101 is not a “condition for patentability” under part II of Title 35 (and therefore not a proper invalidity defense) is both plausible and consistent with the language of 35 U.S.C. § 282(2).  What is more disturbing to me is that the courts (including the Supreme Court) have assumed “beyond question” for 60 years that patent-eligibility under 35 U.S.C. § 101 is a proper invalidity defense, but without ever engaging in any rigorous analysis of what, exactly, is the statutory basis (including 35 U.S.C. § 282(2)) for it being an invalidity defense.  I can just imagine Judge Newman shaking her head over this one.

For more on this please see Patently-O’s article, which also provides copies of the briefs filed.

*© 2012 Eric W. Guttag.  Posted September 13, 2012 on IPWatchdog.com.