Fast 101 Pty Ltd. v. Citigroup Inc.

424 F.Supp.3d 385

FAST 101 PTY LTD., Plaintiff,

v.CITIGROUP INC. and Citibank, N.A., Defendants.

Civil Action No. 19-1819-RGA

United States District Court, D. Delaware.

Signed January 30, 2020

Raymond H. Lemisch and Sean M. Brennecke, KLEHR HARRISON HARVEY BRANZBURG, LLP, Wilmington, DE; and Robert R. Brunelli, Matthew C. Holohan, and Tara K. Hawkes, SHERIDAN ROSS P.C., Denver, CO, Attorneys for Plaintiff.

Kelly E. Farnan and Valerie A. Caras, RICHARDS, LAYTON & FINGER, P.A., Wilmington, DE; and Howard Wizenfeld and Maegan A. Fuller, CADWALADER, WICKERSHAM & TAFT LLP, New York, NY, Attorneys for Defendants.

MEMORANDUM OPINION

ANDREWS, UNITED STATES DISTRICT JUDGE:

Before me is Defendants' Motion to Dismiss for failure to state a claim. (D.I. 14). I have reviewed the parties' briefing. (D.I. 15, 17, 20). Because I find that none of the claims in the Asserted Patents claim patent-eligible subject matter, I will grant Defendants' motion.

I. BACKGROUND

Plaintiff alleges Defendants infringe all of the claims of U.S. Patent Nos. 8,515,867 ("the '867 patent"), 8,660,947 ("the '947 patent"), 8,762,273 ("the '273 patent"), 9,811,817 ("the '817 patent"), and 10,115,098 ("the '098 patent") (collectively, the "Asserted Patents"). The Asserted Patents, all of which have a common specification, "relate[ ] generally to data processing systems, and more particularly, to electronic trading and settlement systems." (D.I. 1, Ex. 1 at 1:19-21). The patents claim priority to an Australian patent application filed on May 3, 1999. (Id. at 1:6-14).

Defendants move to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. (D.I. 14). Defendants argue that none of the claims in the Asserted Patents claim patent-eligible subject matter, and thus are all invalid under 35 U.S.C. § 101. (D.I. 15). Defendants also contend that Plaintiff has failed sufficiently to plead indirect or willful infringement of any of the claims of the Asserted Patents.

I find Claim 1 of the '867 patent representative of all 234 claims of the Asserted Patents for the purposes of determining whether the claims recite patent-eligible subject matter. First, the independent claims in the remaining patents recite the same concept as described in the '867 patent, an incentive system applied to trade between a customer, a supplier, and a provider of funds. The dependent claims discuss, for example, variations in "incentive amount" based on different factors,¹ a "message" containing the various amounts involved in the financial transaction,² an "agreement" between the provider of funds and the supplier,³ and an "electronic network" used to communicate a message.⁴ Plaintiff argues that these additional limitations add inventive concepts to the claims. (D.I. 17 at 15). But none of these asserted limitations in the dependent claims offer any improvement—or even significant variation— in technical functioning of the claimed invention.

Because all of the independent claims of the remaining patents recite the same concept as described in the '867 patent, and the dependent claims offer only minor, non-technical variations, I will consider claim 1 of the '867 patent as representative of the other claims in the Asserted Patents. See Content Extraction & Transm'n LLC v. Wells Fargo Bank, N.A. , 776 F.3d 1343, 1348 (Fed. Cir. 2014). "[C]ourts may treat a claim as representative ... if the patentee does not present any meaningful argument for the distinctive significance of any claim limitations not found in the representative claim." Berkheimer v. HP Inc. , 881 F.3d 1360, 1365 (Fed. Cir. 2018).

The claims recite a system to: (1) receive an order from a customer, (2) store the order, (3) determine a discount, (4) pay a supplier a discounted amount from a fund provider, and (5) receive customer payment at a later date. (D.I. 1). Representative claim 1 recites:

A system configured for electronic settlement of an order placed by a customer with a supplier comprising:

one or more bank servers, at least one of the one or more bank servers receives a message related to the order, the message comprising at least an order amount;

a database associated with at least one of the one or more bank servers that stores the order amount;

one or more processors associated with at least one of the one or more bank servers that determines an incentive amount, wherein the incentive amount is determined based at least in part on one or more fiscal attributes of the customer and the order amount; and

a payment gateway associated with at least one of the one or more bank servers, the payment gateway electronically transfers to a supplier account on a first date an early payment for the order, the supplier account associated with the supplier, wherein the early payment is less than the order amount by at least the incentive amount, and the payment gateway that electronically receives a customer payment from a customer account on a second date, the customer account associated with the customer, wherein the customer payment is not less than the early payment plus an interest amount, wherein the interest amount is based at least in part on a credit period, wherein the credit period is an amount of time between the first date and the second date.

II. LEGAL STANDARD

a. Patent-Eligible Subject Matter

Patentability under 35 U.S.C. § 101 is a threshold legal issue. Bilski v. Kappos , 561 U.S. 593, 602, 130 S.Ct. 3218, 177 L.Ed.2d 792 (2010). Accordingly, the § 101 inquiry is properly raised at the pleading stage if it is apparent from the face of the patent that the asserted claims are not directed to eligible subject matter. See Cleveland Clinic Found. v. True Health Diagnostics LLC , 859 F.3d 1352, 1360 (Fed. Cir. 2017), cert. denied , ––– U.S. ––––, 138 S. Ct. 2621, 201 L.Ed.2d 1026 (2018). This is, however, appropriate "only when there are no factual allegations that, taken as true, prevent resolving the eligibility question as a matter of law." Aatrix Software, Inc. v. Green Shades Software, Inc. , 882 F.3d 1121, 1125 (Fed. Cir. 2018).

Section 101 of the Patent Act defines patent-eligible subject matter. It provides: "Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title." 35 U.S.C. § 101. The Supreme Court has recognized an implicit exception for three categories of subject matter not eligible for patentability—laws of nature, natural phenomena, and abstract ideas. Alice Corp. Pty. v. CLS Bank Int'l , 573 U.S. 208, 215, 134 S.Ct. 2347, 189 L.Ed.2d 296 (2014). The purpose of these carve-outs is to protect the "basic tools of scientific and technological work." Mayo Collaborative Servs. v. Prometheus Labs., Inc. , 566 U.S. 66, 71, 132 S.Ct. 1289, 182 L.Ed.2d 321 (2012). "[A] process is not unpatentable simply because it contains a law of nature or a mathematical algorithm," as "an application of a law of nature or mathematical formula to a known structure or process may well be deserving of patent protection." Id. at 1293–94 (internal quotation marks and emphasis omitted). In order "to transform an unpatentable law of nature into a patent-eligible application of such a law, one must do more than simply state the law of nature while adding the words ‘apply it.’ " Id. at 72, 132 S.Ct. 1289 (emphasis omitted).

The Supreme Court reaffirmed the framework laid out in Mayo "for distinguishing patents that claim laws of nature, natural phenomena, and abstract ideas from those that claim patent-eligible applications of those concepts." Alice , 573 U.S. at 217, 134 S.Ct. 2347. First, the court must determine whether the claims are drawn to a patent-ineligible concept. Id. If the answer is yes, the court must look to "the elements of the claim both individually and as an ‘ordered combination’ " to see if there is an " ‘inventive concept’—i.e. , an element or combination of elements that is ‘sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself.’ " Id. (alteration in original). "A claim that recites an abstract idea must include ‘additional features’ to ensure that the [claim] is more than a drafting effort designed to monopolize the [abstract idea]." Id. at 221, 134 S.Ct. 2347. Further, "the prohibition against patenting abstract ideas cannot be circumvented by attempting to limit the use of [the idea] to a particular technological environment." Id. at 222, 134 S.Ct. 2347 (quoting Bilski , 561 U.S. at 610-11, 130 S.Ct. 3218 ). Thus, "the mere recitation of a generic computer cannot transform a patent-ineligible abstract idea into a patent-eligible invention." Id. For this second step, the machine-or-transformation test can be a "useful clue," although it is not determinative. Ultramercial, Inc. v. Hulu, LLC , 772 F.3d 709, 716 (Fed. Cir. 2014).

"Patent eligibility under § 101 is a question of law that may contain underlying issues of fact." Solutran, Inc. v. Elavon, Inc. , 931 F.3d 1161, 1165 (Fed. Cir. 2019). Whether a claim is drawn to patent-eligible subject matter "is a matter of both claim construction and statutory construction." In re Bilski , 545 F.3d 943, 951 (Fed. Cir. 2008), aff'd sub nom. Bilski v. Kappos , 561 U.S. 593, 130 S.Ct. 3218, 177 L.Ed.2d 792 (2010). Claim construction is a question of law. See Teva Pharm. USA, Inc. v. Sandoz, Inc. , 574 U.S. 318, 135 S. Ct. 831, 837, 190 L.Ed.2d 719 (2015) (citing Markman v. Westview Instruments, Inc. , 517 U.S. 370, 388-91, 116 S.Ct. 1384, 134 L.Ed.2d 577 (1996) ).

III. DISCUSSION

a. Patent Eligible Subject Matter

i. The Asserted Patents Claim an Abstract Idea

The claimed invention comprises "methods and systems ... [which] provid[e] an invoiceless trading system that creates incentives for customers to pay suppliers within a predetermined...