Background

Cellspin sued Fitbit and thirteen other defendants in the Northern District of California alleging infringement of U.S. Patent Nos. 8,738,794, 8,892,752, 9,749,847, and 9,258,698.  The defendants filed a motion to dismiss, alleging invalidity of the patents under 35 U.S.C. § 101.

As an example of one of the asserted claims, claim 1 of the '794 patent recites:

1.  A method for acquiring and transferring data from a Bluetooth enabled data capture device to one or more web services via a Bluetooth enabled mobile device, the method comprising:
    providing a software module on the Bluetooth enabled data capture device;
    providing a software module on the Bluetooth enabled mobile device;
    establishing a paired connection between the Bluetooth enabled data capture device and the Bluetooth enabled mobile device;
    acquiring new data in the Bluetooth enabled data capture device, wherein new data is data acquired after the paired connection is established;
    detecting and signaling the new data for transfer to the Bluetooth enabled mobile device, wherein detecting and signaling the new data for transfer comprises:
        determining the existence of new data for transfer, by the software module on the Bluetooth enabled data capture device; and
        sending a data signal to the Bluetooth enabled mobile device, corresponding to existence of new data, by the software module on the Bluetooth enabled data capture device automatically, over the established paired Bluetooth connection, wherein the software module on the Bluetooth enabled mobile device listens for the data signal sent from the Bluetooth enabled data capture device, wherein if permitted by the software module on the Bluetooth enabled data capture device, the data signal sent to the Bluetooth enabled mobile device comprises a data signal and one or more portions of the new data;
    transferring the new data from the Bluetooth enabled data capture device to the Bluetooth enabled mobile device automatically over the paired Bluetooth connection by the software module on the Bluetooth enabled data capture device;
    receiving, at the Bluetooth enabled mobile device, the new data from the Bluetooth enabled data capture device;
    applying, using the software module on the Bluetooth enabled mobile device, a user identifier to the new data for each destination web service, wherein each user identifier uniquely identifies a particular user of the web service;
    transferring the new data received by the Bluetooth enabled mobile device along with a user identifier to the one or more web services, using the software module on the Bluetooth enabled mobile device;
    receiving, at the one or more web services, the new data and user identifier from the Bluetooth enabled mobile device, wherein the one or more web services receive the transferred new data corresponding to a user identifier; and
    making available, at the one or more web services, the new data received from the Bluetooth enabled mobile device for public or private consumption over the internet, wherein one or more portions of the new data correspond to a particular user identifier.

In summary, this claim relates to an application on a Bluetooth enabled mobile device assisting a Bluetooth enabled data capture device (e.g., a digital camera or wireless fitness tracker) to publish data received from the latter on one or more web sites.  According to the '794 patent, doing so overcomes difficulties associated with manual transfer of files from the capture device to the communication device, as well as uploading and publishing such files.

In Alice Corp. v. CLS Bank Int'l, the Supreme Court set forth a two-part test to determine whether claims are directed to patent-eligible subject matter under § 101.  One must first decide whether the claim at hand is directed to a judicially-excluded law of nature, a natural phenomenon, or an abstract idea.  If so, then one must further decide whether any element or combination of elements in the claim is sufficient to ensure that the claim amounts to significantly more than the judicial exclusion.  But generic computer implementation of an otherwise abstract process does not qualify as "significantly more," nor will elements that are well-understood, routine, and conventional lift the claim over the § 101 hurdle.

Patent Eligibility Dispute

In briefings, the defendants argued that:

Cellspin's claims were (i) directed to the abstract concept of acquiring data using a "data capture device," transferring data over a connection to a mobile device, and publishing the data to a website and (ii) recite only generic computer technology to carry out the abstract idea, technology which the specification describes as "pervasive [and] flexible," such as a "ubiquitous mobile phone," "fairly widespread" personal digital assistants, and "general purpose computers and computing devices."

In its opposing brief, Cellspin countered that the claims were not abstract because they "described specific improvements comprising, acquiring, transferring, and publishing new-data on the Internet, including, a purported improvement in battery consumption, an elimination of the need for bulky hardware, and a purported improvement in the order or timing of the Bluetooth or wireless pairing."  Invoking Berkheimer v. HP, Cellspin also argued that "factual disputes exist regarding whether the claimed features are well-understood, routine, and conventional."  In addition, Cellspin filed an amended complaint "which contained the arguments regarding improvements that plaintiff had asserted in its opposition."

The Court applied the Alice test.  In doing so, it rejected Cellpsin's part one argument because "plaintiff fails to identify these alleged specific improvements or otherwise explain how these improvements result in enhanced 'computer capabilities' rather than a process that qualifies as an abstract idea for which computers are invoked merely as a tool."  The Court was similarly unconvinced by Cellspin's part two position, writing "the asserted claims merely provide a generic environment in which to carry out the abstract ideas of acquiring, transferring, and publishing data, [and] fail to supply an inventive concept sufficient to transform the underlying abstract idea into patentable subject matter."  (In fairness, the reasoning behind the actual decision was far less conclusory than the Court summarized here.)

Thus, the Court entered a judgment in favor of the defendants and invalidated the patents.

Attorney's Fees

Afterward, six of the defendants filed motions for attorney's fees on the grounds that Cellspin's litigation activities were exceptional under 35 U.S.C. § 285.

Regarding this motion, the Court reviewed the standard for determining whether a case is exceptional enough to award attorney's fees to the prevailing party.  Particularly, such a case "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."  The moving party must show exceptionality by a preponderance of evidence and the ultimate determination is in the discretion of the Court after taking into account the totality of circumstances.

Here, the Court relied on the Federal Circuit's Inventor Holdings, LLC v. Bed Bath & Beyond, Inc. decision, which held that "a case presenting either subjective bad faith or exceptionally meritless claims may sufficiently set itself apart from mine-run cases to warrant a fee award."  The Court stated that "[a]s in Inventor Holdings, the claims at issue here are manifestly directed to an abstract idea and the only components disclosed in the specification for implementing the asserted method claims are unambiguously . . . conventional."

The Court also stated that "Cellspin filed its complaint in the face of significant post-Alice precedent" and "chose to file more than a dozen lawsuits asserting four ineligible patents and, in so filing, ignored substantial precedent dismissing analogous data manipulation patent claims."

Further, the Court took issue with Cellspin's "aggressive" litigation conduct, because it did not agree to stay discovery pending resolution of the § 101 motion, as well as filing its amended complaint only three days prior to the hearing on this motion.  While the Court admitted that this conduct "may not amount to bad faith litigation, it does contribute to the totality of the circumstances weighing in favor of a fee award."

Moreover, the Court rejected Cellspin's asserted reliance on an issued patent's presumption of validity.  Particularly, the Court cited to Ultramercial, Inc. v. Hulu to support its position that even though "issued patents are presumed valid, they are not presumed eligible under Section 101."

Finally, the Court reprimanded Cellspin because it did not "analyze its patents critically" and "chose to file and pursue aggressively fourteen lawsuits simultaneously."

For these reasons, the Court awarded a total of $563,000 of attorney's fees to the defendants.

Analysis

Where to start . . . .  There are two distinct issues here, whether the claims are indeed ineligible under § 101, as well as whether that alone or in combination with other factors rise to the level of exceptionality under § 285.  But even if the Court's § 101 determination was correct, it's granting of attorney's fees is highly questionable.

Given the extreme lack of clarity regarding how § 101 is to be applied, it seems unreasonable to contend that Cellspin could somehow determine ahead of time whether its claims would ultimately be invalidated.  For instance, very broad and vague claims in Thales Visionix Inc. v. U.S. and Finjan, Inc. v. Blue Coat Systems, Inc. were found to meet the requirements of § 101.  Nobody has access to a patent-eligibility crystal ball, including Cellpsin.

Also, the Court appears to have misapplied Inventor Holdings.  In that case, attorney's fees were justified because the action was filed prior to Alice and the plaintiff did not reassess the strength of its position given that Alice was a significant shift in § 101.  Here, the suit was filed after Alice, but before Berkheimer and Aatrix Software, Inc. v. Green Shades Software, Inc.  If anything, these two cases are very pro-plaintiff with respect to § 101.  Therefore, Cellspin's case arguably strengthened as this proceeding continued.

Additionally, to the extent that the Court relied on the concurrence in Ultramercial to conclude that patents are not presumed eligible, that is plain wrong.  35 U.S.C. § 282 clearly sets forth that patents are presumed valid, and no Supreme Court or Federal Circuit case (including Ultramercial) establishes binding precedent otherwise.  The fee award may be reversible on this basis alone.

Speaking of which, Cellspin has appealed the § 101 determination to the Federal Circuit.  It would not be surprising if they add the § 285 issue to their appeal.  Stay tuned, as this one is far from over.

Cellspin Soft, Inc. v. Fitbit, Inc. (N.D. Cal. 2018)
Order Granting in Part Motion for Attorney's Fees by District Judge Yvonne Gonzalez Rogers