COOPERATIVE ENTERTAINMENT, INC. v. KOLLECTIVE TECHNOLOGY, INC.

Before Moore, Lourie, and Stark. Appeal from the United States District Court for the Northern District of California.

Summary: Plausible allegations of an inventive concept in a complaint precludes a motion to dismiss for lack of patent eligibility because determining whether such a concept was well-understood, routine, or conventional was a question of fact that could not be resolved at the Rule 12(b)(6) stage.

Cooperative patented a system and method of structuring a peer-to-peer network for distributing large files and accused Kollective of infringement. Kollective moved to dismiss under Rule 12(b)(6), alleging that all claims were ineligible under § 101. Cooperative filed an amended complaint, which led Kollective to refile its motion to dismiss, which the district court granted. On appeal, the Federal Circuit reversed the district court’s dismissal and remanded for further proceedings.

Applying the Supreme Court’s two-step Alice framework to analyze patent eligibility, the Federal Circuit proceeded directly to step two to determine if the amended complaint plausibly alleged that the claims recited an inventive concept. The Federal Circuit concluded that there were at least two alleged inventive concepts that should have precluded dismissal for lack of eligibility: (1) the use of peer nodes to communicate outside of a content distribution network and (2) the use of trace routes in data content segmentation. Without determining whether these concepts were actually inventive, the Federal Circuit noted that Cooperative’s complaint alleged that these concepts were distinctions and improvements over the prior art and provided benefits to the technical field. The Federal Circuit also reasoned that the determination of whether the claimed network was well-understood, routine, or conventional was a question of fact that could not be resolved at the Rule 12(b)(6) stage. Accordingly, the Federal Circuit held that plausible factual allegations regarding inventive concepts precluded dismissal for lack of patent eligibility and remanded for further proceedings.