Attorney advertising. This article is general information, not legal advice.
Many software and business-method patents issued before the Supreme Court’s 2014 decision in Alice Corp. v. CLS Bank. Those patents still carry a presumption of validity. But a September 30, 2026 Federal Circuit decision is a reminder that the presumption is not a substitute for looking hard at your own claims before you file an infringement suit.
In Epic Tech, LLC v. Pen-Tech Associates, Inc., No. 2025-1624 (Fed. Cir. Sept. 30, 2026), a precedential opinion by Chief Judge Moore, the court vacated a district court’s denial of sanctions and attorney fees against a patent owner whose claims were later held ineligible under 35 U.S.C. § 101. The court did not decide that sanctions or fees are owed. It sent the case back because the trial court hadn’t explained why the warning signs about validity didn’t matter.
What happened
Epic Tech owns U.S. Patent No. 8,545,317, which covers an electronic sweepstakes system linking gaming terminals on a server network. The patent issued in October 2013. Months later, the Supreme Court decided Alice and set out its two-step test for patent eligibility.
After Alice, the USPTO rejected claims under § 101 in three related Epic Tech applications. In two of them, the Office had found the claims patentably indistinct from claims of the ‘317 patent. Epic Tech abandoned all three applications without overcoming the rejections.
In June 2020, Epic Tech sued Pen-Tech in the Northern District of Georgia for infringing the ‘317 patent. Separately, Epic Tech had asserted a related patent (No. 8,545,315) in Texas, and in 2021 that court held the asserted ‘315 claims ineligible under § 101. (That ruling was later vacated as part of a settlement.) The Georgia court eventually granted Pen-Tech summary judgment that the asserted ‘317 claims were invalid under § 101.
Pen-Tech then sought Rule 11 sanctions against Epic Tech and its counsel, and fees under 35 U.S.C. § 285, 28 U.S.C. § 1927, and the court’s inherent power. Its theory: Alice, the USPTO’s § 101 rejections, and the Texas ruling put Epic Tech on notice that its claims were likely invalid, so it should have investigated validity before suing. The district court denied every request.
What the Federal Circuit held
The appeals court found the denial couldn’t be meaningfully reviewed. The district court had relied on Epic Tech’s pre-suit infringement investigation (claim charts and a cease-and-desist letter). But that, the Federal Circuit said, doesn’t answer the separate question of whether Epic Tech should have investigated validity, given the notice it had.
The court called the combined warning signs “a compelling concern over the validity of the claims,” and wrote:
“In such circumstances, it does not suffice for Epic Tech or its counsel to rely only on the presumption of validity when faced with multiple indicators that these claims were unpatentable under § 101.”
The court also rejected the trial court’s reasoning that the Texas case involved issues that “were not the exact same,” noting that issues “need not be identical to provide notice of potential invalidity.”
Just as important is what the court didn’t decide. It said expressly that it was not deciding whether Epic Tech or its lawyers violated Rule 11, whether Pen-Tech is entitled to fees, or when notice of potential invalidity makes asserting a presumptively valid patent unreasonable. Those questions go back to the district court.
Why this matters for patent owners
The practical lesson is about pre-suit diligence. Before asserting a patent, owners and their counsel commonly check infringement. Epic Tech signals that when there are strong red flags about validity, a court may expect a validity analysis too, and a fee or sanctions motion may test whether one happened.
Red flags the court pointed to included:
- A change in the law after the patent issued. Alice came after the ‘317 patent and involved a software patent.
- USPTO rejections in related applications. § 101 rejections of closely related claims, especially ones the Office found patentably indistinct, are hard to ignore.
- Court rulings on family members. A ruling invalidating similar claims in a related patent can be notice even if the issues aren’t identical.
A pre-suit checklist for older software patents
If you own a software or business-method patent that issued before 2014, or one whose family has run into § 101 trouble, consider these steps before sending a demand letter or filing suit:
- Read the claims against the current Alice framework, not the law as it stood when the patent issued. Our plain-English guide to Alice and Section 101 explains the two-step test.
- Review the whole family’s prosecution history, including continuations and abandoned applications, for § 101 rejections.
- Search for court and PTAB decisions on related patents or similar claims.
- Document the validity analysis alongside the infringement analysis.
- Weigh the downside. In exceptional cases, a losing patent owner can be ordered to pay the other side’s attorney fees.
None of this means older software patents can’t be enforced. Many have claims that hold up under Alice. The point is to know where you stand before you start.
Sources: the Federal Circuit’s opinion in Epic Tech v. Pen-Tech (PDF) and commentary on Patently-O.
Talk with Iowa patent counsel
Jason Sytsma is a registered patent attorney in Cedar Rapids who works with Iowa software companies on drafting, portfolio review, and eligibility questions. See our software patents page, the About Jason page, and his firm bio.
Contact the office to request a consultation. Any engagement is subject to conflicts review, an engagement agreement, and applicable professional-responsibility rules. This article is attorney advertising and is intended for general educational purposes only; it is not legal advice and does not create an attorney-client relationship. Results vary, and past experience does not guarantee a particular outcome.
