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Encoditech LLC v. Qardio, Inc.

United States District Court, D. Delaware

June 19, 2019

QARDIO, INC., Defendant. ENCODITECH LLC, Plaintiff,


          Honorable Maryellen Noreika United States District Judge

         At Wilmington this 19th day of June 2019:

         As announced at the hearing on June 14, 2019, IT IS HEREBY ORDERED that:

1. Qardio, Inc.'s (“Qardio”) Motion to Dismiss for Failure to State a Claim (D.I. 17 in C.A. No. 18-864) is DENIED.
2. Bushnell Holdings, Inc.'s (“Bushnell”) Motion to Dismiss for Failure to State a Claim (D.I. 8 in C.A. No. 18-2059) is DENIED.
3. NeuroMetrix, Inc.'s (“NeuroMetrix”) Motion to Dismiss for Failure to State a Claim (D.I. 7 in C.A. No. 19-151) is DENIED.

         Defendants moved to dismiss the operative complaints in each of their actions pursuant to Federal Rule of Civil Procedure 12(b)(6), alleging that the claims of U.S. Patent No. 6, 321, 095 (“the '095 Patent”) are invalid as claiming ineligible subject matter under 35 U.S.C. § 101. In their motions, Defendants also seek dismissal of Plaintiff's allegations of direct and indirect infringement under Rule 12(b)(6) as insufficiently pled under Iqbal / Twombly. Defendants' motions were fully briefed as of May 22, 2019, [1] and the Court received further submissions in the Qardio case regarding which Supreme Court or Federal Circuit case each party contends is analogous to the claims at issue in Defendants' motions as related to the § 101 arguments. (See D.I. 29, 30 in C.A. No. 18-864; see also D.I. 27 in C.A. No. 18-864).[2] The Court carefully reviewed all submissions in connection with Defendants' motions, heard oral argument[3] and applied the following legal standard in reaching its decision:


         A. Motion to Dismiss for Failure to State a Claim

         In ruling on a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the Court must accept all well-pleaded factual allegations in the complaint as true and view them in the light most favorable to the plaintiff. See Mayer v. Belichick, 605 F.3d 223, 229 (3d Cir. 2010); see also Phillips v. Cnty. of Allegheny, 515 F.3d 224, 232-33 (3d Cir. 2008). “[A] court need not ‘accept as true allegations that contradict matters properly subject to judicial notice or by exhibit,' such as the claims and the patent specification.” Secured Mail Sols. LLC v. Universal Wilde, Inc., 873 F.3d 905, 913 (Fed. Cir. 2017) (quoting Anderson v. Kimberly-Clark Corp., 570 Fed.Appx. 927, 931 (Fed. Cir. 2014)). Dismissal under Rule 12(b)(6) is only appropriate if a complaint does not 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) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)); see also Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009). “[P]atent eligibility can be determined at the Rule 12(b)(6) stage . . . when there are no factual allegations that, taken as true, prevent resolving the eligibility question as a matter of law.” Aatrix Software, Inc. v. Green Shades Software, Inc., 882 F.3d 1121, 1125 (Fed. Cir. 2018).

         B. Patent-Eligible Subject Matter

         Section 101 of the Patent Act provides that anyone who “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. 35 U.S.C. § 101. The Supreme Court has long recognized three exceptions to the broad categories of subject matter eligible for patenting under § 101: laws of nature, physical phenomena, and abstract ideas. Alice Corp. Pty. v. CLS Bank Int'l, 573 U.S. 208, 134 S.Ct. 2347, 2354 (2014). These “are ‘the basic tools of scientific and technological work' that lie beyond the domain of patent protection.” Ass'n for Molecular Pathology v. Myriad Genetics, Inc., 569 U.S. 576, 589 (2013) (quoting Mayo Collaborative Servs. v. Prometheus Labs., Inc., 566 U.S. 66, 77-78 (2012)); see also Alice, 134 S.Ct. at 2354. A claim to any one of these three categories is directed to ineligible subject matter under § 101. “[W]hether a claim recites patent eligible subject matter is a question of law which may contain underlying facts.” Berkheimer v. HP Inc., 881 F.3d 1360, 1368 (Fed. Cir. 2018).

         Courts follow 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; see also Mayo, 566 U.S. at 77-78. First, at step one, the Court determines whether the claims are directed to one of the three patent-ineligible concepts. Alice, 134 S.Ct. at 2355. If the claims are not directed to a patent-ineligible concept, “the claims satisfy § 101 and [the Court] need not proceed to the second step.” Core Wireless Licensing S.A.R.L. v. LG Elecs., Inc., 880 F.3d 1356, 1361 (Fed. Cir. 2018). If, however, the Court finds that the claims at issue are directed a patent-ineligible concept, the Court must then, at step two, 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.'” Alice, 134 S.Ct. at 2355 (alteration in original) (quoting Mayo, 566 U.S. at 72-73).

         1. Step One of the Alice Framework

         At step one of Alice, “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) (step one looks at the “focus of the claimed advance over the prior art” to determine if the claim's “character as a whole” is to ineligible subject matter). In performing step one of Alice, the Court should be careful not to oversimplify the claims or the claimed invention because, at some level, all inventions are based upon or touch on abstract ideas, natural phenomena, or laws of nature. Alice, 134 S.Ct. at 2354; see also McRO, Inc. v. Bandai Namco Games Am. Inc., 837 F.3d 1299, 1313 (Fed. Cir. 2016). “At step one, therefore, it is not enough to merely identify a patent-ineligible concept underlying the claim; [courts] must determine whether that patent-ineligible concept is what the claim is ‘directed to.'” Rapid Litig. Mgmt. Ltd. v. CellzDirect, Inc., 827 F.3d 1042, 1050 (Fed. Cir. 2016).

         2. Step Two of ...

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