Teliax Tech. LLC v. Affinity Network, Inc.

636 F.Supp.3d 1199

TELIAX TECHNOLOGY LLC; The Toll-Free Exchange, LLC, Plaintiffs v. AFFINITY NETWORK, INC., Defendant

Case No. 2:22-cv-00362-CDS-DJA

United States District Court, D. Nevada

Signed October 19, 2022

Erik Foley, V. R. Bohman, Gil Kahn, Snell & Wilmer, LLP, Las Vegas, NV, Jeffrey David Blake, Pro Hac Vice, Merchant & Gould, Atlanta, GA, James W. Beard, Pro Hac Vice, Merchant & Gould P.C., Denver, CO, for Plaintiff Teliax Technology LLC.

James W. Beard, Pro Hac Vice, Merchant & Gould P.C., Denver, CO, V. R. Bohman, Gil Kahn, Snell & Wilmer L.L.P., Las Vegas, NV, for Plaintiff Toll-Free Exchange, LLC.

F. Christopher Austin, Weide & Miller, Ltd., Las Vegas, NV, Michael J. Zinna, Pro Hac Vice, Vincent M. Ferraro, Pro Hac Vice, Kelley Drye & Warren LLP, New York, NY, for Defendant.

Order Granting Defendant's Motion to Dismiss, Denying Defendant's Motion to Stay as Moot, and Closing Case

[ECF Nos. 29, 30]

Cristina D. Silva, United States District Judge

This case concerns plaintiff Teliax Technology LLC's patent, U.S. Patent No. 9,807,249, which discloses "methods and systems 'for routing toll-free calls through a toll-free exchange.' " Suppl. Compl., ECF No. 16 at 4 (quoting Patent Abstract, ECF No. 16-1 at 2). Teliax and plaintiff The Toll-Free Exchange, LLC, sue defendant Affinity Network Inc. for alleged infringement of the '249 patent. See generally id. Affinity Network moves to dismiss the supplemental complaint under Federal Rule of Civil Procedure 12(b)(6), based on Affinity Network's position that the '249 patent claims patent-ineligible subject matter. See generally Mot. to Dismiss, ECF No. 29. Also before me is defendant's motion to stay the case pending resolution of the motion to dismiss. ECF No. 30. Because I find that the '249 patent indeed concerns unpatentable subject matter, I grant Affinity Network's motion to dismiss and deny as moot its motion to stay the case.

I. Relevant Background Information

a. Underlying Dispute

Teliax is a telecommunications company that provides services to commercial and carrier markets, including routing of telecommunication messages. ECF No. 16 at 3. Teliax filed this action on February 28, 2022, accusing Affinity Network of infringing upon the '249 patent. See generally Compl., ECF No. 1. Teliax then filed a supplemental complaint on May 9, 2022, to add The Toll-Free Exchange as a co-plaintiff. ECF No. 16. Teliax and The Toll-Free Exchange assert that Affinity Network's "Toll-Free Peering Service" infringes upon plaintiffs' service, known as the "Toll-Free IPX." Id. at 2. The Toll-Free IPX "allows a commercial entity to bypass some or all of the traditional Public Switched Telephone Network . . . when routing toll-free calls." Id. at 3. It can "result in significant cost savings and more efficient administration for commercial consumers that regularly receive toll-free calls or text messages, and the toll-free calls or text messages can be routed in a more efficient manner resulting in higher quality and reliability." Id.

Underlying the operation of the Toll-Free IPX is plaintiffs' '249 patent, issued by the United States Patent and Trademark Office on October 31, 2017. Id. at 3-4; see also '249 Patent, ECF No. 16-1 at 2. The '249 patent, entitled "Routing of Toll-Free Numbers Using a Toll-Free Exchange" (ECF No. 16-1), was issued to David Aldworth, the sole named inventor of the patent and president of Teliax. ECF No. 16 at 4. Teliax claims to be the owner of all interest in the '249 patent and declares The Toll-Free Exchange its exclusive licensee. Id.

Teliax claims that Affinity Network's infringement of the '249 patent is unsurprising because Affinity Network CEO Gary Fry "was employed as the Chief Operating Officer of Teliax, Inc. from August 2015 - January 2018." ECF No. 16 at 6; see also ECF No. 16-6 at 27. Teliax alleges that Fry is "intimately familiar with the operation of plaintiffs' service." ECF No. 16 at 6.

Affinity Network responds to the supplemental complaint by moving to dismiss plaintiffs' causes of action under Rule 12(b)(6). See generally ECF No. 29. The motion to dismiss alleges that the claims of the '249 patent are directed to routing a call based on the identification of the called party; thus, the '249 patent claims an unpatentable abstract idea. Id. at 7. Specifically, Affinity Network asserts that such claims have already been found to be unpatentable by the United States Court of Appeals for the Federal Circuit in Voip-Pal.com, Inc. v. Apple Inc., 798 Fed. Appx. 644 (Fed. Cir. 2020) (per curiam), because routing calls based on characteristics of the participants is an abstract idea that fails step one of the test prescribed by Alice Corp. Pty. Ltd. v. CLS Bank Int'l, 573 U.S. 208, 134 S.Ct. 2347, 189 L.Ed.2d 296 (2014). Id. Affinity Network further contends that "the claims at issue [in the '249 patent] merely recite generalized steps to carry out generic functions." Id. Affinity Network states that a determination on the patentability of the '249 patent requires neither discovery nor formal claim construction. Id. at 9. It urges this court to find the '249 patent directed toward an unpatentable idea and to dismiss plaintiffs' claims with prejudice. Id. at 29.

b. The '249 Patent

The '249 patent describes a method for toll-free routing of phone calls using a toll-free exchange, designed specifically for use in commercial telecommunications. See generally Patent, ECF No. 16-1. The '249 patent seeks to improve on existing call routing methods (often called "traditional" or "legacy" networks) used to route toll-free calls. ECF No. 16 at 3, ¶ 10. Toll-free telephone numbers are set up such that the called party (also called the "toll-free subscriber") pays for each phone call they receive, rather than the caller paying to place the call. ECF No. 16-1 at 8. To obtain a toll-free number and become a toll-free subscriber, entities must register with Somos, the administrative organization designated by the Federal Communications Commission to handle such inquiries. ECF No. 16 at 2, ¶ 8. The entity must register as a Responsible Organization (RESPORG). Id. Such registration allows them to use the 1-800, 1-888, 1-877, etc. prefixed area codes with which we are all familiar. ECF No. 16-1 at 8. The entity is also assigned an identification number (RESPORG ID). ECF No. 16 at 2, ¶ 8. The '249 patent describes a method of routing calls based on the RESPORG IDs of the called party and claims its method does so more efficiently than traditional call routing services. Id.

Traditional phone calls go through a Public Switched Telephone Network (PSTN). A legacy routing network, PSTN works by routing phone calls from the caller through various exchanges to the callee. Id. Calls routed through the legacy PSTN networks require interconnects between (1) the caller to the local carrier, (2) the local carrier to the one or more, often multiple, other service providers, (3) that provider to a "tandem"—or centralized—network exchange that hands the call from one carrier to another, (4) the tandem back to the recipient's carrier, and (5) the recipient's local carrier to the recipient themselves. Id. at 3, ¶ 10.

Each link of the chain represents a single service provider who needs to route the call over the PSTN. Id. at 2, ¶ 8. They generate their own charges and invoices for their service. Id. There may also be some loss of information (or inefficiencies) for each additional service provider. Id. The '249 patent seeks to cut out the middlemen and effectuate cost savings for high-volume commercial callers. For example (traditional PSTN illustration in solid arrows on top, '249 patent in dashed arrows at bottom):

Image materials not available for display.

Fig. 3, ECF No. 16 at 4.

The '249 patent makes twenty claims, including three independent claims (claims 1, 10, and 17) and seventeen dependent claims, which either reference the independent claims (claims 2-4, 6, 8-9, 11-12, 14-15, and 18-20) or reference other dependent claims that themselves reference the independent claims (claims 5, 7, 13, 16). Claim 1 of the '249 patent claims the method for routing toll-free calls through a toll-free exchange. ECF No. 16-1 at 14. That method involves three steps:

receiving, from an originating responsible organization (RESPORG), a toll-free call, wherein the toll-free call is directed to a toll-free subscriber that is served by a terminating RESPORG;

querying a database to determine a RESPORG identification associated with the terminating RESPORG, wherein the database is associated with the toll-free exchange and stores the RESPORG identification associated with the terminating RESPORG; and

routing, to the terminating RESPORG, the toll-free call based in part on the RESPORG identification.

Id. Claim 10 of the '249 patent claims the method for routing toll-free calls without using a carrier identification code but otherwise contains substantively similar language to Claim 1. Id. Claim 17 of the '249 patent claims a system for routing a toll-free call using a toll-free exchange and describes the hardware components necessary to effectuate the method described by Claims 1 and 10. Id.

II. Legal Standards

a. Motion to Dismiss under Rule 12(b)(6)

A defendant may move to dismiss an action for a plaintiff's failure to allege sufficient factual matter to "state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard . . . asks for more than a sheer possibility that a defendant has acted unlawfully." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citation omitted). In ruling on a Rule 12(b)(6) motion, the court must "accept factual allegations in the complaint as true...