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

By Steve Brachmann
September 27, 2019

“[F]or counsel representing patent owners, PPS Data might temper any 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 of informing them of the proper meaning of ‘routine’ and ‘conventional’—terms which aren’t very well defined for the purposes of determining patent validity.”

jury - https://depositphotos.com/12286502/stock-photo-trial-by-jury.htmlOn 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.

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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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The Author

Steve Brachmann

Steve Brachmann is a freelance journalist located in Buffalo, New York. He has worked professionally as a freelancer for more than a decade. He writes about technology and innovation. His work has been published by The Buffalo News, The Hamburg Sun, USAToday.com, Chron.com, Motley Fool and OpenLettersMonthly.com. Steve also provides website copy and documents for various business clients and is available for research projects and freelance work.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 8 Comments comments.

  1. concerned September 27, 2019 9:02 am

    I would have no problem with a jury deciding if I get a patent.

    And the USPTO is not following Berkheimer. My examiner has not offered any fact or evidence that my “inventive step” is used in my field of technology or any field of technology. In fact, the examiner admitted in his PTAB rebuttal on page 5 that my process is useful in solving a business problem.

    I feel very confident that a jury of my peers would not care a flying “F” whether the computer itself was improved. The jury’s focus would be that a problem of 63 years was solved that prevents loss of income, prevents a financial repayment hardship on a retiree, and that Medicaid fraud is prevent.

    Why does it matter whether a generic computer is used or a wege board? New and useful process solves problem. Period.

  2. Stan Wellington September 27, 2019 9:42 am

    More reason to avoid filing for a patent in the anti patent America. The country only caters to the super rich. Patents are dead and time to file for patents in Germany or China where is there is real patent protection. Greed has killed off IP holders in America.

  3. anonymous September 27, 2019 10:26 am

    First, it is good that defendant’s 12(b)(6) motion was denied. The plaintiff at least got a jury trial.

    Can someone please post the full jury instructions? With this question on the verdict form, I can almost guarantee the jury instructions contained legal error. I bet there is nothing that informed the jury that in applying the abstract idea judicial exception, they must tread carefully lest all of patent law be swallowed. Surprising that neither side would have objected.

    That question on the verdict form is only reached if the judge determined each claim was directed to an abstract idea as a matter of law. He would have needed to define the abstract idea, for each claim, and set out which claim elements in each claim correspond to that defined abstract idea. Only then would the jury then need to determine whether there was “something more” in the claim as a whole, whatever “something more” means.

    Can you imagine a question from the jury asking the judge, “Dear Judge Gilstrap, what does ‘something more’ mean?” No answer is possible. That should have been a stand alone question for the jury, asked in conjunction with the WRC question.

    Even considering no one knows what “something more” means, the question “Does claim 1 contain something more than _____?” would potentially have a different answer.

    The verdict form is also confusing, because the question relates to seven “Asserted Claims” collectively. Then, there is a line for each claim. The courts cannot articulate a clear test, so juries certainly cannot apply one either.

    We all know the “abstract idea” judicial exception is totally unworkable. As a group of professionals, let’s stop kidding ourselves.

    Congress, please fix this mess. How much more time and money must be wasted before you put forward clean legislation eliminating so-called “judicial exceptions”? We’ll rally behind your bill if you’ll just give us a clean one.

  4. Stan Wellington September 27, 2019 11:29 am

    More reason to avoid filing for a patent in the anti patent America. The country only caters to the super rich. Patents are dead and time to file for patents in Germany or China where there is real patent protection. Greed has killed off IP holders in America.

  5. Someone September 27, 2019 11:40 am

    Section 101 is interpreted as involving questions of novelty. Doesn’t that overlap with, or even moot, sections 102 and 103. Is there no canon of construction that disfavors an interpretation of one section (101) that partially subsumes another section (102/103)?

  6. Pro Say September 27, 2019 3:06 pm

    Excellent points anonymous @ 3.

    Just one point. Where you say, “He would have needed to define the abstract idea, for each claim …”; Alice actually calls for the identification of just ONE abstract idea to which ALL the claims at issue are ‘directed to’.”

    Shocking how many attorneys let their adversaries, the PTO, and some courts get away with alleging multiple alleged abstract ideas / concepts.

    Stop it.

    Hold them all to what Alice actually stands for.

  7. Night Writer September 28, 2019 6:46 am

    All this shows is that the test in Alice is absurd.

  8. Random guy September 28, 2019 1:41 pm

    While this sucks for the patent owner, it’s probably good for the overall patent ecosystem that the first case up for jury trial came out this way.