Intellectual Ventures I LLC v. Erie Indem. Co.

200 F.Supp.3d 565

INTELLECTUAL VENTURES I LLC, et al., Plaintiffs,

v.ERIE INDEMNITY COMPANY, et al., Defendants.

Civil Action No. 2:14-cv-220

United States District Court, W.D. Pennsylvania.

Signed August 4, 2016

Henry M. Sneath, Kelly A. Williams, Robert L. Wagner, Picadio Sneath Miller & Norton, P.C., Pittsburgh, PA, Robert Cutler, Christian J. Hurt, Kirk A. Voss, Ross Leonoudakis, Nix, Patterson & Roach, LLP, Irving, TX, Derek T. Gilliland, Nix, Patterson & Roach, LLP, Daingerfield, TX, Edward K. Chin, Albritton Law Firm, Southlake, TX, for Plaintiffs.

David C. Marcus, Wilmer Cutler Pickering Hale and Dorr LLP, Erik John Carlson, Sidley Austin LLP, Los Angeles, CA, Gregory H. Lantier, WilmerHale LLP, Washington, DC, John G. Ebken, Alexander W. Saksen, Gordon & Rees, LLP, Arthur H. Stroyd, Jr., Justin T. Romano, Del Sole Cavanaugh Stroyd LLC, Pittsburgh, PA, Leslie Stierman Pearlson, Monica Grewal, Wilmer Cutler Pickering Hale and Dorr LLP, Boston, MA, Alexander Baxter, Vernon Winters, Sidley Austin LLP, San Francisco, CA, Russell Cass, Sidley Austin LLP, Chicago, IL, for Defendants.

OPINION

Mark R. Hornak, United States District Judge

Before the Court is a Motion to Dismiss infringement claims as to the last of several patents at issue in this case. ECF No. 132. The Motion argues that this patent, U.S. Patent 7,757,298 (the "'298 Patent") is not drawn to patent-eligible subject matter under 35 U.S.C. § 101. The Plaintiff patent holders disagree and the parties have fully briefed the issue. ECF Nos. 133, 134, 135. The Erie Defendants also brought some supplemental authority to the Court's attention, ECF Nos. 138, 140, about which the Court also heard from the Plaintiffs, ECF Nos. 139, 141. With that excellent briefing, the Court will dispense with oral argument and decide the matter on the papers.

For the reasons stated in this Opinion, the Court concludes that the '298 Patent is drawn to patent-ineligible subject matter and does not clear the Alice bar. Therefore, the Erie Defendants' Motion to Dismiss will be granted.

I. BACKGROUND

a. Earlier Litigation & The Court's First Opinion

By Order of the Court, three related patent infringement cases filed by Plaintiffs Intellectual Ventures I and Intellectual Ventures II LLC ("Intellectual Ventures") were consolidated. ECF No. 50. At issue were four patents held by Intellectual Ventures: U.S. Patent Nos. 6,519,581 ; 6,510,434 ; 6,546,002 ; and the '298 Patent. The various Defendants moved to dismiss the infringement claims against them on § 101 grounds. After full briefing and argument, the Court granted the Motions to Dismiss as to the '581 Patent,¹ the '434 Patent, and the '002 Patent, finding each to be drawn to patent-ineligible subject matter. Intellectual Ventures I LLC, et al. v. Erie Indem. Co., 134 F.Supp.3d 877, 926 (W.D.Pa.2015) (" Erie I ").

That Opinion did not substantively address the '298 Patent because it was not subject to any then-pending Motion to Dismiss. Id. at 881 n. 8. When the initial Motions to Dismiss were filed, the '298 Patent was subject to invalidity proceedings before the Patent Trial and Appeal Board ("PTAB"). ECF No. 46-1, at 1 n.2. The PTAB declined to initiate an inter partes review proceeding against the '298 Patent on 35 U.S.C. §§ 102 or 103 grounds. See Int'l Bus. Mach. Corp. v. Intellectual Ventures I LLC, IPR2014-01516 (P.T.A.B. Aug. 24, 2015). Now that has all been cleared up, the Defendants filed this Motion to Dismiss and the matter is ripe for disposition.

b. The '298 Patent

The '298 Patent is titled "Method and Apparatus for Identifying and Characterizing Errant Electronic Files" and is designed to solve the problem of the proliferation of illicit files on the Internet (like pornography, pirated music or software, etc.). '298 Patent col. 4 ll. 30–34, 47–52 (filed June 3, 2005). Claim 1 is representative:

1. A computer-implemented method for identifying and characterizing stored electronic files, said method comprising:

under control of one or more configured computer systems:

selecting a file from a plurality of files stored in a computer storage medium, wherein selecting the file is performed according to at least one of:

selecting the file based on the size of the file by determining whether an aggregate size of plural identically-sized files exceeds a predetermined threshold;

selecting the file based on whether content of the file matches a file type indicated by a name of the file; or

selecting the file based on whether the file comprises data beyond an end of data marker for the file;

generating an identification value associated with the selected file, wherein the identification value is representative of at least a portion of the content of the selected file;

comparing the generated identification value to one or more identification values associated with one or more of a plurality of unauthorized files; and

characterizing the file as an unauthorized file if the identification value matches one of the plurality of identification values associated with the unauthorized files.

'298 Patent col. 12 11. 21–44 (Claim 1).

In non-patentspeak, the claim can be boiled down to four fundamental steps: (1) selecting a file; (2) generating a unique value corresponding to the file; (3) comparing that unique value to a bunch of previously generated values that correspond to different types of illicit files; and (4) marking the file for deletion or other treatment if its assigned value matches a known one. '298 Patent col. 2 ll. 58–65.

The invention purports to "reliably characterize files according to pre-set criteria, that is not easily circumvented, and that reduces the amount of manual review necessary to verify proper operation."² '298 Patent col. 2 ll. 42–44. It recognizes various characteristics of files—like being split into parts, illegitimate files appended to legitimate ones, and names that give away illegal, illicit, or offensive content (readers can imagine such names for themselves)—and in so doing, saves Web hosting services from criminal, copyright, or some other liability.

II. LEGAL STANDARDS

a. Motion to Dismiss

Federal Rule of Civil Procedure 12(b)(6) provides for the dismissal of cases that fail to state a claim upon which relief can be granted. Complaints must allege facts "sufficient to show that the plaintiff has a ‘plausible claim for relief.’ " Fowler v. UPMC Shadyside , 578 F.3d 203, 211 (3d Cir.2009) (quoting Ashcroft v. Iqbal , 556 U.S. 662, 679, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ). In assessing a motion to dismiss, courts must accept all "well-pleaded facts as true" and disregard any legal conclusions. Fowler , 578 F.3d at 210–11 (citing Iqbal , 556 U.S. at 677, 129 S.Ct. 1937 ).

A "plausible claim for relief" in a patent infringement case necessarily requires a valid patent; otherwise there can be no infringement. And "[w]hether a claim is drawn to patent-eligible subject matter under § 101 is an issue of law." 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). Thus, the 12(b)(6) stage is a proper one at which to examine patent eligibility under § 101.

b. Alice & § 101 : The Law

In general, patents may be granted to "[w]hoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof ...." 35 U.S.C. § 101. But there are three categories of exceptions to that broad sweep including "laws of nature, physical phenomena, and abstract ideas." Diamond v. Chakrabarty, 447 U.S. 303, 309, 100 S.Ct. 2204, 65 L.Ed.2d 144 (1980). It is the "abstract ideas" category with which we are concerned here.

Patent eligibility under § 101 is governed by the two-step framework set out by the Supreme Court in Alice Corp. Pty. Ltd. v. CLS Bank Int'l, ––– U.S. ––––, 134 S.Ct. 2347, 2355, 189 L.Ed.2d 296 (2014) (describing "the longstanding rule that an idea of itself is not patentable."). In step one, courts must determine whether the claims at issue are "directed to a patent-ineligible concept." Id. Abstract ideas are things like "preexisting, fundamental truth[s]" (like mathematical equations), "method [s] of organizing human activity," or "longstanding commercial practice[s]" (like intermediated settlement or risk hedging). Id. at 2356. "[A] relevant inquiry at step one is ‘to ask whether the claims are directed to an improvement to computer functionality versus being directed to an abstract idea.’ " TLI Comms. LLC v. AV Automotive, LLC, 823 F.3d 607, 612 (Fed.Cir.2016) (quoting Enfish, LLC v. Microsoft Corp., 822 F.3d 1327, 1335 (Fed.Cir.2016) ). But courts must not oversimplify claims because "[a]t some level, ‘all inventions ... embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas.’ " Alice , 134 S.Ct. at 2354 (quoting Mayo Collaborative Servs. v. Prometheus Labs., Inc., 566 U.S. 66, 132 S.Ct. 1289, 1293, 182 L.Ed.2d 321 (2012) ). In essence, Alice step one prompts courts to ask, what are the claims generally trying to achieve? See Erie I , 134 F.Supp.3d at 897–98.

If the claims are directed to a patent-ineligible concept, courts proceed to step two and look for 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." Alice , 134 S.Ct. at 2355 (citing Mayo , 132 S.Ct. at 1298 ). "It is well-settled that mere recitation of concrete, tangible components is insufficient to confer patent eligibility to an otherwise abstract idea." TLI , 823 F.3d at 613. Therefore, the claims must contain more than merely stating an abstract idea and adding the words "apply it." Alice , 134 S.Ct. at 2357. Appending "well-understood, routine, conventional activity" won't do, nor will "the mere recitation of a generic computer." Id. at 2358–59. At Alice step two, the machine-or-transformation test can be a ...