Trial by eligibility

In the history of the United States, every single jury trial on patent eligibility under 35 U.S.C. § 101 has resulted in a defense verdict. After the Supreme Court breathed new life into eligibility defenses in 2014 and the Federal Circuit cemented the potential for factual issues underlying eligibility in 2018, there have been exactly three trials which put questions of eligibility to the jury—all in the Eastern District of Texas, all of which resulted in defense verdicts.

The first such trial to a judgment occurred in PPS Data v. Jack Henry & Associates, before the Honorable Chief Judge J. Rodney Gilstrap. This first such trial addressed a patent on allegedly inventive systems for digital check processing, which would avoid the traditional requirement to use magnetic ink processing systems for checks. In six hours, the jury returned with its verdict: they found the patent not infringed, and that each asserted claim was invalid for being directed to ineligible subject matter. The PPS Data patentee chose not to appeal or file a JMOL (judgment as a matter of law), eliminating a detailed inquiry into the kinds of evidence required to sustain a jury verdict on eligibility.

The other two cases in which a jury assessed eligibility also resulted in defense verdicts. The trial before Judge Robert W. Schroeder resolved via settlement before judgment was entered but after the jury found the patent ineligible at Alice Step 2 – while simultaneously finding the patent nonobvious. The trial before Judge Amos L. Mazzant resulted in a full defense verdict and is currently subject to post-trial briefing on the eligibility question (Judge Mazzant denied a JMOL challenging the jury’s verdict on May 24, 2021).

Why have defendants uniformly won eligibility verdicts? This brief piece explores a few of the possible reasons why defendants are dominating the eligibility inquiry even as they lose infringement verdicts from the same set of jury pools (when eligibility isn’t an issue).

A complete picture of the prior art

Perhaps one of the most central reasons why eligibility verdicts favor the defense is that the eligibility defense allows a robust, fulsome picture of the prior art. That is true in both a substantive sense and a procedural one.

 In contrast to obviousness and anticipation defenses, eligibility defenses force defendants to substantively focus on broad, thematic descriptions of the state of the art. For a jury that is learning of a patented invention for the first time, the inventor appears to innovate against a blank canvas: absent a technical background in the area, the patent is the first time the jury has heard of the problem at issue or the invention designed to solve it. When defendants respond with anticipation or obviousness defenses, the disputes frequently turn on only a few disputed limitations – often highly technical in nature. Many times, the disputed limitations are not amenable to easy thematic description. And when trial presentation focuses on the disputed limitations, the principal facts presented to the jury can come to appear vague and abstruse – and it may become difficult to see their importance in the context of the invention. In contrast, eligibility defenses ask the jury to determine whether an invention involved well-understood, routine, and conventional activity in the field at the time of patenting. By definition, this inquiry requires defendants to paint with a broad brush, pivoting away from any given reference to describe why the technical field – as a whole – would have understood the patent as non-inventive. This broad context can strip away some of the patentee’s shine by showing the background against which they innovated. By coloring in the jury’s blank canvas, eligibility defenses encourage defendants to paint vivid pictures of the shoulders on which the patentee stood when they sought patent protection.

Eligibility defenses also present a procedural advantage. Unlike obviousness and anticipation references, the local rules in the Eastern District of Texas – and many other districts whose rules are textually identical – allow defendants to use references that were not disclosed in invalidity contentions in support of eligibility arguments. As Circuit Judge William Bryson, sitting by designation, explained: “courts in the Eastern District have permitted defendants to rely on references that were not included in their invalidity contentions when the references were not proposed as invalidating prior art, but were directed to other purposes, such as showing the state of the art at the time of the invention.” 2:15-cv-1455, Dkt. No. 395 at *5 (E.D. Tex. Aug 3, 2017)).

Citing Judge Bryson’s decision, Judge Schroeder ruled in February 2021 that a defendant could go to trial on several hundred references that were disclosed in its 35 U.S.C. § 282 notice, as long as the defendant used the references only for eligibility and state-of-the-art for obviousness, rather than using them for the “express purpose” of invalidating the patents as § 102 or § 103 references. That litigation settled the evening of the first day of trial.

Conclusion

Perhaps surprisingly, the eligibility defense is among the most useful tools in a defendant’s trial toolkit. It allows defendants to paint broad, complete pictures of the prior art, giving the jury needed context to understand the relevant innovative background.

In an academic sense, this is the role of obviousness as well—the Supreme Court’s obviousness case law requires that defendants be allowed to present “interrelated teachings” of patents, existing market demands, and the background knowledge possessed by persons of ordinary skill, fashioned “together like pieces of a puzzle.” But time limitations and narrowly focused trial presentations make this vision of obviousness a rarity, for practical purposes – which may impact jury attention and accessibility.

Since the eligibility inquiry compels a broader focus and thematic analysis, jurors have – thus far – been more receptive to eligibility challenges. While it is unlikely that defendants will win every eligibility challenge in the future, it is notable that – at this moment in time – the defense has a perfect record.