Many lower courts have interpreted the Federal Circuit’s Nalco decision to hold that claim construction is inappropriate at the motion to dismiss stage. But the Federal Circuit’s recent UTTO decision clarified that claim construction is not categorically forbidden at the motion to dismiss stage.

The Court noted whether claim construction is appropriate at the motion to dismiss stage is case-specific, as sometimes “a claim's meaning may be so clear . . . that no additional process is needed.” For patent litigants, the UTTO decision provides express support for patent litigants to make claim construction arguments at the motion to dismiss stage.

Prior Understandings From Nalco

Nalco Co. (“Nalco”) was the exclusive licensee of U.S. Patent No. U.S. 6,808,692 (the “’692 Patent), which was directed to “Enhanced mercury control in coal-fired power plants.” Independent claim 1 of the ’692 Patent recites “[a] method of treating coal combustion flue gas containing mercury, comprising . . . injecting a member selected from the group consisting of molecular halogen and a thermolabile molecular halogen precursor into said flue gas.” Chem-Mod, LLC (“Chem-Mod”) is an environmental services company that specializes in pollutant control technologies and licenses its “Chem-Mod Solution.” The Chem-Mod Solution comprises mixing a thermolabile molecular halogen precursor with coal before the coal is fed into a coal combustion process.

Nalco brought an action for patent infringement against Chem-Mod, arguing that the Chem-Mod Solution practices all steps of at least claim 1 of the ’692 Patent. At the district court, Chem-Mod argued that the Chem-Mod Solution did not infringe because mixing thermolabile molecular halogen precursors prior to combustion does not constitute “injecting” such precursors into flue gas post-combustion. The district court ultimately agreed, dismissing Nalco’s complaint and subsequent amended complaints, which Nalco ultimately appealed to the Federal Circuit.

The Federal Circuit reversed and remanded the district court’s dismissal and, in doing so, discussed the inappropriateness of claim construction at the pleading stage in this case. Focusing on the Twombly/Iqbal pleading standards, the Court held that Nalco had plausibly alleged that “injection” of the halogen precursor occurred when treated coal was fed into a furnace for combustion. In discussing this theory of infringement, the Court went on to explain:

Defendants’ objections to this theory of infringement read like classic Markman arguments. Defendants first take issue with Nalco's allegation that “coal combustion flue gas” is “the gas that is created during the combustion of coal. But Defendants’ arguments boil down to objections to Nalco’s proposed claim construction for “flue gas,” a dispute not suitable for resolution on a motion to dismiss.

Many lower courts have read this passage and others in Nalco to hold that claim construction is categorically forbidden at the motion to dismiss stage.

UTTO’s Clarification of Nalco

UTTO Inc. (“UTTO”) owned U.S. Patent No. U.S. 9,086,441 (the “’441 Patent), which was directed to “Detection of buried assets using current location and known buffer zones.” Independent claim 1 of the ’441 Patent recites “[a] method . . . comprising . . . generating, based on the group of buried asset data points, a two dimensional area comprising the buffer zone . . ..” The core of the process involves using both (1) a GPS to pinpoint a person’s location and (2) previously stored buried assert data to locate and generate a buffer zone around a buried asset.

Metrotech Corp. (“Metrotech”), a competitor of UTTO, sold a device that had a “walk back” feature that performed substantially similar to the claimed method. However, the walk back feature “requires only a single point” to generate a buffer zone, as opposed to a group of buried asset data points.

UTTO brought an action for patent infringement and moved for a preliminary injunction against Metrotech, arguing that the walk back feature infringes on the ’441 Patent. In denying Metrotech’s motion for preliminary injunction, the district court construed the claims in favor of Metrotech.

Specifically with respect to claim 1, the Court noted that “[t]he claim does not mention ‘one or more’ data points, or ‘a’ data point. It describes a ‘group’ of ‘data points,’ plural. The ordinary and customary meaning indicates that more than one data point is necessary to create the buffer zone.” Based on the Court’s construction, Metrotech moved to dismiss UTTO’s complaint, and the dismissal of UTTO’s third amended complaint was ultimately appealed to the Federal Circuit.

The Federal Circuit sided with UTTO and vacated the dismissal of UTTO’s third amended complaint, finding the district court’s claim construction to be incomplete in this case. However, the Court squarely addressed arguments made in UTTO’s briefing that misconstrued Nalco. Specifically directed to the passages of Nalco provided in the previous Section, the Court noted that:

Those passages, we conclude, should not be read as stating a categorical rule against a district court's adoption of a claim construction in adjudicating a motion to dismiss. The passages do not in terms state such a rule. They are readily understood to be drawing a conclusion about the need for further proceedings to resolve the particular claim-construction issues in that case before a sound determination of the appropriateness of dismissal could be reached. Nalco should be read in that case-specific way.

The Court went on to say that some case-specific circumstances make it improper to resolve a claim construction dispute at the pleading stage, but “sometimes a claim's meaning may be so clear . . . that no additional process is needed.”

While claim construction is now expressly not forbidden at the pleading stage under UTTO, Nalco is still good law and should be read in a case-specific way. Like the Federal Circuit did in both Nalco and UTTO, cases will still be remanded where “[t]here has been insufficient exploration in the record, both [at the Federal Circuit] and in the district court, of too many questions of apparent relevance to identifying a proper construction of [a] limitation.”