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Genedics, LLC v. Meta Co.

United States District Court, D. Delaware

August 21, 2018

GENEDICS, LLC, Plaintiff,
v.
META COMPANY, Defendant.

          David W. deBruin, THE DEBRUIN FIRM, LLC, Wilmington, DE; Leslie L. Jacobs, Jr. and Gabriela I. Coman, RUBIN AND RUDMAN LLP, Washington, D.C., Attorneys for Plaintiff.

          David E. Moore, Bindu A. Palapura, and Stephanie E. O'Byrne, POTTER ANDERSON & CORROON LLP, Wilmington, DE; Craig Kaufman, Michael C. Ting, and Fatima Alloo, TECHKNOWLEDGE LAW GROUP LLP, Redwood City, CA, Attorneys for Defendant.

          MEMORANDUM OPINION

          BURKE, UNITED STATES MAGISTRATE JUDGE

         Presently before the Court in this patent infringement case is Defendant Meta Company's ("Defendant" or "Meta") motion to dismiss for failure to state a claim (the "Motion"), filed pursuant to Federal Rule of Civil Procedure 12(b)(6). (D.I. 11) Defendant argues that Plaintiff Genedics, LLC's ("Plaintiff' or "Genedics") asserted United States Patent Nos. 8, 319, 773 (the "773 patent"), 8, 477, 098 (the "'098 patent"), 8, 730, 165 (the '"165 patent"), 8, 902, 225 (the '"225 patent"), 9, 110, 563 (the '"563 patent"), and 9, 335, 890 (the '"890 patent") (collectively, the "asserted patents" or the "patents-in-suit") are directed to non-patent-eligible subject matter pursuant to 35 U.S.C. § 101 ("Section 101"), or, failing that, that the direct, indirect, and willful infringement allegations in the Complaint, (D.I. 1), fail to meet the Twomblyllqbal pleading standard. (D.I. 11; D.I. 12 at 1-3) For the reasons that follow, the Court will DENY Defendant's Motion, in the manner set out below.

         I. BACKGROUND

         A. Factual Background

         The patents-in-suit can be broken down into two families. (D.I. 12 at 4-6) The first family of patents consists of the '098, '165, '563, and '890 patents, each of which claims priority to United States Patent Application No. 11/932, 792 (which is now the '098 patent); these patents all share a common specification. (Id. at 5) The second family, consisting of the 773 and '225 patents, claims priority to Patent Application No. 11/932, 450 (now abandoned); both of these patents share a common.specification. (Id. at 6) In general, the asserted patents claim systems and methods for a three-dimensional (or "3-D")[1] user interface in which sensors are able to sense user interaction with an image, a processor correlates the user's interaction with the image, and the processor then updates the image or alters the image's location based on that interaction. (See Id. at 6-7; D, I. 18 at 1; D.I. 33 (hereinafter "Tr.") at 43; see also 773 patent, Abstract; '098 patent, Abstract).

         The Complaint identifies two Meta products that are alleged to infringe the asserted patents: the Meta 1 Development Kit and the Meta 2 Development Kit (the "accused products" or "development kits"). (See, e.g., D.I. 1 at ¶¶ 10, 25, 26; see also D.I. 12 at 3) According to Defendant's website, '"Meta's products enable people to manipulate digital objects or holograms with their hands, as well as create and share digital content with others in the same room or miles away.'" (D.I. 1 at ¶ 11 (citation omitted)) Plaintiff alleges that "each of the Meta development kits includes a Meta headset that displays holograms [J and each includes Meta software built on top of the Unity 3D software engine." (Id. at ¶ 33) And each development kit "offer[s] direct hand interaction with holograms." (Id. at ¶ 34) The headsets included with the kits include "a sensor array to sense hand interactions and positional tracking[, which makes it] possible to see, grab[, ] and move holograms just like physical objects." (Id. at ¶¶ 35-36) The sensor array also "includes depth sensing technology for determining the distance to a feature of the environment or an object within the environment in which the Meta headset is deployed." (Id. at ¶ 37)

         The Complaint also contains allegations that, on May 31, 2017, Plaintiff sent a letter ("the May 31 letter") to Defendant's general counsel identifying the asserted patents and providing notice that Defendant infringed them. (Id. at ¶ 12) Plaintiff included claim charts for each of the patents along with this letter, "which identified Meta's infringement of numerous claims, on an element-by-element basis." (Id. at ¶ 13) Defendant allegedly received the May 31 letter on June 2, 2017 and replied to Plaintiff on June 15, 2017. (Id. at ¶¶ 14-15)

         B. Procedural Background

         On August 1, 2017, Plaintiff filed its Complaint. (D.I. 1) The parties thereafter jointly consented to the Court's jurisdiction to conduct all proceedings in the case, including trial, the entry of final judgment, and all post-trial proceedings. (D.I. 10)

         On September 28, 2017, Defendant filed the instant Motion (as well as a motion to transfer the case to the Northern District of California). (D.I. 11; D.I. 13)[2] The parties completed briefing on the instant Motion on October 19, 2017. (D.I. 22) Thereafter, at the parties' joint request, the Court stayed case deadlines pending the resolution of the then-pending motions. (D.I. 24)

         Meta requested oral argument on both then-pending motions, (D.I. 25), and the Court granted argument on the instant Motion via an Order dated January 12, 2018. Prior to oral argument, Plaintiff filed a notice of subsequent authority, calling to the Court's attention two recent decisions from the United States Court of Appeals for the Federal Circuit: Berkheimer v. HP Inc., 881 F.3d 1360 (Fed Cir. 2018) and Aatrix Software, Inc. v. Green Shades Software, Inc., 882 F.3d 1121 (Fed. Cir. 2018). Oral argument was held on March 6, 2018.

         II. STANDARD OF REVIEW

         A. Standard of Review Regarding a Rule 12(b)(6) Motion

         As noted above, the entirety of Defendant's Motion is premised on Rule 12(b)(6). Pursuant to Rule 12(b)(6), a party may move to dismiss the plaintiffs complaint based on the failure to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). The sufficiency of pleadings for non-fraud cases is governed by Federal Rule of Civil Procedure 8, which requires "a short and plain statement of the claim showing that the pleader is entitled to relief[.]" Fed.R.Civ.P. 8(a)(2). In order to survive a motion to dismiss pursuant to Rule 12(b)(6), "a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks and citation omitted).

         In assessing such a motion, first the court separates the factual and legal elements of a claim, accepting "all of the complaint's well-pleaded facts as true, but [disregarding] any legal conclusions." Fowler v. UPMC Shady side, 578 F.3d 203, 210-11 (3d Cir. 2009). Second, the court determines "whether the facts alleged in the complaint are sufficient to show that the plaintiff has a 'plausible claim for relief" Id. at 211 (quoting Ashcroft, 556 U.S. at 679). A plausible claim does more than merely allege entitlement to relief; it must also demonstrate the basis for that "entitlement with its facts." Id. Thus, a claimant's "obligation to provide the 'grounds' of his' entitle[ment] to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).

         B. Rule 12(b)(6) Motions that Challenge Patent Eligibility Pursuant to Section 101

         Here, in addition to arguing that Plaintiff did not sufficiently plead facts establishing that the elements of direct, indirect and willful infringement are met, Defendant is also using the instant Motion to assert an affirmative defense-that the asserted patents are subject matter ineligible under Section 101. Below, the Court will first set out legal standards relating to whether a patent claims eligible subject matter. Thereafter, it will discuss other considerations relevant to Rule 12(b)(6) motions that challenge subject matter eligibility.

         1. Legal Standards Relating to Patentable Subject Matter

         Patent-eligible subject matter is defined in the Patent Act as follows:

Whoever 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.

35 U.S.C. § 101. While the scope of Section 101 is broad, there is an "important implicit exception [to it]: [l]aws of nature, natural phenomena, and abstract ideas are not patentable." Alice Corp. Pty. Ltd. v. CLS Bank lnt'l, 134 S.Ct. 2347, 2354 (2014) (internal quotation marks and citation omitted).

         In Alice Corp. Pty. Ltd. v. CLS Bank lnt'l, 134 S.Ct. 2347 (2014), the Supreme Court of the United States provided the two-step framework for assessing whether a patent contains eligible subject matter under Section 101.

         a. Step One

         Pursuant to step one, courts "must... determine whether the claims at issue are directed to a patent-ineligible concept[, ]" such as an abstract idea. Alice, 134 S.Ct. at 2355. Here the claims are considered in their entirety to ascertain not simply whether they involve a patent-ineligible concept, but whether "'their character as a whole is directed to [an abstract idea.]'" Enfish, LLC v. Microsoft Corp., 822 F.3d 1327, 1335 (Fed. Cir. 2016) (quoting Internet Patents Corp. v. Active Network, Inc., 790 F.3d 1343, 1346 (Fed. Cir. 2015)). "The abstract ideas category embodies the longstanding rule that [a]n idea of itself is not patentable." Alice, 134 S.Ct. at 2355 (internal quotation marks and citations omitted).

         What is an abstract idea? It can be, but need not amount to, a "preexisting, fundamental truth" about the natural world "that has always existed," or a "method of organizing human activity" (such as a "longstanding commercial practice"). Id. at 2356 (internal quotation marks and citations omitted); see also DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245, 1256-57 (Fed. Cir. 2014). A claim to an abstract idea has been described by the Federal Circuit as one directed to a "'disembodied' concept... a basic building block of human ingenuity, untethered from any real-world application[.]" CLS Bank lnt'l v. Alice Corp. Pty. Ltd., Ill. F.3d 1269, 1286 (Fed. Cir. 2013) (citation omitted). Beyond that, the concept of an "abstract idea" has not been crisply defined, see Alice, 134 S.Ct. at 2357 (declining to "labor to delimit the precise contours of the 'abstract ideas' category"), and the Supreme Court and the Federal Circuit have found it sufficient to compare claims at issue to those claims already found to be directed to an abstract idea in previous cases, see Enfish, 822 F.3d at 1334.

         As to claims like those at issue here, which involve systems or methods relating to computer technology, a relevant step one question is whether the claims '"focus on a specific means or method that improves the relevant technology' or [instead] are 'directed to a result or effect that itself is the abstract idea[.]'" Apple, Inc. v. Ameranth, Inc., 842 F.3d 1229, 1241 (Fed. Cir. 2016) (quoting McRO, Inc. v. BandaiNamco Games Am. Inc., 837 F.3d 1299, 1314 (Fed. Cir. 2016)). Put differently, courts try to ascertain whether the "claims do no more than describe a desired function or outcome, without providing any limiting detail that confines the claim to a particular solution to an identified problem." Affinity Labs of Tex., LLC v. Amazon.com Inc., 838 F.3d 1266, 1269 (Fed. Cir. 2016). At step one, courts should not "oversimplif[y]" an invention's key inventive concepts or "downplay[]" its benefits. Enfish, LLC, 822 F.3d at 1337-38; see also McRO, Inc., 837 F.3d at 1313 ("[C]ourts 'must be careful to avoid oversimplifying the claims'' by looking at them generally and failing to account for the specific requirements of the claims.") (citation omitted).

         How does one know what a patent claim is "directed to"? The Federal Circuit has indicated that the patent's specification can be helpful in answering that question. If a claim contains a particular element or elements that are described by the patent's specification as what the "present invention comprises" or as being "the innovation over the prior art" or the "the essential, most important aspect" of the patented invention, then it stands to reason that the claim is "directed to" that element or concept. See Enfish, 822 F.3d at 1337; Internet Patents Corp., 790 F.3d at 1348; see also Kaavo, Inc. v. Amazon.com Inc., Civil Action No. 15-638-LPS-CJB, Civil Action No. 15-640-LPS-CJB, 2016 WL 6562038, at *6 (D. Del. Nov. 3, 2016). And if that element or concept is not itself an abstract idea, then the claim is not ineligible. That said, the Federal Circuit has recognized that in some cases "involving computer-related claims, there may be close calls about how to characterize what the claims are directed to"; in such cases, "an analysis of whether there are arguably concrete improvements in the recited computer technology [may] take place under step two." Enfish, 822 F.3d at 1339.

         b. Step Two

         If a claim is directed to an abstract idea, then step two of the Alice framework requires a court to assess "[w]hat else is there in the claims"; a court does so by considering "the elements of each claim both individually and 'as an ordered combination' to determine whether the additional elements 'transform the nature of the claim' into a patent-eligible application." Alice, 134 S.Ct. at 2355 (internal quotation marks and citation omitted). The Supreme Court describes step two as a search 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." Id. (internal quotation marks and citation omitted); see also Berkheimer, 881 F.3d at 1367. The purpose of the "inventive concept" requirement is to "ensure that the claim is more than a drafting effort designed to monopolize the abstract idea." Alice, 134 S.Ct. at 2357 (internal quotation marks, citation, and brackets omitted).

         Neither "limiting the use of an abstract idea to a particular technological environment[, ]" nor simply stating an abstract idea and adding the words "apply it with a computer[, ]" will transform an abstract idea into a patent-eligible invention. Id. at 2358 (internal quotation marks and citations omitted). And the additional elements within the claim, apart from the abstract idea itself, must involve more than '"well-understood, routine, conventional activities]' previously known to the industry." Id. at 2359 (quoting Mayo Collaborative Servs. v. Prometheus Labs., Inc., 566 U.S. 66, 73 (2012)); see also Prometheus, 566 U.S. at 82 ("[S]imply appending conventional steps, specified at a high level of generality, to ... abstract ideas cannot make those ... ideas patentable.").[3]

         2. How to Assess Section 101 Challenges Pursuant to Rule 12(b)(6)

         Because Defendant's Section 101 challenge is made at the pleading stage (in the form of the assertion of an affirmative defense), dismissal is permitted "only when there are no factual allegations that, taken as true, prevent resolving the eligibility question as a matter of law." Aatrix Software, Inc., 882 F.3d at 1125. While patentability under Section 101 is ultimately a question of law, Berkheimer, 881 F.3d at 1365; see also In re Bilski, 545 F.3d 943, 951 (Fed. Cir. 2008), aff'd, Bilski v. Kappos, 561 U.S. 593 (2010), this question of law is also one that "may contain underlying issues of fact[, ]" Berkheimer, 881 F.3d at 1365 (citing Mortg. Grader, Inc. v. First Choice Loan Servs. Inc., 811 F.3d 1314, 1325 (Fed. Cir. 2016)); see also Aatrix Software, Inc., 882 F.3d at 1128 ("While the ultimate determination of eligibility under [Section] 101 is a question of law, like many legal questions, there can be subsidiary fact questions which must be resolved en route to the ultimate legal determination.").

         The Federal Circuit has explained that "plausible factual allegations may preclude dismissing a case under [Section] 101 where, for example, nothing on th[e] record ... refutes those allegations as a matter of law or justifies dismissal under Rule 12(b)(6)." Aatrix Software, Inc., 882 F.3d at 1125 (second alteration in original) (internal quotation marks and citation omitted). Factual allegations that might preclude dismissal at the Rule 12 stage include those relating to "[w]hether something is well-understood, routine, and conventional to a skilled artisan at the time of the patent[.]" Berkheimer, 881 F.3d at 1369; see also Aatrix Software, Inc., 882 F.3datll28.[4]

         3. Assessing "Representative" Claims

         As noted above, Defendant relies upon certain representative claims in arguing that all asserted claims of the patents are subject matter ineligible. "Courts may treat a claim as representative in certain situations, such as if the patentee does not present any meaningful argument for the distinctive significance of any claim limitations not found in the representative claim or if the parties agree to treat a claim as representative." Berkheimer, 881 F.3d at 1365 (citations omitted).

         Additionally, courts in this District have elucidated "several considerations relevant to deciding a Rule 12 motion that challenges the patent eligibility of multiple patent claims based on analysis of a single representative claim." Cronos Techs., LLC v. Expedia, Inc., C.A. No. 13-1538-LPS, 2015 WL 5234040, at *2 (D. Del. Sept. 8, 2015). Those considerations were set out as follows:

First, are all non-representative claims adequately represented by the representative claim (i.e., do all of the challenged claims relate to the same abstract idea and do any of the non-representative claims add one or more inventive concepts that would result in patent eligibility)?[] Second, are there issues of claim construction that must be decided before resolving the motion? [5] Finally, is there any set of facts that could be proven relating to preemption, [] questions of patentability, [] or whether the claims ...

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