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Sapphire Crossing LLC v. Quotient Technology Inc.

United States District Court, D. Delaware

August 14, 2019

SAPPHIRE CROSSING LLC, Plaintiff,
v.
QUOTIENT TECHNOLOGY INC., Defendant.

          REPORT AND RECOMMENDATION

          Christopher J. Burke United States District Judge.

         Presently before the Court in these consolidated patent infringement cases are six motions (the "motions") filed pursuant to Federal Rule of Civil Procedure 12(b)(6) by Defendants Quotient Technology Inc. ("Quotient"); Intuit Inc.; HealthEquity, Inc.; WEX Health, Inc.; Xero, Inc.; and Visa Inc. (collectively "Defendants") seeking to dismiss Plaintiff Sapphire Crossing LLC's ("Plaintiff) claims of patent infringement for failure to state a claim upon which relief can be granted.[1] According to Defendants, asserted U.S. Patent No. 6, 891, 633 ("the '633 patent" or "the asserted patent") is directed to ineligible subject matter under 35 U.S.C. § 101 ("Section 101"). For the reasons set out below, the Court recommends that the motions be GRANTED without prejudice.

         I. BACKGROUND

         A. Procedural History

         This is a patent case filed by Plaintiff against the respective Defendants between October 31, 2018 and December 28, 2018, in which Plaintiff alleges that those Defendants infringe the '633 patent. (D.I. 1; Civil Action No. 18-1856, D.I. 1; Civil Action No. 18-2072, D.I. 1; Civil Action No. 18-2074, D.I. 1; Civil Action No. 18-2075, D.I. 1; Civil Action No. 18-2076, D.I. 1) Judge Maryellen Noreika thereafter referred the case to the Court to hear and resolve all pretrial matters, up to and including expert discovery matters. (D.I. 12)

         Between December 26, 2018 and February 27, 2019, Defendants filed their respective motions, each seeking to dismiss the respective Complaints filed against them on Section 101 grounds. (D.I. 6; Civil Action No. 18-1856, D.I. 8; Civil Action No. 18-2072, D.I. 10; Civil Action No. 18-2074, D.I. 10; Civil Action No. 18-2075, D.I. 10; Civil Action No. 18-2076, D.I. 10) Standard briefing on the motions was completed by April 26, 2019. (D.I. 33; D.I. 34; D.I. 35; D.I. 36) Pursuant to an order of the Court, the parties also filed short additional letter briefs that further highlighted some basic details about the nature of their Section 101 arguments. (D.I. 20; D.I. 22; D.I. 29; D.I. 38; D.I. 39; D.I. 40; D.I. 41; D.I. 42; Civil Action No. 18-1856, D.I. 25) Defendants also requested oral argument on the motions, (D.I. 37), which the Court granted (D.I. 45). Oral argument was held on June 26, 2019. (D.I. 46 (hereinafter "Tr."))[2]

         B. The'633 Patent

         The '633 patent is entitled "Image Transfer System" and describes an "electronic assembly comprising an image transfer device . . . and a computer." (D.I. 1, ex. A (hereafter '"633 patent") at Abstract) The figures in the patent are hand-drawn, and Figure 1, reproduced below, provides a "schematic diagram of an image transfer system incorporating features of the present invention[, ]" ('633 patent, col. 2:40-41):

         (Image Omitted)

         (Id., FIG. 1 (illustrating "image transfer system 10," "image transfer device 12," and "computer 14 []connected to the image transfer device 12 by a cable 36"); see also id., col. 3:6-18)

         The '633 patent explains that "[t]here are examples in the prior art of image transfer systems comprising an image transfer device coupled to one or more computers." (Id., col. 1:12-14) The patent-in-suit cites U.S. Patent No. 5, 798, 738, entitled "Printing Manager System for a Copier in a Network," as an exemplary prior art system "compris[ing] a terminal connected to a copying machine." (Id., col. 1:14-17) However, the'633 patent criticizes such "copying machines in the prior ar[t, ]" explaining that they are "capable of performing only a given set of functions regardless of whether the copying machine is connected to a computer or not." (Id., col. l:17-20)[3]

         The '633 patent goes on to distinguish the present invention from such prior art. It asserts that "[o]ne object of the present invention is to provide a software and user interface (UI) solution for enriching personal and desktop copier feature sets by utilizing the processing power and memory capacity of a connected personal computer ['PC']." (Id., col. 1:21-25) Indeed, the '633 patent repeatedly touts this borrowing of a connected computer's processing power and memory as a key inventive contribution of the patent. (See, e.g., id., col. 14:1-12 ("The present invention provides a stand alone image transfer device equipped with minimal memory and processing capabilities to perform basic image transfer operations, which when connected to a computer such as a PC, can be quickly expanded to have an extended number of advanced function[s] which generally are not available in an image transfer device of that size."); see also id., cols. 14:42-48, 15:1-9, 15:20-41) The patent also notes that another object of the present invention is to "provide[] for initiation of the job to take place at the device, so the user need not know the PC is involved in the process." (Id., col. 1:31-34)

         In several of the embodiments described in the '633 patent, a document/image is first scanned at the image transfer device (also called a "multifunction device"). (Id., cols. 1:25-29, 15:1-9) The scanned data is then sent to the connected computer to leverage that computer's processing power, in order to perform "enriched" functions (e.g., "collation" or adding a "fixed message" to the document); thereafter, the enhanced document is sent back to the image transfer device for "output" or "printing on [a] sheet medium[.]" (Id., cols. 1:21-31, 2:4-16, 13:16-67, 14:13-15:19)

         In another embodiment (one particularly relevant to the discussion below), "data used to effect image transfer . . . according to the enhanced menu features" is stored in the connected computer's memory 34A. (id. col. 11:40-43; see also id. cols. 11:44-12:17, FIG. 9) "[S]uch data may include bitmaps representing time and date stamps, fixed messages, logos or watermarks to [be] added to the images as well as the coordinates for printing the bitmaps[.]" (Id., col. 11:43-46) Unlike other described embodiments that leverage the attached computer's processor 32C to perform extended features, in this embodiment, the central processing unit ("CPU") 20 of the image transfer device itself performs the enhanced function of "merg[ing] the bitmap with the image data" after the bitmap has been uploaded from the connected computer. (id. cols. 11:50-12:8). This process is further depicted in Figure 9 of the patent, which is reproduced below:

         (Image Omitted)

         (Id., FIG. 9 (illustrating step "T4" as "Device [i.e., the image transfer device] merges bitmap with image read by reader"))

         C. Inter Paries Review of the '633 Patent (IPR2016-00723)

         On March 8, 2016, Unified Patents Inc. ("Petitioner") petitioned the United States Patent and Trademark Office's Patent Trial and Appeal Board ("PTAB" or "Board") to institute inter partes review ("IPR") of every claim (1-26) of the '633 patent. (D.I. 13, ex. A (Unified Patents Inc. v. Ruby Sands LLC, No. IPR2016-00723, Paper No. 7 at 2 (P.T.A.B. August 29, 2016) ("Institution Decision"))[4] Petitioner asserted five grounds of unpatentability: three grounds for claims 1-18 and 21-26, and two grounds for claims 19 and 20. (Id. at 11) The grounds asserted for claims 19 and 20 were anticipation by U.S. Patent No. 5, 701, 184 ("Motoyama") and anticipation by U.S. Patent No. 7, 315, 386 ("Shiimori"). (Id. at 10-11)

         The Board's institution decision found that Petitioner had established a reasonable likelihood of success in proving unpatentability for only one of the unpatentability grounds asserted: obviousness of claims 1-18 and 21-26 over four references. (Id. at 40, 54) The Board found that Petitioner had not established a reasonable likelihood of success of proving unpatentability based on the other four proposed grounds, and thus issued a partial institution decision. (Id. at 54) Cf. SAS Inst, Inc. v. Iancu, 138 S.Ct. 1348 (2018) (forbidding this practice two years later).

         The Board rejected Petitioner's challenge to claims 19 and 20 based on Motoyama because the Board was not persuaded that Motoyama disclosed the claims' requirement that the processor of the image transfer device must "automatically merg[e]" electronic data with an image read by the device's scanner. (D.I. 13, ex. A at 47-49; see also Id. at 41-42 (overview of Motoyama)) As for Petitioner's challenge to claims 19 and 20 based on Shiimori, the Board similarly found Petitioner's argument lacking. There, it ruled that Petitioner had impermissibly attempted to combine two separate embodiments disclosed in Shiimori in an attempt to show anticipation by a reference. (Id. at 51-53; see also Id. at 49-50 (overview of Shiimori))

         Subsequently, the Patent Owner requested adverse judgment pursuant to 37 C.F.R. § 42.73(b), asking that the Board "cancel claims 1-18 and 21-26." Unified Patents Inc. v. Ruby Sands LLC, No. IPR2016-00723, Paper No. 17 (P.T.A.B. December 2, 2016). Thereafter, the Board granted this request. Unified Patents Inc. v. Ruby Sands LLC, No. IPR2016-00723, Paper No. 18 (P.T.A.B. January 6, 2017).

         II. STANDARD OF REVIEW

         As noted above, these Rule 12(b)(6) motions are premised on the assertion that the remaining patent claims-in-suit are directed to patent-ineligible subject matter. The Court has often set out the relevant legal standards for review of such a motion, including in Genedics, LLC v. Meta Co., Civil Action No. 17-1062, 2018 WL 3991474, at *2-5 (D. Del. Aug. 21, 2018). The Court hereby incorporates by reference its discussion in Genedics of these legal standards. In assessing the motions, the Court will follow this body of law. To the extent consideration of the motions necessitates discussion of other, related legal principles, the Court will set out those principles in Section III below.

         III. DISCUSSION

         In resolving Defendants' motions, the Court will first discuss which claim will be specifically addressed herein as representative. Thereafter, it will analyze the relevant claim under both steps of the test for patent eligibility set out ...


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