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International Business Machines Corp. v. Groupon, Inc.

United States District Court, D. Delaware

November 17, 2017

INTERNATIONAL BUSINESS MACHINES CORPORATION, Plaintiff,
v.
GROUPON, INC., Defendant.

          David E. Moore, Bindu A. Palapura, Stephanie E. O'Byrne, POTTER ANDERSON & CORROON LLP, Wilmington, DE.

          John M. Desmarais, Jon T. Hohenthaner, Karim Z. Oussayef, Laurie N. Stempler, Robert C. Harrits, DESMARAIS LLP, New York, NY Attorneys for Plaintiff International Business Machines Corporation.

          John G. Day, Andrew C. Mayo, ASHBY & GEDDES, Wilmington, DE.

          J. David Hadden, Saina S. Shamilov, Phillip J. Haack, Adam M. Lewin, FENWICK & WEST LLP, Mountain View, CA Attorneys for Defendant Groupon, Inc.

          MEMORANDUM OPINION

          STARK, U.S. DISTRICT JUDGE.

         Plaintiff International Business Machines Corporation (“IBM”) filed suit against Defendant Groupon, Inc. (“Groupon”), alleging infringement of U.S. Patent Nos. 5, 796, 967; 7, 072, 849; 5, 961, 601; and 7, 631, 346.

         Presently before the Court is Groupon's motion for judgment on the pleadings that the '967 and '849 patents (collectively, the “Filepp patents”) are directed to ineligible subject matter and are invalid under 35 U.S.C. § 101. (D.I. 29[1]) The parties submitted briefing (see D.I. 30, 37, 39) and the Court heard oral argument on June 5, 2017. (See D.I. 100 (“Tr.”)) On September 15, 2017, the Court requested supplemental briefing in light of the Federal Circuit's recent decision, Visual Memory LLC v. NVIDIA Corp., 867 F.3d 1253 (Fed. Cir. 2017). The parties submitted letter briefing on September 19, 2017 (D.I. 167) and September 20, 2017 (D.I. 168). They also provided their views on another Federal Circuit opinion, Two-Way Media Ltd. v. Comcast Cable Commc'ns, LLC, __F.3d __, 2017 WL 4931936 (Fed. Cir. Nov. 1, 2017), on November 10 (D.I. 192) and November 14 (D.I. 194).

         I. BACKGROUND

         The Filepp patents are related patents directed to “generating screen displays for interactive applications (such as for making travel reservations or shopping) with integrated advertisements and commands to navigate within and between the applications.” (D.I. 30 at 2-3) The '967 patent is titled “Method for Presenting Applications in an Interactive Service” and the '849 patent is titled “Method for Presenting Advertising in an Interactive Service.” (Id.)

         Groupon asserts that the Filepp patents are invalid under § 101 because they are “directed to the abstract ideas of local storage of information and resources at a user's computer and for using such information and resources in presenting a partitioned display, ” without the addition of an inventive concept. (Id. at 1, 8) (internal quotation marks omitted) Groupon bases its motion on the Court's adoption of Magistrate Judge Burke's Report and Recommendation denying a similar motion in related case IBM v. Priceline. In that case, the defendants[2] argued that the Filepp patents and two others were directed to patent-ineligible subject matter pursuant to § 101. (IBM v. Priceline, C.A. No. 15-137-LPS-CJB D.I. 60 (“Priceline R&R”), D.I. 73 (“Priceline Order”)) In the February 16, 2016 Priceline R&R, Judge Burke agreed with the defendants that the claims were directed to abstract ideas under Alice step one, finding that “the concepts of locally storing information and resources at a user's computer and presenting a partitioned display are abstractions ‘devoid of a concrete or tangible application.'” (Priceline R&R at 48) However, Judge Burke recommended the Court deny the motion without prejudice under Alice step two because “[c]laim construction and discovery should further illuminate whether the claims' limitations are specific enough to be an inventive concept.” (Id. at 49) On March 30, 2016, the Court adopted the Priceline R&R and denied the motion to dismiss without prejudice, agreeing that “issues of claim construction . . . must be briefed and resolved before Defendants should be permitted to file a renewed motion under 35 U.S.C. § 101.” (Priceline Order at 2-3)

         Now that claim construction has been completed, Groupon renews the Priceline argument, asserting that the Filepp patents, even when construed, are “void of any inventive concept necessary to transform their recited abstract ideas into a patent-eligible application.” (D.I. 30 at 6) IBM contends that the law has changed since the Priceline decision, and under Enfish LLC v. Microsoft Corp., 822 F.3d 1327 (Fed. Cir. 2016) and its progeny, the Filepp patents are patent-eligible under Alice step one because they are directed toward improvements in computer functionality. (D.I. 37 at 6-8)

         II. LEGAL STANDARDS

         A. Motion for Judgment on the Pleadings

         Pursuant to Federal Rule of Civil Procedure 12(c), a party may move for judgment on the pleadings “[a]fter pleadings are closed - but early enough not to delay trial.” When evaluating a motion for judgment on the pleadings, the Court must accept all factual allegations in a complaint as true and view them in the light most favorable to the non-moving party. See Rosenau v. Unifund Corp., 539 F.3d 218, 221 (3d Cir. 2008); see also Maio v. Aetna, Inc., 221 F.3d 472, 482 (3d Cir. 2000). This is the same standard that applies to a Rule 12(b)(6) motion to dismiss. See Turbe v. Gov't of Virgin Islands, 938 F.2d 427, 428 (3d Cir. 1991).

         A Rule 12(c) motion will not be granted “unless the movant clearly establishes that no material issue of fact remains to be resolved and that he is entitled to judgment as a matter of law.” Rosenau, 539 F.3d at 221. “The purpose of judgment on the pleadings is to dispose of claims where the material facts are undisputed and judgment can be entered on the competing pleadings and exhibits thereto, and documents incorporated by reference.” Venetec Int'l, Inc. v. Nexus Med., LLC, 541 F.Supp.2d 612, 617 (D. Del. 2008); see also In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997) (explaining that any documents integral to pleadings may be considered in connection with Rule 12(c) motion). “The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims.” Burlington Coat Factory, 114 F.3d at 1420. Thus, a court may grant a motion for judgment on the pleadings (like a motion to dismiss) only if, after “accepting all well-pleaded allegations in the complaint as true, and viewing them in the light most favorable to plaintiff, plaintiff is not entitled to relief.” Maio, 221 F.3d at 482 (3d Cir. 2000).

         The Court may consider matters of public record as well as authentic documents upon which the complaint is based if attached to the complaint or as an exhibit to the motion. See Oshiver v. Levin, Fishbein, Sedran & Berman, 38 F.3d 1380, 1384 n.2 (3d Cir. 1994). The Court may also take judicial notice of the factual record of a prior proceeding. See Oneida Motor Freight, Inc. v. United Jersey Bank, 848 F.2d 414, 416 n.3 (3d Cir. 1988). Ultimately, a motion for judgment on the pleadings can be granted “only if no relief could be afforded under any set of facts that could be proved.” Turbe, 938 F.2d at 428.

         B. Patent-Eligible Subject Matter

         Under 35 U.S.C. § 101, “[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 therefor, subject to the conditions and requirements of this title.” There are three exceptions to § 101's broad patent-eligibility principles: “laws of nature, physical phenomena, and abstract ideas.” Diamond v. Chakrabarty, 447 U.S. 303, 309 (1980). Pertinent here is the third category, “abstract ideas, ” which “embodies the longstanding rule that an idea of itself is not patentable.” Alice Corp. Pty. Ltd. v. CLS Bank Int'l, 134 S.Ct. 2347, 2355 (2014) (internal quotation marks omitted). “As early as Le Roy v. Tatham, 55 U.S. 156, 175 (1852), the Supreme Court explained that ‘[a] principle, in the abstract, is a fundamental truth; an original cause; ...


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