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Learn more about what you receive with purchase of this case. LLC v. Rpost Communications Ltd.

United States District Court, D. Arizona

June 7, 2016 LLC, Plaintiff,
RPost Communications Limited, et al., Defendants.



Pending before the Court are Plaintiff LLC ("GoDaddy")’s Motion for Summary Judgment, (Doc. 257), and Defendants’[1] Motion for Summary Judgment on Plaintiff’s Count I (Fraudulent Misrepresentation of Patent Ownership), (Doc. 284). The Court now rules on the motions.

I. Background

After multiple rounds of motions to dismiss, briefing for a three-month stay, complete Markman review, a Daubert motion, and dozens of other motions, the factual background of this case is well-established. In short, GoDaddy filed this Declaratory Judgment Action against RPost, seeking, among other things, damages for fraudulent misrepresentation and declarations of invalidity and non-infringement of various patents (the "Asserted Patents")[2] after RPost attempted to enforce those patents against GoDaddy. (Doc. 46 at 38). RPost counterclaimed, alleging that GoDaddy is liable for direct infringement of the Asserted Patents. (Doc. 108 at 20-27).

II. Legal Standard

Summary judgment is appropriate when "the movant shows that there is no genuine issue as to any material fact and that the moving party is entitled to summary judgment as a matter of law." Fed.R.Civ.P. 56(a). A party asserting that a fact cannot be or is genuinely disputed must support that assertion by "citing to particular parts of materials in the record, " including depositions, affidavits, interrogatory answers or other materials, or by "showing that materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact." Id. at 56(c)(1). Thus, summary judgment is mandated "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party’s case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).

Initially, the movant bears the burden of pointing out to the Court the basis for the motion and the elements of the causes of action upon which the non-movant will be unable to establish a genuine issue of material fact. Id. at 323. The burden then shifts to the non-movant to establish the existence of material fact. Id. The non-movant "must do more than simply show that there is some metaphysical doubt as to the material facts" by "com[ing] forward with ‘specific facts showing that there is a genuine issue for trial.’" Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986) (quoting Fed.R.Civ.P. 56(e) (1963) (amended 2010)). A dispute about a fact is "genuine" if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The non-movant’s bare assertions, standing alone, are insufficient to create a material issue of fact and defeat a motion for summary judgment. Id. at 247-48. Further, because "[c]redibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge, . . . [t]he evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn in his favor" at the summary judgment stage. Id. at 255 (citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59 (1970)); Harris v. Itzhaki, 183 F.3d 1043, 1051 (9th Cir. 1999) ("Issues of credibility, including questions of intent, should be left to the jury." (citations omitted)).

At the summary judgment stage, the trial judge’s function is to determine whether there is a genuine issue for trial. There is no issue for trial unless there is sufficient evidence favoring the non-moving party for a jury to return a verdict for that party. Liberty Lobby, Inc., 477 U.S. at 249-50. If the evidence is merely colorable or is not significantly probative, the judge may grant summary judgment. Id. Notably, "[i]t is well settled that only admissible evidence may be considered by the trial court in ruling on a motion for summary judgment." Beyene v. Coleman Sec. Servs., Inc., 854 F.2d 1179, 1181 (9th Cir. 1988).

III. GoDaddy’s Motion for Summary Judgment

GoDaddy moves for summary judgment on seven issues. First, GoDaddy argues that "the asserted claims of the RPost Patents claim patent-ineligible abstract ideas and are invalid under 35 U.S.C. § 101." (Doc. 257 at 7). Second, GoDaddy contends that the ’913 Patent is invalid as "obvious" under 35 U.S.C. § 103. (Id.) Third, GoDaddy maintains that the "earliest priority date claimable for the Tomkow Patents" is December 17, 1999. (Id.) Fourth, GoDaddy asserts that it has "intervening rights as to the Feldbau Patent." (Id.) Fifth, GoDaddy contends that the Accused Products[3] do not infringe the asserted claims of the Tomkow Patents that recite a "copy" or "representation" of "the message." (Id.) Sixth, GoDaddy insists that the Accused Products do not infringe the asserted Feldbau Patent claims. (Id.) Finally, GoDaddy moves for summary judgment on the issue of damages. (Id.)

A. Eligibility of the Asserted Patents

GoDaddy contends that the Asserted Patents are invalid under 35 U.S.C. § 101 because they claim patent-ineligible subject matter. (Doc. 257 at 9-10). Specifically, GoDaddy argues that the Asserted Patents claim "abstract ideas" lacking "inventive concepts sufficient to transform the claimed abstract idea into a patent-eligible application." (Doc. 257 at 10-15) (citing Alice Corp. Pty. Ltd. v. CLS Bank Intern., 134 S.Ct. 2347, 2354-55 (2014) ("Alice")). As to the Feldbau Patent, GoDaddy argues that the claims are drawn to the "abstract idea of collecting and providing information for proving a message was sent to a recipient at a particular time with particular content" without adding an inventive concept sufficient to confer eligibility. (Id. at 18). Regarding the Tomkow Patents, GoDaddy contends that the claims are drawn to the abstract idea of "collecting and providing information for verifying transmission and/or delivery of a message" without including an inventive concept to transform that idea into a patent-eligible application. (Id. at 14).

In response, RPost asserts that an eligibility challenge under § 101 is not a statutory defense in patent infringement litigation and therefore the Court lacks jurisdiction over GoDaddy’s argument. (Doc. 299 at 8-13). According to RPost, neither the Supreme Court of the United States nor the Federal Circuit has expressly held that § 101 is a statutory defense. (Id.) RPost explains that the section heading of § 101, "Inventions patentable, " takes the statute out of the realm of statutory defenses demarcated in 35 U.S.C § 282(b). (Id.) In the alternative, RPost argues that the Asserted Patents are directed to patent-eligible subject matter and recite inventive concepts. (Id. at 13-22). Specifically, RPost contends that the Feldbau Claims provide a technical solution to a technical problem using an "authenticator." (Id. at 20-21). RPost further argues that the Feldbau Claims add an "inventive concept" because the invention requires a physical "transform[ation]" of the information. (Id. at 21-22) As to the Tomkow Patents, RPost asserts that GoDaddy’s characterization of the patents is a "gross oversimplification." (Id. at 14). Instead, RPost insists that the asserted Tomkow Patent claims "recite specific ways to verify delivery of an electronic message using specific information." (Id.)

1. Jurisdiction

Before reaching the merits of GoDaddy’s eligibility argument, the Court must first determine whether it has jurisdiction over patent-eligibility challenges brought pursuant to § 101. According to RPost, § 101 eligibility is not an authorized statutory defense because § 101 is not listed or referenced in § 282(b), the statute designating patent litigation defenses. (Doc. 299 at 8-13). GoDaddy, on the other hand, believes that its § 101 eligibility challenge is properly before the Court due to a long litany of Federal Circuit and Supreme Court cases interpreting § 101 in the context of patent litigation. (Doc. 314 at 7-8) (citing cases). Most notably, GoDaddy points to the recent landmark decision in which the Supreme Court further refined the standards applicable to § 101 eligibility challenges in patent litigation, Alice. (Id.)

a. Legal Background

Section 282(b) of Title 35 of the United States Code provides an exhaustive catalogue of defenses available to an alleged infringer in an action involving the validity or infringement of a patent:

(1) Noninfringement, absence of liability for infringement or unenforceability,
(2) Invalidity of the patent or any claim in suit on any ground specified in part II of this title as a condition for patentability,
(3) Invalidity of the patent or any claim in suit for failure to comply with-
(A) any requirement of section 112, except that the failure to disclose the best mode shall not be a basis on which any claim of a patent may be canceled or held invalid or otherwise unenforceable; or
(B) any requirement of section 251. (4) Any other fact or act made a defense by this title.

§ 282(b). For purposes of this case, the pertinent provision of § 282(b) is the second section, which authorizes defenses based on "invalidity of the patent on or any claim in suit on any ground specified in part II of this title as a condition for patentability."

Part II of Title 35 encompasses §§ 100-212. Of these sections, three are relevant here: §§ 101, 102, and 103. Section 101 is entitled "Inventions patentable" and states as follows: "Whoever 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 therefor, subject to the conditions and requirements of this title." § 101. Section 102 is labeled "Conditions of patentability; novelty" while Section 103 is designated "Conditions for patentability; non-obvious subject matter." See §§ 102, 103.

Fifty years ago, the Supreme Court stated that, The [Patent] Act sets out the conditions of patentability in three sections. An analysis of the structure of these three sections indicates that patentability is dependent upon three explicit conditions: novelty and utility as articulated and defined in § 101 and § 102, and nonobviousness, the new statutory formulation, as set out in § 103.

Graham v. John Deere Co., 383 U.S. 1, 12 (1966). Fifteen years after Graham, the Supreme Court observed that "Section 101 sets forth the subject matter that can be patented, ‘subject to the conditions and requirements of this title.’ The conditions under which a patent may be obtained follow [§ 101]." Diamond v. Diehr, 450 U.S. 175, 190 (1981) (citing S. Rep. No. 1979, 82d Cong., 2d Sess., 5 (1952); U.S. Code Cong. & Admin. News, 1952, p. 2399)). More recently, the Supreme Court explained that,

The § 101 patent-eligibility inquiry is only a threshold test. Even if an invention qualifies as a process, machine, manufacture, or composition of matter, in order to receive the Patent Act’s protection the claimed invention must also satisfy "the conditions and requirements of this title." § 101. Those requirements include that the invention be novel, see § 102, nonobvious, see § 103, and fully and particularly described, see § 112.

Bilski v. Kappos, 561 U.S. 593, 602 (2010). Two years later, the Supreme Court identified a two-part analysis for determining § 101 eligibility in patent litigation. See Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S.Ct. 1289, 1296-97 (2012). Finally, in Alice, the Supreme Court further developed and refined the Mayo two-step inquiry. See 134 S.Ct. at 2354-55.

Similarly, although the Federal Circuit has recognized that only §§ 102 and 103 are textually "denominated" as "conditions of patentability, " MySpace, Inc. v. GraphOn Corp., 672 F.3d 1250, 1259-60 (Fed. Cir. 2012), it has long held that § 282’s defenses "include not only the ‘conditions of patentability’ in §§ 102 and 103, but also those in § 101, " DealerTrack, Inc. v. Huber, 674 F.3d 1315, 1330 n.3 (Fed. Cir. 2012); see Aristocrat Techs. Austl. Pty Ltd. v. Int’l Game Tech., 543 F.3d 657, 661, 661 n.3 (Fed. Cir. 2008) (observing that "it is beyond question that section 101’s other requirement, that the invention be directed to patentable subject matter, is also a condition for patentability" but noting that "sections 102 and 103, " unlike § 101, "are explicitly entitled conditions for patentability"). In other words, the Federal Circuit uniformly holds that § 101 can be raised as a defense in patent infringement litigation. See, e.g., MySpace, 672 F.3d at 1261 (recognizing the benefits of shifting invalidity challenges towards §§ 102 and 103 but acknowledging that "Does this mean that § 101 can never be raised initially in a patent infringement suit? No.").

b. Analysis

Notwithstanding the complexity of RPost’s argument, the Court finds that it has jurisdiction over GoDaddy’s § 101 eligibility challenge. In a slightly different context, the Federal Circuit recently addressed this precise question. In Versata Development Group, Inc. v. SAP America, Inc., the Federal Circuit summarized the patentee’s argument as follows:

[Covered Business Method ("CBM")] post-grant review must be limited to a ground that could be raised under paragraph (2) or (3) of section 282(b). [Patentee] then reasons that § 282(b)(2) authorizes defenses on any ground ‘specified in part II as a condition for patentability, ’ and that the part II reference includes under the headings in the compiled statutes only ‘conditions for patentability, ’ i.e., §§ 102 and 103, but not § 101. Based on the headings in part II of the statutes, [Patentee] draws a distinction between the heading under which § 101 appears, ‘inventions patentable, ’ and ‘conditions of patentability’ under which §§ 102 and 103 are listed.

793 F.3d 1306, 1329-30 (Fed. Cir. 2015). Ultimately, the Federal Circuit held that jurisdiction over the alleged infringer’s § 101 eligibility challenge was proper for the following reasons:

[Patentee] is correct that a strict adherence to the section titles can support an argument that § 101 is not listed as a ‘condition of patentability, ’ but rather has the heading of ‘inventions patentable.’ However, as noted by the [United States Patent and Trademark Office ("USPTO")], both our opinions and the Supreme Court’s opinions over the years have established that § 101 challenges constitute validity and patentability challenges. See also Standard Oil Co. v. Am. Cyanamid Co., 774 F.2d 448, 453 (Fed. Cir. 1985); Aristocrat, 543 F.3d at 661 n.3.
It would require a hyper-technical adherence to form rather than an understanding of substance to arrive at a conclusion that § 101 is not a ground available to test patents under either the [Post Grant Review] or § 18 processes. Section 101 validity challenges today are a major industry, and they appear in case after case in our court and in Supreme Court cases, not to mention now in final written decisions in reviews under the [America Invents Act ("AIA")]. The numerous cases in our court and in the Supreme Court need no citation . . . .
It is often said, whether accurate or not, that Congress is presumed to know the background against which it is legislating. Excluding § 101 considerations from the ameliorative processes in the AIA would be a substantial change in the law as it is understood, and requires something more than some inconsistent section headings in a statute’s codification. We agree with the USPTO and SAP and we so hold that, looking at the entirety of the statutory framework and considering the basic purpose of CBM reviews, the [Patent Trial and Appeal Board ("PTAB")] acted within the scope of its authority delineated by Congress in permitting a § 101 challenge under AIA § 18.

Id. at 1330. Of course, as RPost emphasizes, the Versata court decided a slightly different issue, i.e., the jurisdiction of a court to rule on a § 101 challenge brought under AIA § 18. See Id. To that end, RPost contends that the statutory history of the AIA is different than that of the Patent Act, and thus argues that Congress did not specify § 101 as a "condition of patentability" for purposes of § 282 in infringement litigation. See (Doc. 299 at 8-13).

Similar to the Federal Circuit in Versata, the Court finds that a "hyper-technical adherence" to the section heading of § 101 is not enough to overcome decades of interpreting § 101 as a valid defense in patent infringement litigation. See Lewis v. Hegstrom, 767 F.2d 1371, 1376 (9th Cir. 1985) (noting that courts must not hinge "interpretation of a statute upon a single word or phrase but rather look to the statute as a whole, as well as its object and policies"); see also Pa. Dep’t of Corrs. v. Yeskey, 524 U.S. 206, 212 (1998) ("The title of a statute . . . cannot limit the plain meaning of the text. For interpretive purposes, it is of use only when it sheds light on some ambiguous word or phrase." (quotation omitted)). This is not a case where a mere sprinkling of district courts has incorrectly interpreted an infrequently-invoked statute or where a sharp divide exists in the judicial system. Indeed, the Supreme Court and Federal Circuit unwaveringly consider § 101 to be a viable and robust defense in the context of patent infringement litigation.[4] Whether couched as a "threshold test, " see Bilski, 561 U.S. at 602, or a "condition of patentability, " see Aristocrat, 543 F.3d at 661 n.3, it is firmly decided that the Court has jurisdiction to determine whether the Asserted Patents claim eligible subject matter under § 101, and RPost’s reliance on § 101’s section heading is not enough to create a "substantial change in the law as it is understood, " Versata, 793 F.3d at 1330.

c. Conclusion

For the foregoing reasons, the Court concludes that it has jurisdiction to consider whether the Asserted Patents claim patent-eligible subject matter as required by § 101. Accordingly, the Court now turns to the merits of GoDaddy’s § 101 argument.

2. Legal Standard for § 101 Eligibility

As quoted above, § 101 of the Patent Act defines the subject matter eligible for patent protection as follows: "Whoever 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 therefor, subject to the conditions and requirements of this title." § 101. "Issues of patent-eligible subject matter are questions of law" reserved exclusively to the Court. CyberSource Corp. v. Retail Decisions, Inc., 654 F.3d 1366, 1369 (Fed. Cir. 2011).

The Supreme Court, as noted above, has identified a two-part test for § 101 patent-eligibility in infringement litigation. See Alice, 134 S.Ct. at 2355 (citing Mayo, 132 S.Ct. at 1296-97). First, the Court must determine whether the claims at issue are directed to a patent-ineligible concept, i.e., "Laws of nature, natural phenomena, and abstract ideas." Id. (quoting Ass’n for Molecular Pathology v. Myriad Genetics, Inc., 133 S.Ct. 2107, 2116 (2013)). The term "abstract idea" embodies "the longstanding rule that an idea of itself is not patentable." Id. (citing Gottschalk v. Benson, 409 U.S. 63, 67 (1972)). Not surprisingly, "precision has been elusive in defining an all-purpose boundary between the abstract and the concrete." Internet Patents Corp. v. Active Network, Inc., 790 F.3d 1343, 1345 (Fed. Cir. 2015); see Versata, 793 F.3d at 1331 (noting that the abstract ideas exception "is more of a problem, a problem inherent in the search for a definition of an ‘abstract idea’ that is not itself abstract").[5]

Nonetheless, several guiding principles emerge from Supreme Court and Federal Circuit precedent. For example, if the heart of the patent is a "fundamental economic practice, " "conventional business practices, " or a "method of organizing human activity" that has long been "prevalent in our system of commerce, " then the patent is directed to an abstract idea. Alice, 134 S.Ct. at 2356; see DDR Holdings LLC v., L.P., 773 F.3d 1245, 1256 (Fed. Cir. 2014) (same). Moreover, concepts involving processes humans can perform without the aid of a computer, such as processes that can be done mentally or using pen and paper, are generally directed to abstract ideas. See, e.g., Content Extraction & Transmission LLC v. Wells Fargo Bank, N.A., 776 F.3d 1343, 1347 (Fed. Cir. 2014) (noting that "humans have always performed" the functions of collecting, recognizing, and storing data); CyberSource, 654 F.3d at 1373 ("[A] method that can be performed by human thought alone is merely an abstract idea and is not patent-eligible under § 101."); Gottschalk, 409 U.S. at 67 (observing that the conversion of binary numerals can be done mentally using a mathematical table). Notably, method patents, like the ones at issue in this case, present "special problems in terms of vagueness and suspect validity." Bilski, 561 U.S. at 608.

If the claims at issue are directed to a patent-ineligible concept, the Court must then consider "what else" encompasses the claims to determine whether 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, ’" exists. Alice, 134 S.Ct. at 2360 (quoting Mayo, 132 S.Ct. at 1298). The Supreme Court has recognized that "[a]t some level, all inventions embody, use, reflect, rest upon, or apply laws of nature, natural phenomenon, or abstract ideas." Id. at 2354 (citing Diamond, 450 U.S. at 187). Thus, only if an invention applies a patent-ineligible concept towards a "new and useful end" will it remain eligible for patent protection. Id. (citing Gottschalk, 409 U.S. at 67). To perform this analysis, the Court reviews "the elements of each claim both individually and as an ordered combination to determine whether the additional elements transform the nature of the claim into a patent-eligible application." Id. (internal quotations omitted). Ultimately, the Court must "distinguish between patents that claim the building blocks of human ingenuity and those that integrate the building blocks into something more, thereby transforming them into a patent-eligible invention." Id. (citing Mayo, 132 S.Ct. at 1303).

Notably, "[m]erely requiring a generic computer implementation fails to transform [an] abstract idea into a patent-eligible invention." Id. at 2352; see, e.g., buySAFE, Inc. v. Google, Inc., 765 F.3d 1350, 1354-55 (Fed. Cir. 2014) (noting that Alice "made clear that a claim directed to an abstract idea does not move into § 101 eligibility territory by merely requiring generic computer implementation" (quotation omitted)); Ultramercial, Inc. v. Hulu, LLC, 772 F.3d 709, 717 (Fed. Cir. 2014) ("[A]dding a computer to otherwise conventional steps does not make an invention patent-eligible."). If the claim purports to solve a problem arising ...

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