Yes, Your Read is Accurate... business method patentees can be liable for attorney fees post-Alice

According to a recent precedential Court of Appeals opinion, business method patentees can be liable for attorney fees when continuing to assert their patents post-Alice! Inventor Holdings v. Bed Bath & Beyond, Case No.: 2016-2442 (Fed. Cir. Dec. 8, 2017). Inventor Holdings involves a patent infringement suit brought in 2014 just before Alice v. CLS came down from the US Supreme Court. Post-Alice, the accused infringer, Bed Bath & Beyond, moved for a Rule 12(c) dismissal under §101, which the District Court of Delaware granted. The patentee, Inventor Holdings, then unsuccessfully appealed to the Federal Circuit. Thereafter, Bed Bath & Beyond was granted almost $1M in trial and appellate attorney fees under §285, the district court finding the claims “objectively without merit” post-Alice. Ouch! The Court of Appeals panel affirmed.

As you will recall, §285 allows for a court “in exceptional cases” to “award reasonable attorney fees to the prevailing party.” After Octane Fitness, district courts are to measure exceptionality under a totality of the circumstances. Trial court decisions are reviewed for abuse of discretion. Highmark. Here, the district court “determined that this case was exceptional based solely on the weakness of IH’s post-Alice patent-eligibility arguments and the need to deter future ‘wasteful litigation’ on similarly weak arguments.” at 9.

When most find it difficult to see almost any claim “objectively” based upon Mayo-Alice, it is difficult to find fault in the patentee’s litigation strategy or understand what irked courts so badly about these infringement claims? One would not be alone in thinking that §101 opinions might as well be written in kanji these days because they have been so cryptic. Now, the judiciary is interested in “taxing” reasonably good faith litigants for asserting issued business method patents? Perhaps I am biased… you be the judge.

The Inventor Holdings representative claim 8 related to a method for processing payment at a point of sale for remotely ordered items. It reads,

A method of processing a payment for a purchase of goods, comprising the steps of:

receiving at a point-of-sale system a code relating to a purchase of goods;

determining if said code relates to a local order or to a remote order from a remote seller;

if said code relates to a remote order, then

determining a price for said remote order,

receiving a payment for said remote order, and

transmitting to said remote seller data indicating that said payment has been received for said remote order.

The claimed invention allowed for merchants to accept payment at the retail store after orders had been made remotely to better secure credit card and personal payment information. The district court found the claims directed to the abstract concept of “paying for a remote purchase at a local retailer.” While paying for a remote purchase may be fundamental to long-distance retailing, like Internet sales, it is not all together objectively clear that paying for said purchase in-person is fundamental to retail sales. One could pay remotely or order in-person like with most retail purchases; hence retailers can do quite a bit of business without infringing this claim. Moreover, is it really clear that Alice’s claims – as to using a clearinghouse for settlement risks – necessarily indicated that “paying for a remote purchase at a local retailer” is an abstract concept? The Court of Appeals panel thought so, stating that Alice’s facts applied particularly to this case, quoting Mortgage Grader and indicating that Alice is likely implicated with any claims that “involve implementations of economic arrangements using generic computer technology.” at 12 (emphasis given). This might arguably apply to almost any computer-implemented business method patent.

Few business method patents incorporate non-generic computer functionality since said innovations typically focus on financial solutions versus computer design. So once the abstract concept in Inventor Holdings was drawn so narrowly as to relate to remotely-ordered-but-in-person-purchased purchases, there was little hope for the claimed invention under step 2 of Alice.

Inventor Holdings argued that it was reasonable to assert its patent post-Alice because, inter alia, the district court denied other dismissal motions pre-Alice and §101 was and is an evolving area of the law making the §101 inquiry in this case difficult, referring to eligibility decisions like DDR Holdings v. Hotels.com. These arguments were unavailing, however. In finding the case “meritless” the panel reasoned that the merits were questionable since Bilski. Even the prior district court denials of Rule 12 motions were a postponement of the merits rather than an endorsement of the same. at 12. Still, an attorney might fairly assume that Rule 12 was satisfiable by the denial of similar motions, which could speak to the merits.

Even though Inventor Holdings is merely a three-judge panel decision, considering the analysis it is difficult to image a business method claim, i.e., involving an “economic arrangement,” that when challenged under §101 might not expose the patentee to attorney fee liability for simply contesting eligibility. Are these cases really “exceptional” post-Alice when nearly everyone who opines on §101’s doctrinal exclusions these days attests to their chaos?

Some might raise a glass and say, “good riddance” to those pesky, broad economic arrangement patents.

Others might, in this New Year, pour out a little liquor for business method patentees and the eggshells they will be walking upon all year.