Factual Allegations on Inventive Concept Preclude Dismissal of Complaint Under § 101

Aatrix Software, Inc. v. Green Shades Software, Inc., No. 2017-1452, (Fed. Cir. Feb. 14, 2018) (Before Moore, Reyna, and Taranto, J.) (Opinion for the court, Moore, J.) (Concurring in part and dissenting in part, Reyna, J.)

The ’615 and the ’393 patents at issue in this case are directed to systems and methods that allow a user to manipulate data and create viewable forms and reports. The preferred embodiment is a data processing system with three main components: a form file, a data file, and a viewer. Aatrix sued Green Shades for infringement, and Green Shades moved to dismiss. The district court granted the motion, holding: (1) claim 1 of the ‘615 patent was not directed to any tangible embodiment and was not patent-eligible subject matter under § 101; and (2) under the Alice/Mayo two-step analysis, the remaining claims were for abstract ideas without inventive concepts and were also ineligible. Aatrix appealed. The Federal Circuit vacated the district court’s decision, reversed its denial of Aatrix’s motion for leave to file a second amended complaint, and remanded for further proceedings.

The district court erred in holding claim 1 of the ’615 patent ineligible solely because it was directed to intangible matter. The court should have performed an Alice/Mayo analysis which “begins by identifying whether an invention fits within one of the four statutorily provided categories of patent eligible subject matter.” Claims to pure data and claims to transitory signals embedded with data are generally ineligible because they are not the statutory categories: process, machine, manufacture, and composition of matter. Claim 1 of the ‘615 patent, in contrast, is for a tangible data processing system which requires a computer, software, a means for viewing and changing data, and a means for viewing forms and reports.

Although the court analyzed the remaining claims under Alice/Mayo, it erred by rejecting the proposed amended complaint, which if taken as true, would affect the district court’s §101 eligibility analysis and preclude dismissal. Patent eligibility can be determined at the Rule 12(b)(6) stage when no factual allegations, if taken as true, prevent resolving the question as a matter of law. If there are claim construction disputes at that stage, the court must either adopt the non-moving party’s constructions or resolve the disputes enough to conduct the § 101 analysis. Patentees who adequately allege their claims contain inventive concepts survive a § 101 dismissal under Rule 12(b)(6). Inventions that improve how a computer functions are patent eligible.

Here, the proposed amended complaint contained numerous allegations related to the inventive concepts in the claimed invention, which were enough to survive dismissal under Rule 12(b)(6). These included improved efficiency by saving storage space, reducing memory use and risk of thrashing, faster processing speeds, and improved “data file” importation from third-party applications. These allegations precluded the district court’s conclusion that the claimed “data file” is a routine component of a computer. Viewed in favor of Aatrix, as Rule 12(b)(6) requires, the allegations established inventive components that improved the workings of the computer itself.

Because Aatrix was entitled to its second amended complaint, the Court declined to decide whether the court erred by ruling on the § 101 motion before claim construction. The record showed a need for claim construction, to be conducted on remand.

REYNA, Circuit Judge, concurring-in-part, dissenting-in-part.

Judge Reyna disagreed with the majority’s treatment of factual evidence in its § 101 analysis. He thought the majority opinion shifted the § 101 inquiry from a legal question to a factual inquiry. Furthermore, because the motion to dismiss only challenged the First Amended Complaint, the majority’s inclusion of the Second Amended Complaint it its analysis was merely dicta. Judge Reyna agreed that the court erred in finding that Claim 1 of the ‘615 patent was intangible, and added that this underlined the denial of Aatrix’s motion to amend. As a result, both decisions, to dismiss and to reject the amended complaint, should have been vacated and remanded.

Take Away

Allegations in a patent infringement complaint that create a factual dispute about whether the claimed invention contains an inventive concept will defeat a motion to dismiss under § 101. For software inventions, such allegations include improvements in how a computer functions.  An amended complaint to make such allegations should generally be allowed.

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