Federal Circuit Votes No on Patent Owner’s Appeal of Dismissal under § 101
Intellectual Property News
In an appeal from the Northern District of Florida, Voter Verified, Inc. asked the Federal Circuit to reverse the lower court’s dismissal of its patent infringement lawsuit against Election Systems & Software, LLC. Much to the dismay of Voter Verified last week, the Federal Circuit cast its ballot for Election Systems when it affirmed the lower court’s ruling of invalidity under § 101 (17-1930).
Voter Verified’s patent (U.S. Reissue Patent No. RE40,449), which is directed to voting methods and systems that provide for verification of a voter’s ballot, was previously asserted against Election Systems years ago with a different result. In fact, the first time that Voter Verified sued Election Systems for infringement of the ʼ449 patent, all but two claims of the ʼ449 patent were held to be valid under 35 U.S.C. § 101. More specifically, when Election Systems’ predecessor was sued in 2009 on the same patent, it counterclaimed that the claims of the ʼ449 patent were invalid under 35 U.S.C. §§ 101 and 112, among other provisions. On summary judgment, the district court determined that there was no infringement of the asserted claims by Election Systems and that only one claim was invalid under 35 U.S.C. § 112. However, the district court entered summary judgment that, with the exception of the one claim found to be invalid under 35 U.S.C. § 112, all of the claims in the ʼ449 patent were valid under 35 U.S.C. §§ 101 and 112 because Election Systems did not present any arguments or evidence as to the invalidity of the claims. On appeal of the district court’s decision in the first litigation, the Federal Circuit affirmed the lower court’s ruling finding that Election Systems had not met its burden to prove the invalidity of the claims by clear and convincing evidence.
Despite the affirmance by the Federal Circuit of the validity of the claims of the ʼ449 patent under 35 U.S.C. § 101, when Voter Verified came after Election Systems again for infringement of the ʼ449 patent in 2016, Election Systems moved to dismiss the complaint reasoning that Voter Verified failed to state a claim for relief because the asserted claims were invalid under 35 U.S.C. § 101. Voter Verified countered that Election Systems was precluded from relitigating the invalidity of the claims of the ʼ449 patent under § 101 since the issue had already been decided in the first litigation. Once the district court decided that there was an intervening change in the law between the first and second litigations between the parties, it found that Election Systems was not estopped from arguing the issue of patent validity under § 101 and proceeded to analyze the claims under the two-step analysis set forth in Alice Corp. v. CLS Bank International (134 S. Ct. 2347 (2014)). The district court ultimately held that the claims of the ʼ449 patent were invalid under § 101 and granted Election Systems’ motion to dismiss.
When Voter Verified appealed to the Federal Circuit, it argued that the § 101 judgment from the first litigation had a preclusive effect because Alice was not an intervening change in the law. More specifically, Voter Verified provided that Alice merely applied a rule from Bilski v. Kappos (561 U.S. 593 (2010)), which, according to Voter Verified, was the controlling law at the time of the first litigation between the parties. In deciding upon the initial question posed by Voter Verified, the court laid out the three conditions that must be satisfied for the change of law exception to issue preclusion to apply:
- alteration of the governing law;
- application of the old law to the decision sought to be reopened; and
- arrival of a different result under the facts based on the change in law.
Unfortunately for Voter Verified, while the Federal Circuit agreed that Alice did not alter the governing law of § 101 and thus the intervening change in law exception did not preclude the application of issue preclusion in this case, the court still found that issue preclusion did not apply. In fact, the Federal Circuit agreed with Election Systems that the § 101 issue was not actually litigated and it was not critical and necessary to the judgment -- i.e., the non-infringement holding -- in the first litigation. Accordingly, the Federal Circuit proceeded to look at the merits of the § 101 issue and affirmed the invalidity of the claims of the ʼ449 patent.
Consequently, while Voter Verified’s first run against Election Systems was unsuccessful in obtaining a finding of infringement against its opponent, it at least came out of the litigation with a mostly intact ʼ449 patent. This was regrettably not so in Voter Verified’s subsequent run at Election Systems demonstrating that entering a race for a second time is not always the wisest choice.
To read more about the § 101 aspects of the Federal Circuit’s decision, please visit Bradley’s Patent 213 Blog at www.patent213.com.