Welcome
IP Law News

Texas Verdict May Pave Path to More Juries Judging Patents

Oct. 3, 2019, 8:45 AM

Patent attorneys may start looking to jurors, not only judges, to resolve patent eligibility fights after a financial services company convinced a jury to knock out a check processing patent, practitioners say.

East Texas federal jurors handed a win to accused infringer Jack Henry Associates Inc. in September after a judge, in an unconventional move, let them decide factual questions involving a PPS Data LLC patent. Their decision, that patent claims covered routine, well-known technology, prompted the judge to declare the patent invalid.

The case appears to be the first time a judge sent a factual question about patent eligibility to a jury since the Federal Circuit chastised lower courts in two 2018 decisions for disposing of cases without adequately weighing factual disputes surrounding eligibility.

It presents a new roadmap, potentially, for how patent eligibility fights may play out in court, attorneys said. Parties may be more willing to ask judges to skip pre-trial patent eligibility examinations and, instead, have juries weigh factual evidence and testimony, they said. Judges, too, may not hesitate to allow fact-based jury trials, after seeing how the Texas jury resolved intricate questions of fact, they said.

The shift is promising for patent owners, who historically have faced long odds of having their infringement complaints live long enough to see trial.

Armed with the Texas verdict, they can now tell a court, "`There’s no reason why you need to decide this question early on in a motion to dismiss or a summary judgment,’” Matt Rizzolo, an IP litigation partner at Ropes & Gray LLP in Washington, said. "`See, here in this case, a jury was able to handle it.’”

Jack Henry Case

PPS Data sued Jack Henry for $14 million in damages over technology that helps process checks remotely. Jack Henry then challenged the validity of U.S. Patent No. 7,216,106, saying it failed the two-part patent eligibility test laid down by the U.S. Supreme Court’s 2014 decision in Alice v. CLS Bank. The test prohibits patenting abstract ideas, unless they have an inventive concept that takes them beyond the abstract.

U.S. District Judge Rodney Gilstrap said PPS Data LLC’s patent covered an abstract idea. But he called for a jury trial because he found unresolved factual questions around whether the ‘106 patent claimed a routine, conventional, and well-understood activity.

Judges commonly resolve questions of law, which turn on legal principles and how to interpret statutes and cases. Questions of fact generally go to a jury and require the gathering and exchange of evidence.

Patent juries, though, historically have delved only into factual questions of whether an invention is not novel or obvious—not if it’s ineligible under Section 101 of patent law because it covers a routine, well-known activity. That question has, until now, been subsumed into a court’s overall consideration of a case during pleadings, when both sides make their arguments and complaints are frequently tossed before a trial ever starts.

Then, the U.S. Court of Appeals for the Federal Circuit ruled in Berkheimer v. HP Inc. that the Alice test’s second step may call for factual findings on whether a patent’s claims cover well-understood, routine, and conventional activities. That prompted Gilstrap, in the PPS case, to go to the jury, opening the door for others to follow.

“What the judge did here is exactly what we’re going to see time and time again moving forward,” Robert Sokohl, director at Sterne, Kessler, Goldstein & Fox PLLC in Washington, said.

First Since Berkheimer

Jay Heidrick, a Kansas City-based shareholder at Polsinelli PC who represented Jack Henry, said the case appears to be the first where a decision pivoted on a jury’s factual determination.

Until now, “We haven’t found any cases where a jury has invalidated a patent under 101 since Berkheimer,” he said.

Gilstrap’s move “is largely Berkheimer playing out,” Matt Rozier, counsel at Snell & Wilmer LLP in Denver, said. “This is just the first step after Berkheimer, the first one that’s gotten to that point.”

It’s still early to fully gauge the impact of Berkheimer and the PPS verdict on patent litigation because HP Inc. has petitioned the U.S. Supreme Court to review Berkheimer, Kenneth Weatherwax, a managing partner at Lowenstein & Weatherwax LLP in Los Angeles, said. The Solicitor General’s office has been asked to file a brief in the case.

“If Berkheimer doesn’t get overturned, I would expect it to get popular,” Weatherwax said, referring to jury trials in eligibility disputes.

Aatrix Influence

The Federal Circuit’s other 2018 ruling, in Aatrix Software, Inc. v. Green Shades Software, Inc., took a dim view of a trial court acting quickly on a motion for dismissal before trial.

“You could see plaintiffs pointing to this and say, ‘This a fact question’” that could be resolved by a jury just like the PPS-Jack Henry case was, Rizzolo said.

Even though PPS data lost its case, getting a rare jury trial on eligibility questions is still a “pro-plaintiff” development, Sokohl said.

“Based on Berkheimer, I’m not surprised this has happened but I’m surprised this is the first time this has happened,” Sokohl said. “It will happen again and again.”

Rozier agreed the shift is a good one for patent owners, who may want to go to trial, even though it’s costly and time-consuming, because it increases the chances of a settlement.

“Anybody would be happy to stay alive through trial and get another chance to argue versus getting a summary judgment dismissal,” he said.

To contact the reporter on this story: Malathi Nayak in Washington at mnayak@bloomberglaw.com

To contact the editors responsible for this story: Rebecca Baker at rbaker@bloomberglaw.com; Keith Perine at kperine@bloomberglaw.com