Wednesday, February 11, 2015

Patent Eligibility Attack On the Pleadings?

Not where you need to rely on evidence outside the pleadings...

Stoneeagle Services has sued Pay-Plus Solutions and Premier Healthcare Exchange for infringement of U.S. Patent RE 43,904 and RE 44,748 relating to healthcare provider reimbursement systems and methods.  Defendants, as has become all too common, moved for judgment on the pleadings early in the case, arguing that the patents are not patent eligible.  They challenged "representative" claim 2:
2. A method of facilitating payment of adjudicated health care benefits to a health care provider comprising:
identifying the health care provider that renders medical services in anticipation of payment;
identifying a payer that has agreed to pay the health care provider on behalf of a patient subject to preselected conditions;
identifying an administrator that determines whether the medical services conducted by the service provider meet the preselected conditions by the payer, generates an explanation of benefits, and authorizes payment of the service provider for an authorized amount;
intercepting the explanation of benefits and payment information transmitted from the administrator to the health care provider;
acquiring a single-use, stored-value card account number and loading it with funds equal to the authorized amount;
merging the stored-value card account number, the authorized amount, a card verification value code, and an expiration date with the explanation of benefits into a computer-generated image file; and
transmitting the image file to the health care provider via a computer-implemented transmission.
Defendants argued that the claim was directed to the abstract idea of "paying a service provider by transmitting a payment combined with an explanation of the payment."  Plaintiff disagreed, arguing that the claim was narrowly directed at "(1) the use of stored-value cards; (2) by third-party payors; (3) to pay healthcare benefits; (4) via a computer-generated file, which couples the payment with an explanation of benefits."  Plaintiff also offered expert testimony in support of its position.

The Court recognized the logistical issue with entertaining such a motion at such an early stage in the proceedings.  Specifically, regardless of the parties' arguments, the Court must analyze whether the claims (not just a "representative" claim) are directed to an "abstract idea" and if so, whether the elements of the claims (considered individually and in combination) contain an "inventive step." How a Court can properly do this without looking beyond a patent and its specification is not clear.
Upon careful consideration of the parties' filings, Defendant's Motion for Judgment on the Pleadings is denied, as premature.  As an initial matter, both Defendants and Plaintiff cite to matters outside of the pleadings, in support of their respective positions, including the prosecution history of a "parent" patent, an expert report prepared by Robert Allen (Plaintiff's Chairman and CEO), and a declaration submitted by Mr. Allen.  However, discovery is still ongoing, and the record is thus not "fully developed."  Jozwiak [v. Stryker], 2010 WL 743834 at *4.  Due to the deficiency of the available record, the Court declines to convert Defendant's Rule 12(c) motion into a motion for summary judgment.
* * *
In this case, the parties dispute the basic character of the claimed subject matter. ... At the very least, proper construction of the term "stored-value card" is necessary prior to an assessment of whether the claims implicate a fundamental economic practice, and whether the claims comprise a sufficiently inventive process.
The Court was not also inclined to address claims as "representative" without a stipulation:
Finally, Defendant's Motion unilaterally designates certain claims as "representative." ...
"[A] party challenging the validity of a claim, absent a pretrial agreement or stipulation, must submit evidence supporting a conclusion of invalidity of each claim the challenger seeks to destroy."  Shelcore, Inc. v. Durham Indus., Inc., 745 F.2d 621, 625 (Fed. Cir. 1984) (underlined emphasis added); see, e.g., Alice Corp. Pty. Ltd., 134 S. Ct. at 2352 (noting that the parties agreed on representative claims); cf. Content Extraction & Transmission LLC v. Wells Fargo Bank, Nat'l Ass'n, Nos 2013-1588, et al., ___ F.3d ___, 2014 WL 7272219 at *4 (Fed. Cir. Dec. 23, 2014) (affirming district court's designation of claims as representative where patentee did not object).
Defendants' Motion fails to meaningfully address the claims not designated as "representative."  In order to narrow the issues, and to conserve both the Court's and the parties' resources, the parties are encouraged to stipulate to representative claims.  Absent a stipulation, Defendants will be required to address the challenged claims individually in any subsequent motion.
(emphasis provided by Court).  

Motion for judgment on the pleadings, denied as premature.
Stoneeagle Services, Inc. v. Pay-Plus Solutions, Inc., Case No. 8:13-CV-2240 (M.D. Fla. Feb. 9, 20150) (J. Covington)