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Kroy IP Holdings, LLC v. Groupon, Inc.

United States District Court, D. Delaware

December 10, 2018

KROY IP HOLDINGS, LLC, Plaintiff,
v.
GROUPON INC., Defendant.

          David E. Moore, Bindu A. Palapura, Stephanie E. O'Byrne, Potter Anderson & Corroon LLP, Wilmington, DE; Jonathan K. Waldrop, Darcy L. Jones, Marcus A. Barber, John W. Downing, Heather S. Kim, Jack Shaw, Kasowitz Benson Torres LLP, Redwood Shores, CA; Hershy Stern, Kasowitz Benson Torres LLP, New York, NY, Rodney R. Miller, Kasowitz Benson Torres LLP, Atlanta, GA- attorneys for Plaintiff

          Steven J. Balick, Andrew C. Mayo, Ashby & Geddes, Wilmington, DE; Thomas L. Duston, Tron Y. Fun, Marshall, Gerstein and Borun, LLP, Chicago, IL - attorneys for Defendants

          MEMORANDUM OPINION

          NORMKA, U.S. DISTRICT JUDGE

         Presently before the Court are the objections of Plaintiff Kroy IP Holdings, LLC ("Plaintiff or "Kroy") (D.I. 41) to Magistrate Judge Fallon's Report and Recommendation (D.I. 39, "the Report"). The Report recommended denial of Defendant Groupon Inc.'s ("Defendant" or "Groupon") motion to dismiss for failure to state a claim (D.I. 10) on the grounds that certain claims of U.S. Patent No. 6, 061, 660 ("the '660 Patent") are invalid as claiming ineligible subject matter under 35 U.S.C. § 101. The Court has reviewed the Report, Plaintiffs objections and Defendant's responses thereto, and the Court has considered de novo the relevant portions of Defendant's motion to dismiss, materials submitted with the motion and the transcript of the May 22, 2018 hearing before Magistrate Judge Fallon. For the reasons set forth below, Plaintiffs objections are OVERRULED, the Report is ADOPTED and Defendant's motion to dismiss is DENIED.

         I. BACKGROUND

         On October 6, 2017, Plaintiff filed the present action, alleging that Defendant's Merchant Center for Groupon Stores, Merchant Center for Groupon Now! Deals and Deal Builder offerings infringe claims 1, 10, 16-21, 25 and 27-30 of the '660 Patent ("the Asserted Claims"). (See, e.g., D.I. 1 ¶¶ 1, 44). On December 14, 2017, Defendant filed the present motion to dismiss (D.I. 10) for failure to state a claim upon which relief may be granted, arguing that the Asserted Claims of the '660 Patent are invalid as claiming ineligible subject matter under 35 U.S.C. § 101.

         The '660 Patent, which is titled "System and Method for Incentive Programs and Award Fulfillment," is generally directed to conducting incentive programs over computer networks and providing sponsors, retailers and consumers with the ability to fulfill awards received through the incentive program. ('660 Patent at Abstract; see also Id. at 1:20-22, 5:47-54).[1] The '660 Patent originally contained fifteen claims, each directed to a system or method[2] for "incentive program generation" or "incentive program generation and award fulfillment." (Id. at Claims 1-15). In an ex parte reexamination, Plaintiff amended several of these claims and added an additional 100 claims. (See Id. at Claims 1, 2, 4, 7, 14, 16-115 (reexam certificate)).

         Claims 1 and 10 of the '660 Patent are the only independent claims of the Asserted Claims.

         Claim 1, as amended in the ex parte reexamination, recites:

         1. A system for incentive program generation, comprising:

a network;
a sponsor computer connected to the network; a host computer connected to the network, the host computer having a server;
an incentive program builder application, running on the server;
a database of objects associated with parameters of the incentive program builder application; and
an interface of the incentive program builder application for sponsor entry of parameters for an incentive program,
wherein the sponsor builds an incentive program by interacting with the incentive program builder application,
wherein the host computer is configured to receive first input from
a plurality of sponsors corresponding to the parameters for creating a plurality of incentive programs associated with the plurality of sponsors via the interface of the incentive program builder application from a plurality of sponsors, receive second input from a consumer selecting an incentive program from among the plurality of incentive programs, issue an award to the consumer corresponding to the selected incentive program, receive a request to validate the award from a sponsor among the plurality of sponsors associated with the selected incentive program, and validate the award, wherein the host, the sponsor, and the consumer are different entities, and wherein the host and the sponsor are different individuals or corporate entities.

('660 Patent at Claim 1 (reexam certificate)). Claim 10 is directed to a system like claim 1 but with additional limitations regarding award fulfillment (e.g., "a fulfillment automation application program" and "an electronic card for fulfillment") and computer code for the incentive builder application:

         10. A system for incentive program generation and award fulfillment, comprising: a host computer connected to a network;

a client computer of a consumer connected to the network;
a sponsor computer of a sponsor connected to the network; an incentive participation application program for participation by the consumer in an incentive program, wherein the participation may be in incentive programs of a plurality of sponsors; a server of the host computer;
a web site, located on the server of the host computer, wherein the consumer may participate in an incentive program via the web site;
a database of the host computer of awards associated with the incentive participation ...

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