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Cloudflare's win over Blackbird jeopardized by two recent CAFC cases.

Zachary Silbersher

Cloudflare recently prevailed on its motion to invalidate patents as ineligible in a case commenced by Blackbird Tech.  The case is notable, and has been followed within certain tech circles more than a typical patent case, because Cloudflare widely publicized the lawsuit as a purportedly grave and unfortunate attack from an alleged patent troll. 

Cloudflare’s win may be in jeopardy.  Two recent decisions from the Federal Circuit have held that winning on early Alice motions, like the one on which Cloudflare prevailed, will now be more difficult.  The Federal Circuit’s recent decisions in Berkheimer and Aatrix stand to jeopardize Cloudflare’s chances of winning on appeal, along with many other patent-litigation defendants sitting on an Alice win yet to be decided on appeal.  Cloudflare’s celebratory win may not rest on firm footing.

The lower court’s decision that dismissed Blackbird’s case was just under two pages long.  While this, in itself, does not mean that the decision will not stand up on appeal, it is not negligible.  Judges write long, reasoned decisions precisely for the purpose of fortifying their decisions on appeal.  Typically, the point is to lay out the evidence and the court’s reasoning for how it arrived at its factual findings.  By contrast, a short opinion suggests that the court may have glossed over factual questions that, technically, should have been given deference to the plaintiff on a motion to dismiss.  The Federal Circuit’s decision in Berkheimer and Aatrix spoke directly to this issue.  Those cases held that improperly resolved factual issues on an early Alice motion warrant vacating the decision and remanding for further proceedings.

Turning to the court’s decision itself in Cloudflare, in the course of addressing the second Alice step, “inventive concept,” the lower court found that Blackbird’s patent is directed to routine and conventional technology.  The court’s opinion stated the patent does not contain a “discrete and non-conventional means of monitoring and modifying a data stream.”  Rather, the Court found, “the claims make clear the processing device used to monitor and modify data can be nearly anything and can be placed nearly anywhere, so long as the processing device is not the server that originates the data stream.”  That is essentially the extent of the court’s analysis.

On appeal, the question will be whether Blackbird can show that the court overlooked any factual allegations that would have called these findings by the court into question.  For instance, during briefing, Blackbird argued, “To be clear: An intermediate networking device on the internet that used protocol parameters to modify communications with third party data was entirely unconventional in the 1990s and there is nothing ‘generic’ about such a device.”  (Case No. 3:17-cv-6112-VC, N.D. Cal.) (Dkt. 77 at 14) (emphasis in original).  This potentially suggests that whether Blackbird’s patent is directed to routine or conventional technology is a question that cannot be resolved by the court, alone, on a motion to dismiss, but rather requires a more developed record through discovery.  If so that could warrant vacating Cloudflare’s victory.

The lower court also concluded that Blackbird’s patent “attempts to monopolize the abstract idea of monitoring a preexisting data stream between a server and a client for a specific condition and modifying that stream when that condition is present.”  Yet, a previous Federal Circuit decision, McRo v. Bandai Namco Games, held that findings like this typically require discovery, and cannot be summarily decided on a motion to dismiss by a judge. 

It is not possible to determine, prior to appellate briefing, whether Blackbird will prevail on appeal.  Yet, patent practitioners will be looking for signals that the decisions in Berkheimer and Aatrix may have changed the way the Federal Circuit reviews factual determinations underlying early Alice decisions.  The very public Cloudflare case may be a case in point, and Berkheimer and Aatrix may have given Blackbird arguments on their appeal that were not as readily available before.  Cloudflare may not be out of the woods just yet.