IP UPDATE
Exploring the Latest in Intellectual Property Law
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Exploring the Latest in Intellectual Property Law
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Jury Trial on Legal Issue Denied, But No Harm Done

by | Aug 29, 2024 |

The US Court of Appeals for the Seventh Circuit affirmed a district court’s denial of a jury trial, concluding it was harmless error because the defendant would have been entitled to a directed verdict regardless. Overwell Harvest Ltd. v. Trading Techs. Int’l, Inc., Case No. 23-2150 (7th Cir. Aug. 12, 2024) (Kirsch, Pryor, Kolar, JJ.)

Overwell Harvest was established to invest in Neurensic, a company specializing in market surveillance technology. Despite Overwell’s investment of millions of dollars, Neurensic faced significant financial distress, leading its management to pursue a sale. Neurensic’s CEO and COO accepted an offer from Trading Technologies, which subsequently hired former Neurensic employees with the CEO and COO’s approval. Prior to the sale, Overwell submitted a competing bid, to which Trading Technologies responded by raising its offer. Neurensic chose to accept Trading Technologies’ offer.

Overwell sued Trading Technologies for aiding and abetting breaches of fiduciary duties by Neurensic’s leadership. The district court dismissed Overwell’s jury demand and ruled that the claim was equitable despite the damages sought. In a bench trial, the district court ruled in favor of Trading Technologies, determining that Overwell waived its claims that Trading Technologies had aided and abetted breaches of fiduciary duty by Neurensic’s leadership. The district court’s decision was based on Overwell’s failure to advance arguments concerning improper notice to shareholders regarding the vote on Trading Technologies’ offer. Overwell appealed.

The Seventh Circuit decided that Overwell had a Seventh Amendment right to a jury trial because the case involved legal relief in addition to equitable relief. While the Court agreed that Overwell’s claim for aiding and abetting breaches of fiduciary duty under Delaware law was historically equitable, the request for compensatory and punitive damages constituted legal relief. The Court emphasized that even if a claim is equitable, the pursuit of legal relief (such as money damages) entitles a party to a jury trial. The Seventh Circuit determined that the district court erred by denying Overwell this right because determining legal relief is traditionally the role of a jury.

The Seventh Circuit concluded that this error was harmless, however, because under Delaware law Trading Technologies would have been entitled to a directed verdict. The Court explained that a directed verdict is appropriate when no reasonable jury could find for the losing party based on the evidence, viewing the record in the light most favorable to the losing party.

The Seventh Circuit rejected Overwell’s breach of fiduciary duty claims, finding that the alleged breaches lacked merit under the Delaware standard for aiding and abetting fiduciary breaches. First, the Court held that Overwell failed to show that Trading Technologies knowingly participated in a fiduciary breach, as the continued servicing of Neurensic’s customers by former employees benefitted Neurensic, not Trading Technologies.

Second, the Seventh Circuit determined that Overwell’s claim of blocking competitive bids could not succeed as Neurensic still held its most valuable asset – its source code – and could have repossessed its servers. Trading Technologies’ negotiation tactics were permissible under Delaware law, which allows [...]

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Recipe for Rejection: Trademark Application Burnt by Specimen Flaws

by | Aug 22, 2024 |

The Trademark Trial & Appeal Board issued a precedential decision affirming a refusal to register a mark because there was no direct association between the specimen and the applied-for services. In re Gail Weiss, Serial No. 88621608 (July 31, 2024, TTAB) (Cataldo, Goodman, Pologeorgis, ATJ)

Gail Weiss applied to register the mark GABBY’S TABLE on the Principal Register for “computerized online retail store services in the field of food, cooking utensils, cookware, culinary arts cookbooks, magazines, and videos, and lifestyle books, magazines, and videos.” Weiss submitted a specimen of use that consisted of “website marketing and advertising.” The Examining Attorney refused registration on the grounds that the specimen failed to show the mark in use in commerce in connection with the identified services. The Examining Attorney argued that the specimen only showed a list of items recommended for purchase, but the website did not offer the consumer retail store services to purchase the goods. Instead, the website included a “buy now” button that redirected customers to third-party websites that offered to retain store services to consumers. Weiss appealed.

The issue before the Board was whether the specimen demonstrated a direct association between the GABBY’S TABLE mark and the online retail store services identified in the application. The Board found that the specimen did not meet this requirement as it only provided referrals to third-party websites where the products could be purchased. The Board also noted that the specimen lacked the essential elements of online retail store services, such as a virtual shopping cart, pricing, shipping information or any other indicia of online retail store services. The Board also found that the third-party stores provided commissions to affiliate websites like those in the specimen but did not constitute providing online retail store services. The Board therefore affirmed the refusal to register.

Practice Note: This decision highlights the necessity for applicants to provide specimens that demonstrate the use of the mark in connection with the identified services.



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Due Diligence Deficit Sinks Fraud Claims in Trademark Battle

by | Aug 22, 2024 |

The US Court of Appeals for the Second Circuit affirmed the dismissal of an independent action asserting “fraud on the court” based on the finding that the alleged fraud on the US Patent & Trademark Office (PTO) should have been uncovered by the exercise of due diligence in a prior action. Marco Destin Inc. v. Levy et al., Case No. 23-1330 (2d Cir. Aug. 8, 2024) (Jacobs, Sack, Sullivan, JJ.)

In 2007, L&L Wings filed a lawsuit against Marco Destin and related entities (collectively, Marco Destin) in the District Court for the Southern District of New York, asserting claims of breach of contract and trademark infringement related to Marco Destin’s unauthorized use of L&L’s unregistered trademark WINGS on beach apparel. Although L&L and Marco Destin entered into an allegedly valid temporary licensing agreement in 1998, L&L alleged that Marco Destin continued to use the mark after the agreement expired in 2006. Post-discovery, L&L revealed a recent trademark registration for the WINGS mark, causing L&L and Marco Destin to enter a stipulated order of settlement and dismissal in 2011. Marco Destin paid L&L $3.5 million, ceased using the WINGS mark, and agreed to never bring an action based on the WINGS mark or the 1998 temporary licensing agreement.

More than a decade later, Marco Destin sued L&L again in the Southern District of New York for “fraud on the court” and “fraud” and demanded vacatur, sanctions and damages due to key facts revealed in a separate unrelated Eastern District of North Carolina action. In relevant part, it was discovered that L&L was not the owner of the WINGS mark. Rather, an entity named Shepard Morrow owned the WINGS mark and licensed it to L&L for a brief period in the 1990s. L&L stopped paying the required licensing fees to Shepard Morrow and improperly licensed the unregistered WINGS mark to other entities (including Marco Destin). As a result, the Eastern District of North Carolina granted sanctions against L&L for failing to disclose Shepard Morrow’s trademark registration and license agreement, and L&L’s WINGS mark registration was cancelled as a consequence of L&L’s false representations to the PTO. L&L moved to dismiss Marco Destin’s New York complaint pursuant to FRCP 12(b)(6). The district court granted the motion to dismiss, concluding that the “fraud on the court” claim was an independent action for relief from a judgment under Rule 60(d)(3) and Marco Destin had a reasonable opportunity to discover L&L’s false representations during the initial litigation. Marco Destin appealed.

The Second Circuit affirmed, reviewing the dismissal of an independent action for fraud on the court under FRCP 60(d)(3) for abuse of discretion. A party challenging a judgment may file either a timely motion within a fixed time window – one year under FRCP 60(b)(3) – or an independent action any time after that pursuant to FRCP 60(d)(3). Independent actions require a more demanding showing of fraud (such as fraud on the court itself) than a timely motion, and generally claimants seeking equitable relief through independent [...]

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Patent by Secret Process: Perils of Pre-Patent Profiting

by | Aug 22, 2024 | ,

The US Court of Appeals for the Federal Circuit affirmed the International Trade Commission’s (ITC) determination that the asserted process patents were invalid under the America Invents Act (AIA) because products made using the patented process were sold more than one year before the patents’ effective filing dates. Celanese International Corporation, et al. v. International Trade Commission, Case No. 22-1827 (Fed. Cir. Aug. 12, 2024) (Reyna, Mayer, Cunningham, JJ.)

Celanese owns patents that cover a process for making the artificial sweetener acesulfame potassium (Ace-K). It was undisputed that Celanese’s patented process was in secret use in Europe and that Ace-K produced using this process had been sold in the United States before the patents’ effective filing dates. Under pre-AIA caselaw, such sales of products made using a secret process before the critical date would trigger the on-sale bar and invalidate any later-sought patent claims on that process. However, because Celanese’s patents had effective filing dates after March 15, 2013, the AIA rules applied. Thus, the case hinged on whether the AIA altered this rule.

In 2019, in Helsinn v. Teva, the Supreme Court addressed similar facts and confirmed that the Federal Circuit’s pre-AIA “on sale” case law, which established that “secret sales” could invalidate a patent, still applied. In Helsinn, the patentee had obtained a patent related to a fixed dose of palonosetron. Prior to the critical date, the patentee entered into a supply and purchase agreement with a third party that covered this same fixed dose of palonosetron. The Supreme Court concluded that Congress, by reenacting similar language in the AIA concerning the on-sale bar, appeared to have adopted the Federal Circuit’s pre-AIA interpretation of the on-sale bar. Accordingly, the Supreme Court held that, consistent with Federal Circuit pre-AIA precedent, an inventor’s prior sale of an invention to a third party can qualify as invalidating prior art even if the third party is obligated to keep the invention confidential.

However, unlike in Helsinn, where the claimed invention was the very subject of the commercial sale at issue, Celanese’s patents covered the secret process used to make Ace-K, and it was only the resulting Ace-K that was the subject of commercial sale – not the patented process itself. Although this distinction would not alter the outcome under pre-AIA law, Celanese averred that the AIA had revised the rules for this specific situation. To support its theory, Celanese referenced, among other things, the AIA’s use of the phrase “claimed invention” as opposed to simply “invention” as recited in pre-AIA discussion of the on-sale bar. According to Celanese, this change implied that the invention specifically “claimed” must be on sale to qualify as invalidating prior art.

The ITC rejected Celanese’s argument, concluding that the AIA did not alter the pre-AIA rule that “a patentee’s sale of an unpatented product made according to a secret method triggers the on-sale bar to patentability.” Accordingly, the ITC found that Celanese’s patents were invalid because Celanese sold Ace-K made using its secret process more [...]

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Insuring Innovation: Software Code May Be Protected as an Arrangement

by | Aug 22, 2024 | ,

The US Court of Appeals for the Eleventh Circuit once again remanded a trade secret and copyright dispute involving software for generating life insurance quotes, finding that the district court erred by failing to consider the copyrightability of the source code’s arrangement. As to the trade secret claim, however, the Eleventh Circuit found that the district court did not err in finding that the defendants misappropriated the trade secrets at issue and could be held jointly and severally liable, despite varying levels of culpability. Compulife Software, Inc. v. Newman, Case No. 21-14074 (11th Cir. Aug. 1, 2024) (Jordan, Brasher, Abudu, JJ.)

Compulife’s software generates life insurance quotes using a proprietary database of insurance rates. The software produces a quote by using blocks of code, arranged in a particular manner, that correspond to different data points such as state, birth month, birthday, birth year, sex and smoking status. Compulife licenses its software to customers and offers an online version to the public.

David Rutstein is a former insurance agent who is permanently barred from the profession. Rutstein misled Compulife into giving him its software by pretending that he worked with someone who had a license to use it. Rutstein then created and registered several websites in his son’s name using Compulife’s software in connection with the sites. One of the websites was later owned by Aaron Levy. Rutstein and Levy directed an employee, Moses Newman, to launch a scraping attack on Compulife’s website to get millions of quotes, which they used for their own websites. Compulife’s sales declined as a result.

Compulife sued Rutstein, Rutstein’s son, Levy and Newman for copyright infringement and misappropriation of trade secrets, among other claims. After a bench trial, the parties appealed, and the Eleventh Circuit directed the district court to make more specific findings. After a second bench trial, the district court determined that the defendants did not infringe Compulife’s software by copying it and using it for their own website, but they did misappropriate Compulife’s trade secrets. The defendants were held jointly and severally liable despite differing degrees of culpability. All parties appealed.

Compulife argued that the district court erred in concluding that the defendants did not infringe its copyright. The Eleventh Circuit agreed in part, finding that the district court incorrectly applied the abstraction-filtration-comparison test used in software copyright infringement analyses. Compulife claimed that the arrangement of its various source code elements (e.g., state, birth month, birthday, birth year and sex) was a creative and therefore protectable form of expression. The Court agreed that the arrangement was potentially protectable, similar to its holding in another case that the arrangement of yacht listings in a boat guide could be protectable. BUC Int’l v. Int’l Yacht Council (11th Cir. 2007). The Court remanded the copyright infringement analysis to the district court, finding that it erred in the abstraction step because it “never identified the entire arrangement of these variables in the code as a constituent component of the code.” The Eleventh Circuit disagreed, however, with [...]

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Don’t Share Trade Secrets With Your Fiancé: A Cautionary Tale

by | Aug 15, 2024 |

The US Court of Appeals for the First Circuit largely affirmed a multimillion-dollar award against a temp agency for misappropriation of trade secrets and unjust enrichment due to its employee’s act of obtaining proprietary information from his fiancée, who worked at a competitor placement firm. BioPoint, Inc. v. Dickhaut, et al., Case No. 23-1575 (1st Cir. July 30, 2024) (Rikelman, Lynch, Howard, JJ.) (Rikelman, dissenting in part).

BioPoint is a Massachusetts-based life sciences consulting firm that places highly skilled candidates in temporary positions at pharmaceutical, biopharmaceutical and medical device companies. Leah Attis was one of the company’s top salespeople. Catapult is a Texas-based placement company. It opened a Boston office in 2017 and hired Attis’s fiancé, Andrew Dickhaut, as managing director. When business did not go well at Catapult’s Boston office, Attis began to help Dickhaut place candidates by giving him proprietary information about candidates and rates from BioPoint’s database, even though Catapult did not initially operate in the life sciences sector. As a result, Catapult eventually entered into a managed services provider agreement with biotechnology company Vedanta, whereby Catapult would manage all of Vedanta’s labor contracts and would have the first opportunity to fill openings there. Attis continued to give Dickhaut information on candidates from BioPoint’s system to help with Vedanta openings.

Upon discovering that it lost a candidate placement to Catapult because of Attis’s interventions, BioPoint fired her in December 2019. BioPoint then sued Catapult and Dickhaut for federal and state law claims, alleging misappropriation of trade secrets, tortious interference, and unfair and deceptive trade practices. The case proceeded to trial, and the district court divided the claims between a jury trial for the legal claims and a bench trial for equitable relief. The jury found that Catapult had misappropriated trade secrets and tortiously interfered with BioPoint’s relationship with the candidate that Attis helped Dickhaut place. The jury awarded BioPoint more than $300,000 in damages. At the bench trial on the equitable claims, the district court found that all profits that Catapult derived from its relationship with Vedanta arose on account of misappropriation of trade secrets and were recoverable as unjust enrichment. The district court awarded treble damages jointly against Dickhaut and Catapult, totaling more than $5 million. Catapult appealed.

While the First Circuit largely affirmed the district court and the jury’s findings, the First Circuit found two errors. First, the Court found that the district court erred in awarding BioPoint both the lost profits from the placement of the candidate and the unjust enrichment that accrued to Catapult as the result of the placement. The Court explained that the law does not permit the lost profits to be counted twice and reduced the award by more than $150,000, which was the amount that the district court had awarded for the loss of the candidate.

Second, the First Circuit found that the district court erred in finding Dickhaut jointly and severally liable for the entirety of his employer’s unjust enrichment, calling it “a bridge too far.” Since the [...]

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Unbranded Brandy: COGNAC Certification Mark Matters, Even in Hip-Hop

by | Aug 15, 2024 |

The US Court of Appeals for the Federal Circuit vacated a ruling from the Trademark Trial & Appeal Board, disagreeing with the Board’s dismissal of Bureau National Interprofessionnel du Cognac’s opposition to a trademark application filed by Cologne & Cognac Entertainment related to a hip-hop record label. Bureau National Interprofessionnel Du Cognac v. Cologne & Cognac Entertainment, Case No. 23-1100 (Fed. Cir. Aug. 6, 2024) (Lourie, Clevenger, Hughes, JJ.)

The certification mark COGNAC is protected by two entities: the Bureau National Interprofessionnel du Cognac (the interprofessional union of all growers, producers and merchants of COGNAC spirits) and the Institut National des Appellations d’Origine (an administrative agency within the French government) (collectively, the opposers). Unlike a trademark that indicates a single source for a product, a certification mark is used by an entity other than the owner and is typically used to certify regional or other origin-related characteristics of the product (e.g., FLORIDA oranges, DARJEELING tea or GEORGIA peaches). The opposers are responsible for controlling and protecting the common law certification mark COGNAC for brandy manufactured in the Cognac region of France according to particular standards.

The applicant filed a trademark application in March 2019 seeking registration of a composite trademark for Cognac & Cologne Entertainment to be used for hip-hop music and production services.

The opposers opposed that trademark application, claiming priority and arguing both a likelihood of confusion with the COGNAC certification mark and that the applicant’s mark, by creating an association with the COGNAC mark, would likely cause dilution through blurring. In a split decision, the Board dismissed the opposition, finding no likelihood of consumer confusion and no likelihood of dilution. The opposers appealed.

For likelihood of confusion, the opposers argued and the Federal Circuit agreed that:

  • The Board applied the wrong legal standard for “fame,” and its finding that the COGNAC mark was not famous was not supported by substantial evidence.
  • The Board legally erred in analyzing similarities in the parties’ marks, and its allegedly inconsistent findings showed that its conclusion on similarity was not supported by substantial evidence.
  • The Board applied the wrong legal standard in evaluating the relatedness of goods, trade channels and consumers.

The Federal Circuit reviewed the Board’s decision, working through each issue in turn. First, the Court assessed likelihood of confusion, reviewing the Board’s ultimate legal conclusion de novo and underlying factual findings for substantial evidence. The Court analyzed the DuPont factors to assess whether a likelihood of confusion existed.

Fame: DuPont factor five assesses the fame of the prior mark, including sales, advertising and length of use. Fame is not binary, but instead is a spectrum from very strong (i.e., very famous) to very weak. More famous marks have more extensive public recognition and renown and accordingly are afforded a broad scope of protection. The Federal Circuit found multiple reversible errors in the Board’s fame analyses.

The Federal Circuit explained that the first Board error was its requirement [...]

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Digital Rights, Digital Wrongs: The DMCA Lives On

by | Aug 15, 2024 |

The US Court of Appeals for the District of Columbia affirmed that the Digital Millennium Copyright Act’s (DMCA) laws against bypassing digital locks and distributing circumvention tools are designed to prevent piracy and are not unconstitutionally broad. Matthew D. Green, et al. v. United States Department of Justice, et al., Case No. 23-5159 (D.C. Cir. Aug. 2, 2024) (Pillard, Henderson, Millett, JJ.)

As technology has advanced, access to copyrighted content has expanded dramatically, with billions of people now able to stream or download content instantly. In response to this digital revolution, Congress enacted the DMCA 26 years ago to address the growing threat of digital piracy and unauthorized access to copyrighted materials online. The DMCA reinforces the use of technological protection measures, or “digital walls,” to secure copyrighted works from unauthorized access. The DMCA’s anticircumvention provision prohibits bypassing these technological protections, treating such acts as akin to digital trespassing.

Matthew Green, a computer science professor at Johns Hopkins University, and Andrew Huang, a tech inventor, challenged the constitutionality of key sections of the DMCA. They argued that the DMCA’s anticircumvention and antitrafficking provisions, which prohibit the circumvention of technological protections on copyrighted works and the distribution of circumvention tools, violated their First Amendment rights. They claimed that these provisions excessively restricted their ability to engage in lawful speech, particularly in the context of fair use.

While the DMCA leaves the fair use defense intact, Green and Huang argued that the DMCA unduly restricts fair use, particularly when the DMCA prohibits activities that would otherwise be considered lawful under copyright law. The district court dismissed Green and Huang’s facial First Amendment challenges, finding that they had not demonstrated that § 1201 of the DMCA overwhelmingly restricted protected speech to the extent that it warranted facial invalidation. Green and Huang appealed.

The DC Circuit explained that the DMCA’s anticircumvention provisions primarily target conduct – specifically, the act of bypassing digital protections – rather than expression. The Court noted that such conduct is not inherently expressive and does not typically implicate the First Amendment. The Court also found that the DMCA’s anticircumvention provisions serve a legitimate and extensive purpose in preventing piracy. While Green and Huang cited examples of potential overreach, such as a teacher circumventing a DVD’s encryption for classroom use, the Court explained that these examples did not convincingly demonstrate that the statute’s unconstitutional applications outweighed its lawful ones. The Court further explained that existing exemptions, such as those allowing circumvention for educational purposes, reduce the burden on free speech.

Green and Huang also argued that § 1201(a) imposes an unconstitutional prior restraint on speech by requiring fair users to obtain exemptions from the Librarian of Congress before circumventing technological protections. They likened this process to a speech-licensing regime, claiming that it invites content and viewpoint discrimination without sufficient judicial oversight. However, the DC Circuit rejected this claim, ruling that the DMCA’s exemption process is not a prior restraint on speech. The Court reiterated and emphasized that § 1201(a) regulates conduct, [...]

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One Bite at the Apple Where State and Federal Jurisdiction Is Concurrent

by | Aug 15, 2024 |

The US Court of Appeals for the Second Circuit upheld a federal district court’s dismissal of a case on res judicata grounds after a state court issued a decision on different claims but had concurrent jurisdiction over the claims alleged in the federal case. Beijing Neu Cloud Oriental Sys. Tech. Co. v. Int’l Bus. Machs. Corp., Case No. 22-3132 (2d Cir. July 25, 2024) (Livingston, Menashi, Kahn, JJ.)

Beijing Neu Cloud Oriental System Technology filed suit in federal district court against several International Business Machines companies (collectively, IBM defendants) asserting a single claim for trade secret misappropriation under the Defend Trade Secrets Act (DTSA). Shortly thereafter, Neu Cloud also sued the IBM defendants in New York state court, alleging state law causes of action for unfair competition, unjust enrichment, breach of fiduciary duty, breach of contract and tortious interference.

The state court dismissed the claims. After the state court issued its decision, the IBM defendants moved to dismiss the federal action, arguing that:

  • Neu Cloud’s claim was time-barred.
  • Neu Cloud failed to state a plausible DTSA claim.
  • The judgment of the New York Supreme Court precluded the instant DTSA claim under res judicata.

The district court granted the motion to dismiss, agreeing with the IBM defendants on the DTSA claims but not on the effect of res judicata. Neu Cloud appealed the dismissal of its complaint. The Second Circuit only considered the arguments related to the IBM defendants’ res judicata defense.

Applying New York law to determine the preclusive effect of the state court’s judgment, the Second Circuit explained that under New York preclusion law “a party may not litigate a claim where a judgment on the merits exists from a prior action between the same parties involving the same subject matter.” This rule applies if the subsequent claim was “actually litigated” in the prior action or if it merely “could have been raised in the prior litigation.”

The Second Circuit found that the district court’s decision was on the merits and the trade secret claims could have been raised in the state court action. The Court held that the New York state court would have been competent to adjudicate the DTSA claim since jurisdiction for DTSA actions is not exclusive to federal courts. The Court noted that the plain text of the DTSA is strong evidence that Congress intended for jurisdiction over DTSA claims to be federal and state concurrent. Moreover, the Second Circuit found that the legislative history revealed no evidence that Congress affirmatively intended to confer exclusive jurisdiction over DTSA claims on the federal courts. The Court noted that many other circuit courts had come to the same conclusion.

Since the parties were clearly the same, the state court case involved the same subject matter, and the claims alleged the same injury and arose out of the same or related facts, the Second Circuit stated that the relevant question was whether Neu Cloud should have sought recovery in state court for its claim of trade secret [...]

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Not Just a Blip: Section 101 as Affirmative Defense

by | Aug 15, 2024 |

On appeal from a motion to dismiss based on subject matter eligibility, the US Court of Appeals for the Federal Circuit held that a district court appropriately analyzed certain claims as representative claims and that the claims were directed to an abstract idea and did not recite an inventive concept. Mobile Acuity, Ltd. v. Blippar Ltd., Case No. 22-2216 (Fed. Cir. Aug. 6, 2024) (Lourie, Bryson, Stark, JJ.)

Mobile Acuity sued Blippar for infringement of claims from two patents directed to software for accessing stored information with a captured image. Mobile Acuity’s operative second amended complaint asserted that Blippar infringed “at least Claims 9, 11, and 16” of one patent and “Claims 9, 11, and 16” of the other. Blippar asserted that claim 9 of each patent was “representative of the entire claim set in each respective Asserted Patent” and that the patents were invalid under 35 U.S.C. § 101. The district court granted Blippar’s motion and subsequently denied Mobile Acuity’s motion to amend the judgment and for leave to file a third amended complaint.

Mobile Acuity appealed, asserting that the district court committed several errors, including the treatment of claim 9 in each asserted patent as a representative claim and the holding that the asserted patents were invalid as claiming ineligible subject matter.

Mobile Acuity first argued that the district court erred in holding that a challenge under § 101 is not an affirmative defense. The Federal Circuit agreed that an eligibility challenge on § 101 grounds is an affirmative defense but found that the district court simply misspoke when it stated during oral argument “[w]e are not talking about an affirmative defense.” However, the Federal Circuit concluded that the “error in word choice was harmless because the district court applied the correct legal standard for evaluating an affirmative defense at the motion to dismiss stage.”

In support of its denied motion to amend, Mobile Acuity argued that “the district court required it to ‘anticipate [the] defendant’s affirmative defense in its complaint.’” The Federal Circuit rebuffed this argument, concluding that the district court did not grant the motion to dismiss on the grounds that Mobile Acuity failed to address patentable subject matter in its complaints but correctly dismissed based on an affirmative defense that “clearly appears on the face of the pleading.” The Court stated that “as we have repeatedly recognized, it is possible and proper to determine patent eligibility under 35 U.S.C. § 101 on a Rule 12(b)(6) motion.”

On the merits, the Federal Circuit first determined that the district court did not merely treat claim 9 of each of the asserted patents as representative of all claims. The Federal Circuit explained that “the court did more, separately analyzing all six claims Mobile Acuity specifically identified in the operative complaint,” as well as two additional claims. The Federal Circuit also agreed with the district court that the six claims were representative “of all claims of the two Asserted Patents.”

As to the merits of the motion to dismiss, [...]

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