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PalTalk Holdings, Inc. v. Riot Games, Inc.

United States District Court, D. Delaware

May 15, 2017

PALTALK HOLDINGS, INC. Plaintiff,
v.
RIOT GAMES, INC. Defendant.

          MEMORANDUM ORDER

         At Wilmington this 15th day of May, 2017, having reviewed the papers submitted in connection with defendant's motion to dismiss (D.I. 9), the court issues its decision as follows:

         1. Background.

         PalTalk Holdings, Inc. ("plaintiff") is the owner of U.S. Patent Nos. 5, 822, 523 ("the '523 patent") and 6, 226, 686[1] ("the '686 patent) (collectively "the patents-in-suit"). (D.I. 1 at¶¶6-7) The patents-in-suit relate to distribution of messages between computers in interactive environments, such as online gaming. (D.I. 1 at ¶¶ 11-14) Riot Games, Inc. ("defendant") publishes video games such as League of Legends, which is a multiplayer online video game. (D.I. 1 at ¶ 22) On December 16, 2016, plaintiff filed an action against defendant, alleging that defendant directly infringes the patents-in-suit. (D.I. 1) Defendant moved to dismiss for failure to state a claim for relief under Federal Rules of Civil Procedure 12(b)(6). (D.I. 9) The court has jurisdiction pursuant to 28 U.S.C. §§ 1331 and 1338(a).

         2. Standard of Review.

         A motion filed under Federal Rule of Civil Procedure 12(b)(6) tests the sufficiency of a complaint's factual allegations. BellAtl. Corp. v. Twombly, 550 U.S. 544, 555 (2007); Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir. 1993). A complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief, in order to give the defendant fair notice of what the . . . claim is and the grounds upon which it rests." Twombly, 550 U.S. at 545 (internal quotation marks omitted) (interpreting Fed.R.Civ.P. 8(a)). Consistent with the Supreme Court's rulings in Twombly and Ashcroft v. Iqbal, 556 U.S. 662 (2009), the Third Circuit requires a three-part analysis when reviewing a Rule 12(b)(6) motion. Connelly v. Lane Const. Corp., 809 F.3d 780, 787 (3d. Cir. 2016). In the first step, the court "must tak[e] note of the elements a plaintiff must plead to state a claim." Next, the court "should identify allegations that, because they are no more than conclusions, are not entitled to the assumption of truth." Lastly, "[w]hen there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement for relief." Id. (citations omitted).

         3. Under Twombly and Iqbal, the complaint must sufficiently show that the pleader has a plausible claim. McDermott v. Clondalkin Grp., 2016 WL 2893844, at *3 (3d Cir. May 18, 2016). Although "an exposition of [the] legal argument" is unnecessary, Skinner v. Switzer, 562 U.S. 521 (2011), a complaint should provide reasonable notice under the circumstances. Id. at 530. A filed pleading must be "to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances, " such that "the factual contents have evidentiary support, or if so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery." Anderson v. Bd. of Sch. Directors of Millcreek Twp. Sch. Dist, 574 F.App'x 169, 174 (3d Cir. 2014) (quoting Fed.R.Civ.P. 11(b)). So long as plaintiffs do not use "boilerplate and conclusory allegations" and "accompany their legal theory with factual allegations that make their theoretically viable claim plausible, " the Third Circuit has held "pleading upon information and belief [to be] permissible where it can be shown that the requisite factual information is peculiarly within the defendant's knowledge or control." McDermott, 2016 WL 2893844, at *4 (quotation marks, citation, and emphasis omitted).

         4. As part of the analysis, a court must accept all well-pleaded factual allegations in the complaint as true, and view them in the light most favorable to the plaintiff. See Erickson v. Pardus, 551 U.S. 89, 94 (2007); Christopher v. Harbury, 536 U.S. 403, 406 (2002); Phillips v. Cnty. of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008). In this regard, a court may consider the pleadings, public record, orders, exhibits attached to the complaint, and documents incorporated into the complaint by reference. Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007); Oshiver v. Levin, Fishbein, Sedran & Berman, 38 F.3d 1380, 1384-85 n.2 (3d Cir. 1994). The court's analysis is a context-specific task requiring the court "to draw on its judicial experience and common sense." Iqbal, 556 U.S. at 663-64.

         5. § 101. Defendant argues that dismissal is appropriate, "because the asserted patents do not claim patent eligible subject matter under 35 U.S.C. § 101." (D.I. 10 at 1) The Patent Act extends patent protection to "any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof. . . subject to the conditions and requirements of this title." 35 U.S.C. §101. Despite the protections of § 101, the Supreme Court has held that, "[e]xcluded from such protection are laws of nature, natural phenomena, and abstract ideas." Diamond v. Diehr, 450 U.S. 175, 185 (1981). The purpose of these exceptions is to protect the "basic tools of scientific and technological work." Mayo Collaborative Servs. v. Prometheus Labs., Inc., ___ U.S. ___, 132 S.Ct. 1289, 1293 (2012). In Alice, the Supreme Court endorsed a two-step "framework for distinguishing patents that claim laws of nature, natural phenomena, and abstract ideas from those that claim patent-eligible applications of those concepts." Alice Corp. Pty. Ltd. v. CLS Bank Int'l, ___U.S. ___, 134 S.Ct. 2347, 2355 (2014). First, the court must determine if the claims at issue are directed to a patent-ineligible concept. Id. If the answer is no, that ends the matter and the defendant's motion is denied. See, e.g., Enfish, LLC v. Microsoft Corp., 822 F.3d 1327, 1337 (Fed. Cir. 2016) (finding in step one that the claims were not directed to an abstract idea and, therefore, not addressing step two). If, however, the answer is yes, then the court must "determine whether the additional elements transform the nature of the claim into a patent-eligible application." Alice, 134 S.Ct. at 2355.

         6. Alice, Step One.

          "[T]he 'directed to' inquiry applies a stage-one filter to claims, considered in light of the specification, based on whether 'their character as a whole is directed to excluded subject matter.'" Enfish, 822 F.3d at 1335 (citing Internet Patents Corp. v. Active Network, Inc., 790 F.3d 1343, 1346 (Fed.Cir.2015)). While the Supreme Court "has not established a definitive rule to determine what constitutes an 'abstract idea' ....[, it is] sufficient to compare claims at issue to those claims already found to be directed to an abstract idea in previous cases." Id. at 1334. Defendant argues that claim 1 of the '523 patent and claim 7 of the '686 patent are "substantially identical" and are representative of all the claims in the patents-in-suit, because claims 1 and 7 are directed to "the abstract idea of group communication that uses an agent to aggregate those communications for delivery, "[2] and "the remaining claims are directed to this same abstract idea under Alice step 1." (D.I. 10 at 5-6, 18) Defendant contends that claims 1 and 7 are similar to claim 1 of U.S. Patent No. 6, 073, 142 ("the '142 patent"), which was found to be invalid under § 101.[3] (D.I. 17 at 2-3, citing Intellectual Ventures I LLC v. Symantec Corp., 838 F.3d 1307 (Fed. Cir. 2016)) Meanwhile, plaintiff cites Enfish and argues that the patents-in-suit are not directed to an abstract idea and, instead, "claim a specific improvement directed to solving a critical problem in the prior art that specifically arises in shared, networked, interactive computer applications such as online games." (D.I. 16 at 11 (citing '523 Patent, 2:47-3:22))

         7. The claims.

         Claim 1 of the '523 patent recites:

A method for providing group messages to a plurality of host computers connected over a unicast wide area communication network, comprising the steps of:
providing a group messaging server coupled to said network, said server communicating with said plurality of host computers using said unicast network and maintaining a list of message groups, each ...

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