First Jury Verdict on Section 101 Inquiry Post-Berkheimer Finds Asserted Claims Routine and Conventional

On September 12, a jury verdict form entered in an Eastern District of Texas patent infringement case found in favor of defendant Jack Henry & Associates on its defenses of noninfringement and invalidity regarding patent claims asserted by plaintiff PPS Data. According to information provided to IPWatchdog, the verdict marks the first time that a jury has invalidated a patent under Section 101 since the February 2018 decision of the U.S. Court of Appeals for the Federal Circuit in Berkheimer v. HP Inc., where the appellate court held that factual questions underlie the Section 101 inquiry.

At issue in the verdict were claims 1 through 6 and 9 of PPS Data’s U.S. Patent No. 7216106, Method and System for Processing Financial Instrument Deposits Physically Remote From a Financial Institution. The patent claims cover computer-readable media for financial check processing through remote deposit capture, allowing for checks to be processed without the physical routing of the actual check at a financial institution. The ‘106 patent claims a filing date of April 28, 2000.

PPS Data’s Claims Survive Summary Judgment but Fall at Verdict

According to a previous report on this verdict from Patently-O, U.S. District Judge Rodney Gilstrap had refused to invalidate the claims under Section 101 as being directed to routine and conventional subject matter on a motion for summary judgment filed by Jack Henry, citing the Federal Circuit’s standard under Berkheimer. After a trial, question number 2 that was provided to the jury asked the following:

“Did Jack Henry prove by clear and convincing evidence that, from the perspective of a person of ordinary skill in the art, the Asserted Claims of the ‘106 Patent ONLY involve activities that were well-understood, routine, and conventional as of April 28, 2000?”

The jury verdict entered found that Jack Henry proved invalidity of each of the claims at issue in the verdict. The jury also found that the six accused Jack Henry remote deposit capture products didn’t infringe any of the asserted claims of the ‘106 patent.

“One of the challenges that we faced as parties and with the court is that there’s not a lot out there as far as what other courts have done with jury instructions on the Section 101 issue,” said Jay Heidrick, Shareholder at Polsinelli and lead counsel for Jack Henry. According to Heidrick, the court had proposed the verdict form and neither party had any objection to the wording of the jury instruction.

Heidrick credited Jack Henry’s success in the infringement proceedings to maintaining a laser focus on a particular theme: that Jack Henry didn’t infringe, and that the asserted claims were invalid under Section 101. “If you have compelling facts and the right story to tell, you can be successful on a Section 101 challenge with the jury,” Heidrick said.

IPWatchdog reached out to counsel for PPS Data but had not received a response as of the time of publication.

Enthusiasm for Berkheimer Gives Way to CAFC Confusion

When Berkheimer was first issued more than a year and a half ago, there was some expectation that the decision would be an important one for patent owners by making motions for summary judgment much more difficult for alleged infringers to win. With factual questions underlying the inquiry at Alice step 2B regarding whether the claim limitations recite activities that were well-understood, conventional and routine at the time of the patent application’s filing, analysis of the Federal Circuit’s decision pointed to alleged infringers having difficulties winning at both summary judgment and especially on a Rule 12(b)(6) motion to dismiss for failure to state a claim. There had been many cases in which patent owners have seen their patents invalidated early in the proceedings under the Alice/Mayo framework on a Rule 12(b)(6) motion, so the opportunity to avoid such a devastating fate has certainly been a welcoming sign to many. Further, in PPS Data v. Jack Henry & Associates, Judge Gilstrip cited Berkheimer this March when denying a motion for judgment on the pleadings regarding a Section 101 invalidity challenge, although that motion was directed at claims of a different patent asserted in the case.

In the wake of PPS Data, however, patent owners and their counsel must face the reality that Berkheimer is not a panacea. There are difficulties present in having a jury make factual determinations regarding Section 101 invalidity challenges even if the patent owner can survive past a motion to dismiss and summary judgment.

To be fair, it’s not as if there’s anyone clamoring for a reversion to the pre-Berkheimer standard of Section 101 validity as a question of law given the federal courts’ uneven application of Alice/Mayo leading to a number of contested findings of Section 101 invalidity. But for counsel representing patent owners, PPS Data might temper some of the previous enthusiasm for Berkheimer, as attorneys now face the difficulty of not only presenting the technical elements of an invention to a jury but also educating them with respect to the proper meaning of “routine” and “conventional,” terms which aren’t very well defined for the purposes of determining patent validity.

The fact that Berkheimer had a major impact on the patent litigation landscape is hard to refute; the decision itself and the U.S. Patent and Trademark Office’s examiner guidance following the decision were both deemed to be major stories in the patent world during 2018. Of course, the Federal Circuit has often shown an inability in recent years to evenly apply legal precedent, including its own. Just six months after Berkheimer came out, the Federal Circuit affirmed a grant of summary judgment on the Section 101 inquiry in BSG Tech v. BuySeasons after determining that the allegedly unconventional feature was simply a restatement of the abstract idea identified in Alice/Mayo step 2A. The Federal Circuit has applied Berkheimer in reversing the grant of a 12(b)(6) motion to dismiss for failure to state a claim as was seen in this June’s decision in Cellspin Soft v. Fitbit. But then, in the Chamberlain v. Techtronic decision issued this August, the Federal Circuit applied the well-understood, routine and conventional standard in Alice step 2A, flipping the Alice test and seemingly sidestepping Berkheimer’s instruction.

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