MG Freesites Ltd. v. Scorpcast LLC

651 F.Supp.3d 744

MG FREESITES LTD., Plaintiff, v. SCORPCAST LLC, d/b/a HaulStars, Defendant.

ScorpCast LLC, d/b/a HaulStars, Plaintiff, v. MG Freesites Ltd., et al., Defendants.

Case No. 20-1012-MFK (lead consolidated case)

Case No. 21-887-MFK

United States District Court, D. Delaware

Signed January 20, 2023

Christopher M. Gerson, Pro Hac Vice, Frank M. Gasparo, Pro Hac Vice, Jonathan M. Sharret, Pro Hac Vice, JongChan Daniel Kang, Pro Hac Vice, Ralph A. Dengler, Pro Hac Vice, Ryan R. Owen, Pro Hac Vice, Nicole Kathleen Pedi, Kelly E. Farnan, Richards, Layton & Finger, PA, Wilmington, DE, for Plaintiff.

Michael Simons, Pro Hac Vice, Jonathan L. Hardt, Pro Hac Vice, Gregory Brian Williams, Kasey Hacker DeSantis, Fox Rothschild LLP, Wilmington, DE, for Defendants.

MEMORANDUM OPINION AND ORDER

MATTHEW F. KENNELLY, District Judge:

ScorpCast, LLC, which does business under the name HaulStars, has sued MG Freesites, Ltd. and several other related entities for infringement of its patents on video technology. The defendants have moved for judgment on the pleadings, arguing that HaulStars's asserted patents are not patent eligible under 35 U.S.C. § 101 and that they are entitled to judgment in their favor on HaulStars's claims of willful infringement, indirect infringement, and joint infringement. The defendants also object to HaulStars's service of process on six recently-added defendants. For the reasons set forth below, the Court grants in part and denies in part the defendants' motions for judgment on the pleadings and overrules the defendants' objections to service.

Background

HaulStars is a corporation that conducts research and development to create video technologies and "holds a broad variety of patents related to online videos and content delivery systems." Am. Compl. ¶ 24. HaulStars describes its patented technology as "address[ing] gaps that existed in the online video experience" in which "viewers consistently asked where in a video they could find a particular item mentioned in the title or description." Id. ¶ 22. In response to this identified problem, HaulStars "created a tagging feature that enables content creators to tag any item at a specific point in a video." Id. Viewers can click on the tags to learn more or navigate to a tagged scene in the video. Id. HaulStars asserts in this case patents on "the systems and methods underlying this novel technology"—namely, U.S. Patent Nos. 9,965,780 (the '780 Patent); 9,899,063 (the '063 Patent); 8,595,057 (the '057 Patent); 9,703,463 (the '463 Patent); 9,832,519 (the '519 Patent); 10,205,987 (the '987 Patent); 10,354,288 (the '288 Patent); 10,506,278 (the '278 Patent); 10,560,738 (the '738 Patent). Id. ¶¶ 22-34. Most relevant to the pending motions are the '780 patent and the '057 patent.

The '780 patent "relates to content sharing, and more specifically, to providing user generated or produced video reviews of products and/or services." '780 Patent at 1:15-17. The system of claim 20 comprises: (a) "at least one processing device;" (b) "a network interface configured to communicate over a network with a video data store;" and (c) "non-transitory memory storing programmatic code that when executed" performs operations that enables a user to associate image and/or text at a specified position, stores that association, and then presents the image and/or text during playback of the video on a second user's device. '780 Patent at 47:54-48:19. The non-transitory memory storing programmatic code also performs a "corresponding navigation event" when a user selects the image and/or text. Id. at 48:13-19.

The '057 patent is "directed to a system and method for selecting an artist meeting a certain threshold of votes and apportioning revenue derived from services associated with artist's performance data, and distribution of advertisement and artist's media content." '057 Patent at 1:15-20. Claim 2 recites "[a] non-transitory computer-readable medium comprising computer-readable instructions for apportioning revenue for media content." Id. at 8:11-13. The instructions outline the following steps: 1) "obtaining a media file compromising a work of authorship;" 2) storing the work on a network and presenting it "to an online community;" 3) "obtaining feedback" on the work from users in the community; 4) presenting "a revenue participation offer" when "a threshold condition" for feedback has been met; 5) after acceptance of the offer, "delivering advertising content along with" the work to the online community; 6) "calculating an advertising score based on . . . online community interaction" with the work; and 7) "apportioning revenue" to the author based on the advertising score. Id. at 8:11-38.

MG Freesites "owns and operates multiple pornographic websites" that HaulStars alleges infringe its asserted patents. Am. Compl. ¶ 36. In June 2020, HaulStars sued eighteen of MG Freesites's alleged content partners for infringement of the '780 patent in the Eastern District of Texas. A month later, MG Freesites filed this suit requesting a declaratory judgment that it is not infringing the '780 patent. In September 2020, HaulStars sued MG Freesites in the Western District of Texas for infringement of the '063, '057, '463, '519, '987, '288, '278, '738 patents. That case was transferred to the District of Delaware and consolidated with this case. On May 9, 2022, HaulStars amended its complaint to allege infringement of the '780 patent and add eight defendants: MindGeek S.A.R.L., MG Premium Ltd., MG Billing U.S. Corp, MG Billing Limited, 9219-1568 Quebec, Inc., MCGY Holdings, MG Global Entertainment Inc., and MG Global Entertainment Europe.

Defendant MindGeek S.A.R.L. is the parent company that controls a "web of related companies in different locations around the globe to conduct its business," which the operative complaint refers to as the "MindGeek Group." Id. ¶ 35. In addition to MG Freesites, these companies include MG Premium Ltd., which also operates pornographic websites, and MG Billing U.S. Corp, MG Billing Limited, 9219-1568 Quebec, Inc., MCGY Holdings, MG Global Entertainment Inc., and MG Global Entertainment Europe, which all perform a variety of supporting services. HaulStars alleges that "[t]he organization of the MindGeek Group and the manner that it conducts business appears to be deliberately designed to confuse observers and obscure its activities." Id.

In the operative complaint, HaulStars claims that the defendants both directly and indirectly infringed its asserted patents. HaulStars alleges that the defendants "have a policy or practice of not reviewing the patents of others (including instructing its employees to not review the patents of others)." Id. ¶¶ 193, 212, 226, 240, 254, 268, 282, 297, 311. HaulStars also alleges that the defendants knew of the '780 patent "at least as of the date when [MG Freesites] filed its Complaint," id. ¶ 192, and the rest of the asserted patents "at least as of the date when [they were] notified of the filing of this action," id. ¶¶ 211, 225, 239, 253, 267, 281, 296, 310.

Discussion

"After the pleadings are closed—but early enough not to delay trial—a party may move for judgment on the pleadings." Fed. R. Civ. P. 12(c). "A motion for judgment on the pleadings should be granted if the movant establishes that there are no material issues of fact, and he is entitled to judgment as a matter of law." Zimmerman v. Corbett, 873 F.3d 414, 417 (3d Cir. 2017) (internal quotations marks omitted). "[I]n deciding a motion for judgment on the pleadings, a court may only consider the complaint, exhibits attached to the complaint, matters of public record, as well as undisputedly authentic documents if the complainant's claims are based upon these documents." Wolfington v. Reconstructive Orthopaedic Assocs. II PC, 935 F.3d 187, 195 (3d Cir. 2019) (internal quotations marks omitted). The court must also "accept all of the allegations in the pleadings of the party against whom the motion is addressed as true and draw all reasonable inferences in favor of the non-moving party." Zimmerman, 873 F.3d at 417-18.

A. Patent eligible subject matter

Under the Patent Act, "[w]hoever 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." 35 U.S.C. § 101. This provision is limited by the long-recognized exception that "[l]aws of nature, natural phenomena, and abstract ideas are not patentable." Alice Corp. v. CLS Bank Int'l, 573 U.S. 208, 216, 134 S.Ct. 2347, 189 L.Ed.2d 296 (2014) (internal quotation marks omitted). "Eligibility under 35 U.S.C. § 101 is a question of law, based on underlying facts." SAP Am., Inc. v. InvestPic, LLC, 898 F.3d 1161, 1166 (Fed. Cir. 2018).

In Alice, the Supreme Court outlined a two-step analysis to determine whether a claim is patent eligible. Alice, 573 U.S. at 217-18, 134 S.Ct. 2347. First, the court "determine[s] whether the claims at issue are directed to one of those patent-ineligible concepts." Id. at 217, 134 S.Ct. 2347. If not, the claim is patent eligible, and the inquiry ends. If the claim is directed to a patent-ineligible concept, the court proceeds to step two, which asks if there is an "inventive concept . . . sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself." Id. at 217-18, 134 S.Ct. 2347 (alteration in original) (quoting Mayo Collaborative Servs. v. Prometheus Labs., Inc., 566 U.S. 66, 72-73, 132 S.Ct. 1289, 182 L.Ed.2d 321 (2012)).

The defendants contend that all HaulStars's asserted patents, which the defendants group into two patent families, fail to claim patent-eligible subject matter under 35 U.S.C. § 101. For the first patent family, encompassing the '463, '519, '063, '987, '278, '780, and '738 patents, the defendants focus their analysis on claim 20 of the '780 patent, contending that it is representative. For the second...