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Realtime Adaptive Streaming LLC v. Haivision Network Video Inc.

United States District Court, D. Delaware

December 12, 2018

REALTIME ADAPTIVE STREAMING LLC, Plaintiff,
v.
HAIVISION NETWORK VIDEO INC., Defendant.

          REPORT AND RECOMMENDATION

          SHERRY R. FALLON, UNITED STATES MAGISTRATE JUDGE.

         I. INTRODUCTION

         On October 26, 2017, Realtime Adaptive Streaming LLC ("Realtime") filed a complaint against Haivision Network Video Inc. ("Haivision"), asserting infringement of United States Patent Numbers 8, 934, 535 ("the '535 patent"), 9, 769, 477 ("the '477 patent"), 8, 929, 442 ("the '442 patent"), 9, 762, 907 ("the '907 patent"), and 7, 386, 046 ("the '046 patent") (collectively, the "Fallon patents"). (D.I. 1; D.I. 22) Additionally, Realtime asserts infringement of United States Patent Numbers 8, 634, 462 ("the '462 patent") and 9, 578, 298 ("the '298 patent") (collectively, the "Non-Fallon patents"). (D.I. 22 at ¶¶ 161-211) Realtime is the owner by assignment of the patents-in-suit, which relate to the concept of encoding and decoding data, and the digital compression of data. (D.I. 22 at ¶¶ 7, 38, 69, 100, 131, 162, 190) Pending before the court is the motion to dismiss the Fallon patent claims for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6) and 35 U.S.C. § 101 and the Non-Fallon patent claims pursuant to Federal Rule of Civil Procedure 12(b)(6). (D.I. 23) For the following reasons, I recommend granting-in-part and denying-in-part Haivision's motion to dismiss.

         II. BACKGROUND

         A. Procedural History

         On February 20, 2018, Haivision filed this pending motion to dismiss for failure to state a claim. (D.I. 23) On April 10, 2018, Realtime filed a motion to transfer pursuant to 28 U.S.C. § 1407 with the United States Judicial Panel on Multidistrict Litigation ("the Panel") to consolidate in the District of Colorado actions it originally brought in Delaware, California, Texas, Massachusetts, and Colorado. (D.I. 32) On August 1, 2018, the Panel denied Realtime's motion due to the need for defendant-by-defendant analysis of individual design elements. (D.I. 33) On October 2, 2018, the court heard oral argument on the pending motion to dismiss.[1] (D.I. 38)

         B. Related Cases

         There is a related Realtime case currently pending before the court, Realtime Adaptive Streaming LLC v. Netflix, Inc., et al., C.A. No. 17-1520-CFC-SRF (the "Netflix Litigation").[2]In the Netflix Litigation, Realtime asserts claims for infringement of all of the Fallon patents, except the '442 patent. (C.A. No. 17-1692-CFC-SRF, D.I. 1) There is a pending motion to dismiss the complaint for failure to state a claim pursuant to Rule 12(b)(6) and 35 U.S.C. § 101 filed by defendant Netflix.[3] (C.A. No. 17-1692-CFC-SRF, D.I. 11)

         C. Patents-in-Suit

         The '535 patent is titled "Systems and Methods for Video and Audio Data Storage and Distribution." (D.I. 22 at ¶ 7) Representative claim 15 recites:[4]

15. A method, comprising:
Determining a parameter of at least a portion of a data block; Selecting one or more asymmetric compressors from among a plurality of compressors based upon the determined parameter or attribute; Compressing the at least the portion of the data block with the selected one or more asymmetric compressors to provide one or more compressed data blocks; and Storing at least a portion of the one or more compressed data blocks.

('535 patent, col. 22:1-12) The '046 patent is titled "Bandwidth Sensitive Data Compression and Decompression." (D.I. 22 at ¶ 131) Representative claim 40 recites:[5]

40. A system comprising:
A data compression system for compressing and decompressing data input; A plurality of compression routines selectively utilized by the data compression system, wherein a first one of the plurality of compression routines includes a first compression algorithm and a second one of the plurality of compression routines includes a second compression algorithm; and
A controller for tracking throughput and generating a control signal to select a compression routine based on the throughput, wherein said tracking throughput comprises tracking a number of pending access requests to a storage device; and
Wherein when the controller determines that the throughput falls below a predetermined throughput threshold, the controller commands the data compression engine to use one of the plurality of compression routines to provide a faster rate of compression so as to increase the throughput.

('046 patent, col. 27:25-28:10)

         III. LEGAL STANDARD

         A. Federal Pleading Standard under Rule 12(b)(6)

         Rule 12(b)(6) permits a party to move to dismiss 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. Inc., 542 F.3d 59, 64 (3d Cir. 2008).

         To state a claim upon which relief can be granted pursuant to Rule 12(b)(6), a complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). Although detailed factual allegations are not required, the complaint must set forth sufficient factual matter, accepted as true, to "state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007); see also Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009). A claim is facially plausible when the factual allegations allow the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Iqbal, 556 U.S. at 663; Twombly, 550 U.S. at 555-56.

         When determining whether dismissal is appropriate, the court must take three steps.[6] See Santiago v. Warminster Twp., 629 F.3d 121, 130 (3d Cir. 2010). First, the court must identify the elements of the claim. Iqbal, 556 U.S. at 675. Second, the court must identify and reject conclusory allegations. Id. at 678. Third, the court should assume the veracity of the well-pleaded factual allegations identified under the first prong of the analysis, and determine whether they are sufficiently alleged to state a claim for relief. Id; see also Malleus v. George, 641 F.3d 560, 563 (3d Cir. 2011). The third prong presents a context-specific inquiry that "draw[s] on [the court's] experience and common sense." Iqbal, 556 U.S. at 663-64; see also Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009). As the Supreme Court instructed in Iqbal, "where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged - but it has not 'show[n]' - 'that the pleader is entitled to relief.'" Iqbal, 556 U.S. at 679 (quoting Fed.R.Civ.P. 8(a)(2)).

         B. Patent Eligibility under 35 U.S.C. § 101

         Section 101 provides that patentable subject matter extends to four broad categories, including "new and useful processes], 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 (internal quotations omitted). 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 Bank lnt'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, such as an abstract idea. 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. (internal citation 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 quotations and citations 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) (alteration in original). "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 quotations omitted).

         The Federal Circuit looks to the claims as well as the specification in performing the "inventive concept" inquiry. See Affinity Labs, 838 F.3d at 1271 ("[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 patent adequately alleged an ordered combination of these limitations to be patent-eligible under step 2 at the pleading stage. Id. at 1349.

         The "mere recitation of a generic computer cannot transform a patent-ineligible abstract idea into a patent-eligible invention" under step two. Alice, 134 S.Ct. at 2358. "Given the ubiquity of computers . . . wholly generic computer implementation is not generally the sort of additional feature that provides any practical assurance that the process is more than a drafting effort designed to monopolize the abstract idea itself." Id. (internal quotations and citations omitted). The Federal Circuit has held that certain improvements in computer software are not abstract ideas under Alice step one. Enfish, LLC v. Microsoft Corp.,822 F.3d 1327, 1335 (Fed. Cir. 2016); see also Visual Memory LLC v. NVIDIA Corp.,867 F.3d 1253, 1259 (Fed. Cir. 2017). The relevant question in determining if computer technology is directed to an abstract ...


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