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Coqui Technologies, LLC v. Gyft, Inc.

United States District Court, D. Delaware

November 16, 2018

COQUI TECHNOLOGIES, LLC, Plaintiff,
v.
GYFT, INC., Defendant. COQUI TECHNOLOGIES, LLC, Plaintiff,
v.
TRANSACTION WIRELESS, INC., Defendant.

          REPORT AND RECOMMENDATION

          SHERRY R. FALLON UNITED STATES MAGISTRATE JUDGE

         I. INTRODUCTION

         Presently before the court in these related patent infringement actions are the motions to dismiss for failure to state a claim upon which relief can be granted pursuant to Federal Rule of Civil Procedure 12(b)(6), filed by defendants Gyft, Inc. and Transaction Wireless, Inc. (collectively "Defendants"). (C.A. No. 17-777-JFB-SRF, D.I. 9; C.A. No. 17-778-JFB-SRF, D.I. 9)[1] For the following reasons, I recommend that the court grant the motions to dismiss.

         II. BACKGROUND

         Coqui filed these actions on June 16, 2017, claiming the infringement of United States Patent No. 7, 580, 864 ("the '864 patent"). (D.I. 1) Coqui accuses Defendants of infringing the '864 patent by "directly or through intermediaries, making, using, selling, and/or offering for sale apparatuses and systems, i.e., Gyft e-Gift Cards (the "Accused Instrumentality"), covered by one or more claims of the '864 Patent." (Id. at ¶ 10) Coqui is the owner by assignment of the '864 patent titled "Method for Circulating an Electronic Gift Certificate in Online and Offline System," which claims a method of circulating electronic gift certificates and managing sales of electronic gift certificates according to requests made through wired and wireless networks. (Id. at ¶ 6; Ex. A at Abstract) Specifically, the disclosed system and method operate by

receiving a user's purchase request from the communication terminal; checking a settlement state of the electronic gift certificate bought by the user; settling the electronic gift certificate bought by the user, and issuing the bought electronic gift certificate to the user, when the user requests settlement; storing the issued gift certificate information in the gift certificate database; and notifying the user of the gift certificate purchase particulars in a massage format.

(Id., Ex. A at Abstract) By "unifying an electronic gift certificate management system and a mobile communication system into a single system," the invention "simplif[ies] an electronic gift certificate circulation system and allow[s] the electronic gift certificates to be quickly and accurately purchased, gifted, and used." ('864 patent, col. 2:33-37)

         III. LEGAL STANDARD

         Defendants move to dismiss the pending action pursuant to Rule 12(b)(6), which permits a party to seek dismissal of a complaint for failure to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). When considering a Rule 12(b)(6) motion to dismiss, the court must accept as true all factual allegations in the complaint and view them in the light most favorable to the plaintiff. Umland v. Planco Fin. Servs., 542 F.3d 59, 64 (3d Cir. 2008). According to Defendants, Coqui's complaint fails to state a claim because the patents-in-suit are ineligible for patent protection under 35 U.S.C. § 101.

         Section 101 provides that patentable subject matter extends to four broad categories, including "new and useful process[es], machine[s], manufacture, or composition[s] of matter." 35 U.S.C. § 101; see also Bilski v. Kappos, 561 U.S. 593, 601 (2010) ("Bilski IF); Diamond v. Chakrabarty, 447 U.S. 303, 308 (1980). The Supreme Court recognizes three exceptions to the statutory subject matter eligibility requirements: "laws of nature, physical phenomena, and abstract ideas." Bilski II, 561 U.S. at 601. In this regard, the Supreme Court has held that "[t]he concepts covered by these exceptions are 'part of the storehouse of knowledge of all men... free to all men and reserved exclusively to none.'" Id. at 602 (quoting Funk Bros. Seed Co. v. Kalo Inoculant Co., 333 U.S. 127, 130 (1948)). At issue in the present case is the third category pertaining to abstract ideas, which "embodies the longstanding rule that an idea of itself is not patentable." Alice Corp. Pty. Ltd. v. CLS BankInt'l, 134 S.Ct. 2347, 2355 (2014) (internal quotations omitted).

         In Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U.S. 66 (2012), the Supreme Court articulated 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, 134 S.Ct. at 2355. In accordance with the first step of the Alice test, the court must determine whether the claims at issue are directed to a patent-ineligible concept. See Id. If so, the court must turn to the second step, under which the court must identify 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. (certain quotation marks omitted). The two steps are "plainly related" and "involve overlapping scrutiny of the content of the claims." Elec. Power Grp., LLC v. Alstom S.A., 830 F.3d 1350, 1353 (Fed. Cir. 2016).

         At step 1, "the claims are considered in their entirety to ascertain whether their character as a whole is directed to excluded subject matter." Internet Patents Corp. v. Active Network, Inc., 790 F.3d 1343, 1346 (Fed. Cir. 2015); see also Affinity Labs of Texas, LLC v. DIRECTV, LLC, 838 F.3d 1253, 1257 (Fed. Cir. 2016) ("The 'abstract idea' step of the inquiry calls upon us to look at the 'focus of the claimed advance over the prior art' to determine if the claim's 'character as a whole' is directed to excluded subject matter."). However, "courts must be careful to avoid oversimplifying the claims by looking at them generally and failing to account for the specific requirements of the claims." McRO, Inc. v. Bandai Namco Games Am. Inc., 837 F.3d 1299, 1313 (Fed. Cir. 2016) (internal quotation marks omitted). "Whether at step one or step two of the Alice test, in determining the patentability of a method, a court must look to the claims as an ordered combination, without ignoring the requirements of the individual steps." Enfish, LLC v. Microsoft, 822 F.3d 1327, 1338 (Fed. Cir. 2016).

         At step 2, the Federal Circuit instructs courts to "look to both the claim as a whole and the individual claim elements to determine whether the claims contain 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." McRO, 837 F.3d at 1312 (internal brackets and quotation marks omitted). Under the step 2 inquiry, the court must consider whether claim elements "simply recite 'well-understood, routine, conventional activities].'" Bascom Glob. Internet Servs., Inc. v. AT&T Mobility LLC, 827 F.3d 1341, 1350 (Fed. Cir. 2016) (quoting Alice, 134 S.Ct. at 2359). "Simply appending conventional steps, specified at a high level of generality, [is] not enough to supply an inventive concept." Alice, 134 S.Ct. at 2357 (internal quotation marks omitted).

         The Federal Circuit looks to the claims as well as the specification in performing the "inventive concept" inquiry. See Affinity Labs of Texas v. Amazon.comInc.,838 F.3d 1266, 1271 (Fed. Cir. 2016) ("[N]either the claim nor the specification reveals any concrete way of employing a customized user interface."). "The inventive concept inquiry requires more than recognizing that each claim element, by itself, was known in the art." Bascom, 827 F.3d at 1350. In Bascom, the Federal Circuit held that "the limitations of the claims, taken individually, recite generic computer, network and Internet components, none of which is inventive by itself," but nonetheless determined that the ...


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