Texas’ Eastern District Moves May Curb Recent Trend of Early Challenges by Patent Suit Defendants

© 2015 The Texas Lawbook.

By Michael C. Wilson of Munck Wilson

(June 12) – The U.S. Supreme Court’s 2014 decision in Alice Corp. v. CLS Bank has dramatically impacted the patent litigation landscape by clarifying—or, arguably, altering—the validity standard under 35 U. S. C. §101. In Alice, the Supreme Court held patent claims invalid when they did little more than take a well-established economic principle and implement it on a generic computer.

Mere computer implementation, the Supreme Court found, was not enough to transform the invention from an abstract idea and thus was not patentable pursuant to Section 101. The Federal Circuit has also made Section 101 challenges more attractive to accused infringers by holding that Alice-based patent validity challenges may be brought at the pleading stage.

A year later, Alice-based challenges to software and computer implementation patents based on 12(b)(6) and 12(c) of Section 101 are not only commonplace, they are largely successful, with 70 percent being granted as of May 2015. And because these challenges are being brought—and often granted—before the parties engage in substantial discovery or claim construction, they have become a vital tool for accused infringers to avoid the significant financial cost of protracted patent infringement suits.

This trend may soon be curtailed, however, by a new practice implemented by the busiest judge in the busiest federal district court for patent litigation.

U.S. District Judge Rodney Gilstrap of the Eastern District of Texas is now requiring patent challengers to obtain leave of court, with a showing of good cause, before bringing a Section 101 challenge. Notably, leave of court is not required if the Section 101 challenge is brought after the court has issued its claim construction ruling.

The new procedure is similar to the judge’s already existing practice of requiring letter briefs seeking permission to file summary judgment motions.

While accused infringers have had some success in front of Judge Gilstrap post-Alice, including a grant of a Section 101 challenge despite the patent holder’s argument that the challenge was premature pending claim construction, the new procedure suggests a general disfavor of the early Section 101 motions. That will undoubtedly reduce the number of early Section 101 challenges.

Accused infringers will now have to first request leave, and demonstrate good cause, before challenging patent validity under Section 101 at the pleading stage.

Importantly, even if the accused infringers are ultimately able to invalidate a patent by a Section 101 challenge, the court’s new procedure may force them to conduct significant discovery and complete claim construction despite a patent’s questionable validity under Section 101.

As a result, this procedure may weaken one of the tools in an accused infringer’s arsenal that allows disposing of meritless cases early and at relatively low cost. Given this development, defendants in the Eastern District may give greater consideration to filing petitions with the Patent Trial and Appeal Board (and seek an immediate stay of court proceedings) based on Section 101. However, this route is usually more expensive.

On the other hand, patent holders asserting their rights in front of Judge Gilstrap likely will applaud a rule that allows cases to move forward with some discovery and claim construction before having patent validity issues addressed by the court.

With a patent docket of 968 new cases in 2014 – 20 percent of all patent litigation filed in the U.S. in 2014 – Judge Gilstrap’s move will certainly have an impact on national patent litigation trends. The weight of the directive could become more pronounced if additional Eastern District judges – and perhaps patent venues nationwide – follow his lead.

Michael C. Wilson is a partner at Munck Wilson Mandala LLP. He frequently represents plaintiffs and defendants in patent litigation in the Eastern District of Texas and in venues across the U.S. He can be reached at mwilson@munckwilson.com.

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