Court Opinion

ID: 4227020
Source: CourtListenerOpinion
Date Created: 2017-12-08 16:01:04.563655+00
Date Added: 2024-06-11T07:47:55.289730
License: Public Domain

United States Court of Appeals
      for the Federal Circuit
                ______________________

            INVENTOR HOLDINGS, LLC,
                 Plaintiff-Appellant

                           v.

            BED BATH & BEYOND, INC.,
                 Defendant-Appellee
               ______________________

                      2016-2442
                ______________________

    Appeal from the United States District Court for the
District of Delaware in No. 1:14-cv-00448-GMS, Judge
Gregory M. Sleet.
                 ______________________

              Decided: December 8, 2017
               ______________________

   RICHARD CHARLES WEINBLATT, Stamoulis & Weinblatt
LLC, Wilmington, DE, argued for plaintiff-appellant.

   RICARDO BONILLA, Fish & Richardson P.C., Dallas,
TX, argued for defendant-appellee. Also represented by
DAVID BRANDON CONRAD, NEIL J. MCNABNAY; JOHN A.
DRAGSETH, Minneapolis, MN.
               ______________________

     Before WALLACH, CHEN, and STOLL, Circuit Judges.
CHEN, Circuit Judge.
2        INVENTOR HOLDINGS, LLC   v. BED BATH & BEYOND, INC.

    Inventor Holdings, LLC (IH) sued Bed Bath & Be-
yond, Inc. (BBB) for infringement of U.S. Patent
No. 6,381,582 (the ’582 patent) in April 2014. The Su-
preme Court issued its decision in Alice Corp. v. CLS
Bank International in June 2014. 134 S. Ct. 2347 (2014).
BBB thereafter moved for judgment on the pleadings,
contending that Alice rendered the asserted claims of the
’582 patent invalid under 35 U.S.C. § 101. The district
court granted BBB’s § 101 motion. See Inventor Holdings,
LLC v. Bed Bath & Beyond Inc., 123 F. Supp. 3d 557, 563
(D. Del. 2015). We affirmed the district court’s § 101
decision without opinion under Federal Circuit Rule 36.
See Inventor Holdings, LLC v. Bed Bath & Beyond, Inc.,
643 F. App’x 1014, 1015 (Fed. Cir. 2016).
     BBB moved for an award of attorney fees pursuant to
35 U.S.C. § 285, arguing that, once Alice issued, IH should
have reevaluated its case and dismissed the action. The
district court granted BBB’s fees motion, holding that,
“following the Alice decision, IH’s claims were objectively
without merit.” Inventor Holdings, LLC v. Bed Bath &
Beyond Inc., No. 14-CV-448, 2016 WL 3090633, at *3 (D.
Del. May 31, 2016). The district court awarded BBB its
attorney fees beginning from the date of the Alice deci-
sion, including fees incurred during the § 101 appeal. See
id. at *4. IH appeals the district court’s fees decision. We
affirm.
                       BACKGROUND
                    I. The ’582 Patent
    The claimed invention relates to a method of purchas-
ing goods at a local point-of-sale system from a remote
seller. Claims 8, 25, and 41, excerpted below, are repre-
sentative of the claims of the ’582 patent:
       8. A method of processing a payment for a
    purchase of goods, comprising the steps of:
INVENTOR HOLDINGS, LLC   v. BED BATH & BEYOND, INC.        3

    receiving at a point-of-sale system a code relating
    to a purchase of goods;
    determining if said code relates to a local order or
    to a remote order from a remote seller;
    if said code relates to a remote order, then
        determining a price for said remote order,
        receiving a payment for said remote order,
        and
        transmitting to said remote seller data in-
        dicating that said payment has been re-
        ceived for said remote order.
’582 patent col. 14 ll. 7–18.
        25. A method for a remote seller to process a
    payment for the sale of goods, comprising the
    steps of:
    receiving a remote order for a purchase of goods
    from a customer;
    generating a code and a purchase price for said
    remote order;
    transmitting said code and said purchase price to
    the customer;
    providing order data for use by a point-of-sale sys-
    tem of a local seller in receiving a payment for
    said remote order;
    receiving payment data confirming said payment
    has been received at said point-of-sale system of
    said local seller;
    initiating, responsive to said payment data, a
    shipment of said goods; and
    receiving a payment for said remote order from
    said local seller.
4         INVENTOR HOLDINGS, LLC   v. BED BATH & BEYOND, INC.

Id. col. 15 ll. 7–25.
       41. A method [for] submitting a payment for a
    purchase of goods, comprising the steps of:
    transmitting an order for goods to a remote mer-
    chant;
    receiving a code and a purchase price for said or-
    der from said remote merchant;
    providing at least one of said code and said pur-
    chase price for use by a point-of-sale system of a
    local seller in processing a payment for said order;
    submitting said payment to said local seller at
    said point-of-sale system; and
    receiving said goods from said remote merchant.
Id. col. 16 ll. 5–15.
    Figure 1 from the patent depicts the specification’s on-
ly embodiment of a system used to perform the methods
recited in claims 8, 25, and 41:

    The patent explains, using the system in Figure 1,
that a buyer may place an order for goods with a remote
INVENTOR HOLDINGS, LLC   v. BED BATH & BEYOND, INC.       5

seller, after which the remote seller generates an “order
code.” Id. col. 5 ll. 54–56, col. 6 ll. 37–40. The buyer may
then enter the order code at a point-of-sale (POS) termi-
nal in a local retail store and pay for the order in person.
See id. col. 11 ll. 10–57. According to the patent, paying
at a local POS terminal distinguishes prior art systems
because prior art “catalog purchases” were typically
“conducted by telephone and paid for by credit card,” and
“[m]any consumers . . . do not feel secure in providing
their credit card number to a ‘stranger’ over a telephone.”
Id. col. 1 ll. 45–48. Thus, the ’582 patent purports to
disclose an improved way to “pay for remote purchases”
using “payment options available at a local store.” Id.
col. 13 ll. 34–39. In other words, the invention covers
purchasing goods from a remote seller by placing an
order, receiving an order code, entering the order code at
a POS terminal, and paying for the order in person.
     The specification explains that the components in
Figure 1 are implemented using conventional computer
technology. Id. col. 5 ll. 36–38 (“[D]ata link 24 comprises
an Internet connection, for example a conventional world-
wide-web browser, established through a telephone line.”);
id. col. 5 ll. 39–41 (“[P]oint-of-sale (POS) terminals 26A,
26B, 26n are connected to local POS system 14, for exam-
ple through a conventional computer data network.”); id.
col. 5 ll. 46–48 (“Local POS system 14 with POS terminals
26A–n comprise[] a conventional, commercially available
POS processing system.”); id. col. 5 ll. 48–49 (“Remote
processor system 16 comprises a conventional computer
system . . . .”); id. col. 5 ll. 51–52 (“[B]uyer system 22
comprises a conventional home computer . . . .”); id. col. 5
ll. 64–65 (“[L]ocal POS system 14 comprises a convention-
al POS processing system . . . .”); id. col. 5 ll. 32–34
(“These systems are suitably interconnected by data links
18, 20, comprising for example telephone connections or
electronic network connections.”).       The only physical
6        INVENTOR HOLDINGS, LLC   v. BED BATH & BEYOND, INC.

components recited in the representative claims are a
POS system and POS terminals.
                  II. Procedural History
     IH’s predecessor-in-interest sued 7-Eleven, Inc. (7-
Eleven), Amazon, Inc. (Amazon), PayNearMe, Inc.
(PayNearMe), and Wal-Mart Stores, Inc. (Walmart)
(collectively referred to hereinafter as “other defendants”)
in the United States District Court for the District of
Delaware in January 2013 for infringement of the ’582
patent. 1 7-Eleven, Amazon, and PayNearMe jointly filed
a motion to dismiss IH’s complaints under Federal Rule of
Civil Procedure 12(b)(6), arguing that IH’s patent was
directed to patent-ineligible subject matter under § 101.
Walmart filed a separate Rule 12(b)(6) motion, also argu-
ing invalidity under § 101. The district court denied both
motions without opinion on December 6, 2013.
     In April 2014, IH sued BBB for infringement of the
’582 patent. BBB filed an answer on May 30, 2014. The
Supreme Court issued its decision in Alice on June 19,
2014. BBB did not immediately file its § 101 motion for
judgment on the pleadings after the Supreme Court
issued its decision in Alice, because, according to BBB,
“[i]t interpreted the district court’s denial of the prior
defendants’ motions as an indication that the court in-
tended to give [IH] the discovery and claim construction
opportunities it said it needed in its briefing” before
deciding the § 101 issue. Appellee’s Br. 5.
                  A. BBB’s § 101 Motion
    After IH submitted its proposed claim constructions to
the district court, BBB filed its § 101 motion pursuant to

    1  IH replaced its predecessor-in-interest as plaintiff
in these suits pursuant to stipulations in January and
February 2014.
INVENTOR HOLDINGS, LLC   v. BED BATH & BEYOND, INC.         7

Federal Rule of Civil Procedure 12(c) on February 6, 2015.
BBB argued that the ’582 patent’s claims are directed to
the abstract idea of “paying for a remote purchase at a
local retailer” and that the claims “do not include any
meaningful limitations that would ensure that they
amount to ‘significantly more’ than just the ineligible
abstract idea.” J.A. 169 (quoting Alice, 134 S. Ct. at
2360).
    IH opposed BBB’s motion by arguing that the claims
are directed to “a unique solution to protect a person from
having his or her credit card information stolen when
making a remote purchase,” which IH argued is not an
abstract idea. J.A. 205. IH also argued that the claims
recite an “inventive concept” similar to the one found in
the claims discussed in DDR Holdings, LLC v. Hotels.com,
L.P., 773 F.3d 1245, 1256–57 (Fed. Cir. 2014). J.A. 208.
Specifically, IH argued that “the use and processing of
codes and communication between local and remote
systems” is a “solution” that is “necessarily rooted in
computer technology.”      Id. (quoting DDR Holdings,
773 F.3d at 1257). According to IH, this solution requires
“complex programming,” although IH did not cite any
complex programming in the patent or the record.
J.A. 212. IH also argued that the claims satisfy the
“machine-or-transformation test.” J.A. 208 (citing Bilski
v. Kappos, 561 U.S. 593, 604 (2010)).
    The district court granted BBB’s § 101 motion on Au-
gust 21, 2015. Inventor Holdings, 123 F. Supp. 3d at 558.
The district court found that the asserted claims are
directed to the abstract idea of “local processing of pay-
ments for remotely purchased goods.” Id. at 561. Accord-
ing to the district court, “[n]one of the ’582 patent’s claims
are restricted to any specific, inventive ways of storing
codes in databases or electronically applying them” under
the second prong of Alice’s test for patent eligibility. Id.
8        INVENTOR HOLDINGS, LLC   v. BED BATH & BEYOND, INC.

    IH appealed the § 101 decision. We affirmed via Rule
36 on April 7, 2016. See Inventor Holdings, 643 F. App’x
at 1015.
                  B. BBB’s Fees Motion
    BBB moved for an award of attorney fees under § 285
on September 4, 2015. The district court did not rule on
BBB’s fees motion until after the completion of IH’s § 101
appeal. BBB argued that this case is exceptional under
the standard articulated in Octane Fitness, LLC v. ICON
Health & Fitness, Inc., 134 S. Ct. 1749 (2014), because IH
should have reevaluated its case after Alice and dismissed
the action, but did not. IH responded that the case was
not exceptional because § 101 was an “evolving area of the
law,” which made patent-eligibility analysis difficult and
uncertain after Alice. J.A. 1083.
    The district court granted BBB’s fees motion, holding
that the case was “exceptional” under § 285. 2 Inventor
Holdings, 2016 WL 3090633, at *1–2. The district court
held that, even though it denied the other defendants’
§ 101 motions before Alice, “following the Alice decision,
IH’s claims were objectively without merit.” Id. at *3.
The district court awarded BBB its post-Alice attorney
fees, including fees incurred during the appeal of the
district court’s § 101 decision, in the amount of
$931,903.45. IH timely appealed. We have jurisdiction
under 28 U.S.C. § 1295(a)(1).
                  STANDARD OF REVIEW
    We review “all aspects of a district court’s § 285 de-
termination” for abuse of discretion. Highmark Inc. v.
Allcare Health Mgmt. Sys., Inc., 134 S. Ct. 1744, 1749
(2014). “A district court would necessarily abuse its

    2   There is no dispute that BBB was the “prevailing
party” under § 285.
INVENTOR HOLDINGS, LLC   v. BED BATH & BEYOND, INC.        9

discretion if it based its ruling on an erroneous view of the
law or on a clearly erroneous assessment of the evidence.”
Id. at 1748 n.2 (quoting Cooter & Gell v. Hartmarx Corp.,
496 U.S. 384, 405 (1990)).
                         DISCUSSION
                    I. Exceptional Case
    Section 285 states: “The court in exceptional cases
may award reasonable attorney fees to the prevailing
party.” 35 U.S.C. § 285. “District courts may determine
whether a case is ‘exceptional’ in the case-by-case exercise
of their discretion, considering the totality of the circum-
stances.” Octane Fitness, 134 S. Ct. at 1756. An excep-
tional case under § 285 is “simply one that stands out
from others with respect to the substantive strength of a
party’s litigating position (considering both the governing
law and the facts of the case) or the unreasonable manner
in which the case was litigated.” Id.
    The district court determined that this case was ex-
ceptional based solely on the weakness of IH’s post-Alice
patent-eligibility arguments and the need to deter future
“wasteful litigation” on similarly weak arguments. Inven-
tor Holdings, 2016 WL 3090633, at *3 (“[W]hatever merit
IH’s claims had at the outset of litigation, by the time of
the Alice decision, the business method claims in the ’582
Patent were objectively ineligible under § 101.”); Id.
(“These facts alone . . . support a finding that the case
‘stands out from others’ and is exceptional under § 285.
The court is convinced that an award of attorneys’ fees in
this case is necessary to deter wasteful litigation in the
future.” (citation and footnote omitted)). We conclude
that the district court acted within the scope of its discre-
tion in finding this case to be exceptional based on the
weakness of IH’s § 101 arguments and the need to deter
similarly weak arguments in the future. See Octane
Fitness, 134 S. Ct. at 1757 (“[A] case present-
ing . . . exceptionally meritless claims may sufficiently set
10       INVENTOR HOLDINGS, LLC   v. BED BATH & BEYOND, INC.

itself apart from mine-run cases to warrant a fee award.”);
id. at 1756 n.6 (noting “the need in particular circum-
stances to advance considerations of compensation and
deterrence” as part of a “‘nonexclusive’ list of ‘factors’”
district courts may consider when determining whether to
award fees under § 285 (quoting Fogerty v. Fantasy, Inc.,
510 U.S. 517, 534 n.19 (1994))).
    Under Alice, the claims of the ’582 patent are mani-
festly directed to an abstract idea, which the district court
accurately described as “local processing of payments for
remotely purchased goods.” Inventor Holdings, 123 F.
Supp. 3d at 561 (citing ’582 patent col. 1 ll. 6–10). The
idea that a customer may pay for items ordered from a
remote seller at a third-party’s local establishment is the
type of fundamental business practice that, when imple-
mented using generic computer technology, is not patent-
eligible under Alice. 134 S. Ct. at 2355 (quoting Le Roy v.
Tatham, 55 U.S. 156, 175 (1852) (“A principle, in the
abstract, is a fundamental truth; an original cause; a
motive; these cannot be patented, as no one can claim in
either of them an exclusive right.”)). As we explained in
Dealertrack, Inc. v. Huber, 674 F.3d 1315, 1333 (Fed. Cir.
2012), the abstract idea exception to patent eligibility
disallows the patenting of “basic concept[s],” such as
“processing information through a clearinghouse,” be-
cause no entity is entitled to “wholly preempt” such
concepts. Id.; see also Alice, 134 S. Ct. at 2354.
    Under Alice’s second step, the only components dis-
closed in the specification for implementing the asserted
method claims are unambiguously described as “conven-
tional.” See supra Background § I. These components do
not supply an inventive concept. See Alice, 134 S. Ct. at
2359 (holding that the implementation of an abstract idea
using computer functions that are “‘well-understood,
routine, conventional activit[ies]’ previously known to the
industry” did not supply an inventive concept (quoting
Mayo Collaborative Servs. v. Prometheus Labs., Inc., 566
INVENTOR HOLDINGS, LLC   v. BED BATH & BEYOND, INC.      11

U.S. 66, 79 (2012))). Moreover, here, as in Alice, consider-
ing the method steps of the representative claims as an
“ordered combination” reveals that they “amount to
‘nothing significantly more’ than an instruction to apply
[an] abstract idea” using generic computer technology.
See Alice, 134 S. Ct. at 2359–60 (quoting Mayo, 566 U.S.
at 79). 3
    IH argues that it was reasonable for it to believe that
the ’582 patent was patent-eligible post-Alice based on the
district court’s denials of the other defendants’ § 101
motions before Alice issued. Appellant’s Br. 15. IH
contends that a “necessary prerequisite” to the district
court’s ruling was that “Alice changed the law on § 101
and did so so clearly and definitively as to render the ’582
patent clearly invalid.” Id. at 15–16. IH then argues that
Alice did not fundamentally change § 101 law, noting that
the Supreme Court applied the same test in Alice that it
previously set out in Mayo. Id. at 16–18 (citing 566 U.S.
at 77–80). IH further argues that § 101 was, and is, an
evolving area of law and that the § 101 inquiry in this
case was therefore difficult. Id. at 18.

   3    IH argued before the district court, in opposition
to BBB’s § 101 motion, that the representative claims’
electronic handling of “codes” supplied an inventive
concept. See, e.g., J.A. 203 n.5 (“A human, unassisted by
the invention of the ’582 patent, cannot store codes in a
database and electronically apply those codes to remote or
local orders entered in a POS system.”); id. at 208 (“The
solution – the use and processing of codes and communi-
cation between local and remote systems – is necessarily
rooted in computer technology.”). IH did not discuss these
arguments in its briefing in opposition to BBB’s fees
motion before the district court and does not raise them
on appeal. See generally J.A. 1080–83.
12       INVENTOR HOLDINGS, LLC   v. BED BATH & BEYOND, INC.

    We find IH’s arguments to be meritless. First, as the
district court correctly noted in its opinion, IH’s claims
were “dubious even before the Alice decision” in light of,
for example, Dealertrack and Bilski. Inventor Holdings,
2016 WL 3090633, at *2 (observing that “[t]here is a
strong argument that using a third-party intermediary to
create a remote pay system is an abstract idea in light of
Bilski[, 561 U.S. at 611–12]”). Although the district court
did not give reasons for denying the other defendants’ pre-
Alice § 101 motions, IH has cited no evidence that the
district court ever endorsed the patent-eligibility of the
asserted claims. Cf. Murr Plumbing, Inc. v. Scherer Bros.
Fin. Servs. Co., 48 F.3d 1066, 1070 (8th Cir. 1995) (“[T]he
denial of the motion to dismiss was not a decision on the
merits of that motion, but was a means of postponing
decision on the merits.”).
    Second, we find that Alice was a significant change in
the law as applied to the facts of this particular case.
Prior to Alice, the state of the law for computer-
implemented business transaction inventions was less
than clear, given this court’s divided en banc opinion in
CLS Bank International v. Alice Corp., 717 F.3d 1269,
1273 (Fed. Cir. 2013). As we later explained, post-Alice,
in Mortgage Grader, Inc. v. First Choice Loan Services
Inc., “a § 101 defense previously lacking in merit may be
meritorious after Alice. This scenario is most likely to
occur with respect to patent claims that involve imple-
mentations of economic arrangements using generic
computer technology, as the claims do here.” 811 F.3d
1314, 1322 (Fed. Cir. 2016). Like the claims at issue in
Mortgage Grader, the ’582 patent’s claims are directed to
an “economic arrangement” implemented using “generic
computer technology.” These issues were significant, if
not determinative, of the Court’s holding in Alice.
    Finally, while we agree with IH as a general matter
that it was and is sometimes difficult to analyze patent
eligibility under the framework prescribed by the Su-
INVENTOR HOLDINGS, LLC   v. BED BATH & BEYOND, INC.        13

preme Court in Mayo, there is no uncertainty or difficulty
in applying the principles set out in Alice to reach the
conclusion that the ’582 patent’s claims are ineligible.
The ’582 patent’s alleged invention does not require us to
engage in a difficult line-drawing exercise for a claimed
invention resting on, or anywhere near, the margins of
patent-eligibility; rather, the patent claims here are
directed to a fundamental economic practice, which Alice
made clear is, without more, outside the patent system.
See, e.g., ’582 patent col. 2 ll. 35–46 (describing prior art
“[w]arehouse type retailers” that permitted customers to
order both “in-stock goods” and goods in “store catalogs”
and pay for either type of goods at a store). In addition,
here, as in Alice, the patentee is attempting to broadly
monopolize an abstract idea as implemented using gener-
ic computer technology. IH’s asserted claims were plainly
invalid in view of Alice and its reasoning.
    It was IH’s responsibility to reassess its case in view
of new controlling law. Taurus IP, LLC v. DaimlerChrys-
ler Corp., 726 F.3d 1306, 1328 (Fed. Cir. 2013) (“[A] party
cannot assert baseless infringement claims and must
continually assess the soundness of pending infringement
claims . . . .”). The district court did not abuse its discre-
tion in awarding fees based on IH’s failure to reassess the
weakness of its case under Alice and then confining the
award to fees accrued after the Alice decision issued.
         II. Award of Appellate Fees Under § 285
    IH argues that the district court abused its discretion
in awarding appellate attorney fees. Appellant’s Br. 24–
27. We have previously held that § 285 “does not bar the
trial court from awarding fees for the entire case, includ-
ing any subsequent appeals.” Therasense, Inc. v. Becton,
Dickinson & Co., 745 F.3d 513, 517 (Fed. Cir. 2014). The
district court “live[d] with the case over a prolonged
period of time,” Highmark, 134 S. Ct. at 1748, and was in
the best position to award fees as an initial matter for the
14       INVENTOR HOLDINGS, LLC   v. BED BATH & BEYOND, INC.

entire case, including the § 101 appeal. There were
obvious issues with the ’582 patent’s claims that IH
should have recognized post-Alice, and these issues per-
sisted throughout the § 101 appeal. The district court
was in a position to readily assess these issues as a collec-
tive whole and did not abuse its discretion in awarding
BBB its appellate attorney fees.
   We have considered IH’s other arguments and find
them to be unpersuasive. 4
                       CONCLUSION
    Because the district court did not abuse its discretion
in awarding attorney fees under § 285, the district court’s
decision is
                       AFFIRMED

     4  IH makes several arguments about general, un-
settled issues in § 101 jurisprudence, relating to the
appropriate burden of proof, whether evidence is neces-
sary to invalidate a patent under § 101, what overlap
there is between § 101 and 35 U.S.C. § 103, etc. But it
makes no specific arguments regarding any of these
issues to tie them to this particular case. We decline to
address broad, theoretical arguments about § 101 law
without any tethering of such arguments to the facts of
this case.