On April 20, 2018, the Court of Appeals for the Federal Circuit held in Voter Verified, Inc. v. Election Sys. & Software LLC,[1] that in spite of a favorable prior judicial ruling (although not necessarily on §101 patent subject matter-eligibility), issue preclusion did not apply, and affirmed the patent-ineligibility holding by the district court.
The facts are as follows.
Voter Verified owns U.S. Patent No. 6,769,613, issued on August 3, 2004, and reissued as U.S. Reissue Patent No. RE40,449, directed to methods and systems of providing for auto-verification of ballots.
Voter Verified and Election Systems have been involved in various litigation. In the first case, filed in 2009, Voter Verified sued Election Systems for infringement of the ‘449 patent in the U.S. District Court, Middle District of Florida. Upon summary judgment, the district court held that claims 1-93 were not infringed and not invalid under §§101 and 112, claims 1-48, 50-84, and 86-92 were not invalid under §§102 and 103, claim 49 was invalid under §103, and claim 94 was invalid under §112.[2] In the present case, Voter Verified again sued Election Systems for infringement of the ‘449 patent in the U.S. District Court, Northern District of Florida. Upon a Rule 12(b)(6) motion, Voter Verified argued that issue preclusion prevented Election System from arguing §101 subject matter-ineligibility. The district court granted the motion, holding that Alice was an intervening change in the law which prevented the doctrine of issue preclusion (i.e., collateral estoppel) from taking effect in this case.
The Fed Circuit panel was composed of Judges Newman, Lourie, and Reyna, with Judge Lourie writing for the court. There were two issues to be addressed by the panel: first, the procedural one, whether or not issue preclusion applied to this case because Alice was an intervening change in the law, and second, the merits of the §101 analysis as to the claims of the ‘449 patent.
Issue Preclusion
Issue preclusion does not apply where there is an intervening change in the legal atmosphere.[3] The panel agreed with Voter Verified that Alice was not an intervening change of the law. However, Judge Lourie specified that issue preclusion still did not apply to this case for a different reason.
In order for the change of law exception to apply to issue preclusion, 1) the governing law must have changed, 2) the current decision sought to reapply the old case, and 3) the change in the law compelled a different result under the facts.[4]
Judge Lourie noted:
Alice,[5] which was decided after the first litigation ended, did not alter the governing law of §101. In Alice, the [Supreme] Court applied the same two-step framework it created in Mayo[6] in its §101 analysis. Mayo was not an intervening change in the law . . . . Mayo was decided while the first appeal was still pending before this court. After that, the only controlling decision that could be considered to have intervened is Alice, which issued after the first litigation.[7]
Because the first element had not been met, Judge Lourie did not discuss the remaining elements of the change of law exception.
Issue preclusion requires an issue at stake which was identical to one previously and actually litigated, that must have been a critical and necessary part of the judgment (emphasis added).[8] Election Systems had contended that because it did not counter Voter Verified’s §101 counterclaim in the previous litigation, the issue was not “actually litigated.” Further, it contended that in that court’s judgment, §101 was “not critical or necessary to final judgment.” Judge Lourie agreed:
First, the §101 issue was not actually litigated . . . because the court did not evaluate that question. Second, the §101 issue of invalidity was not necessary to the judgment in the first district court action.[9]
He further made his point by noting that most of the claims in the first litigation’s judgment were not invalid under §§101, 102, 103, and 112; only claims 49 and 94 were invalid, under §103 and §112, respectively (i.e., not §101). That court’s opinion did not determine which of these findings was dispositive on the judgment of the case. As a result, Judge Lourie determined that issue preclusion did not apply to the case. He then moved on to the merits of the §101 analysis.
101 Patent Subject Matter-Eligibility
The Alice test requires a two-step process. First, the claims are first read as directed to a patent-ineligible concept. If so, claim elements are analyzed whether there is an inventive concept sufficient to transform the claimed invention into something more than just an abstract idea.[10]
Claim 85 recites:
85. A method for voting providing for self-verification of a ballot comprising the steps of:
(a) voting by a voter using a computer voting station programmed to present an election ballot,
accept input of votes from the voter according to the election ballot,
temporarily store the votes of the voter;
(b) printing of the votes of the voter from the votes temporarily stored in the computer for the voting station;
(c) comparison by the voter of the printed votes with the votes temporarily stored in the computer for the voting station;
(d) decision by the voter as to whether a printed ballot is acceptable or unacceptable; and
(e) submission of an acceptable printed ballot for tabulation.
(Emphasis added.)
The panel found the claims were directed to patent-ineligible subject matter.
First, the claims as a whole are drawn to the concept of voting, verifying the vote, and submitting the vote for tabulation. Humans have performed this fundamental activity that forms the basis of our democracy for hundreds of years.
Second, there is no inventive concept in the claims sufficient to transform them into patent-eligible subject matter. Neither party disputes that the claims recite the use of general purpose computers that carry out the abstract idea. . . . Because all of the remaining claims only recite different variations of the same abstract idea being performed with other generic computer components, we therefore conclude that the district court properly determined that the claims of the ‘449 patent are invalid under §101.[11]
This case was the sixth Fed Circuit §101 case decided this year, and only the first one where all claims failed the Alice test. In all fairness, the Voter Verified claimed subject matter was a garden-variety abstract idea, and the holding is in line with case precedent and the Alice framework. It would appear this case is more of an outlier than part of a trend.
[1] ___F.3d___ (Fed. Cir. 2018) (Voter Verified II) (slip op.), aff’g No. 1:16-cv-267, 2017 WL 3688148 (N.D. Fla. Mar. 21, 2017).
[2] See Voter Verified, Inc. v. Premier Election Sols., Inc. (Voter Verified I), 698 F.3d 1374, 1379 (Fed. Cir. 2012), aff’g on limited grounds No. 6:09-cv-1968 (M.D. Fla. Sept. 15, 2010).
[3] See Dow Chem. Co. v. Nova Chems. Corp. (Can.), 803 F.3d 620, 628-29 (Fed. Cir. 2015); Wilson v. Turnage, 791 F.2d 151, 157 (Fed. Cir. 1986); see also Wright et al., 18 Fed. Prac. & Proc. Juris §4425 (3d ed.) (“Preclusion is most readily defeated by specific Supreme Court overruling of precedent relied upon in reaching the first decision”).
[4] See Dow Chem., 803 F.3d at 629.
[5] See Alice Corp. v. CLS Bank Int’l, 134 S. Ct. 2347, 2355 (2014).
[6] See Mayo Collaborative Servs. v. Prometheus Labs., Inc., 566 U.S. 66, 77-79 (2012).
[7] See Voter Verified II, supra (slip op. at 7-8).
[8] See CSX Transp., Inc. v. Bhd. of Maint. of Way Emps., 327 F.3d 1309, 1317 (11th Cir. 2003).
[9] See Voter Verified II, supra (slip op. at 9-10).
[10] See Alice Corp., 134 S. Ct. at 2355.
[11] See Voter Verified II, supra (slip op. at 14-15).