2019-06-20 Motion to Transferpdf
2019-06-20 Motion to Transferpdf
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  1. 1 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS MARSHALL DIVISION QUEST NETTECH CORPORATION, Plaintiff, v. APPLE INC., Defendant. § § § § § § § § §C.A. No. 2:19-cv-00118-JRG JURY TRIAL DEMANDED APPLE INC.’S MOTION TO DISMISS UNDER FEDERAL RULE OF CIVIL PROCEDURE 12(b)(6) Case 2:19-cv-00118-JRG Document 19 Filed 06/20/19 Page 1 of 33 PageID #: 100
  2. ii TABLE OF CONTENTS INTRODUCTION .......................................................................................................................... 1ISSUES TO BE DECIDED ............................................................................................................ 2LEGAL STANDARD ..................................................................................................................... 2ANALYSIS ..................................................................................................................................... 2I.THE ’137 PATENT IS INVALID UNDER § 101 .................................................................. 2A.Background of the ’137 Patent ..................................................................................... 31.The ’137 Patent Specification ........................................................................... 32.The ’137 Patent Claims ..................................................................................... 5B.Patent Eligibility Under § 101 ...................................................................................... 7C.Alice Step 1: The Claims are Directed to the Patent-Ineligible Concept of Storing Financial Transaction Records in a Portable and Organized Manner ........................... 91.The Claims Preempt Electronic Storage of Financial Transaction Records in a Portable and Organized Manner ..................................................................... 122.The Claims Are Not Directed to an Improvement in Computer Functionality......................................................................................................................... 14D.Alice Step 2: No Claim Elements Transform the Claims Into Patent-Eligible Subject Matter .......................................................................................................................... 151.The Independent Claims Recite Only “Well-Understood, Routine, [or] Conventional” Computer Components and are Not Transformative .............. 162.Many Dependent Claims Only Add Generic Computer Structure ................. 193.All Other Dependent Claims Merely Adapt the Abstract Idea to a Particular Technological Environment ............................................................................ 21II.NETTECH’S CLAIMS FOR INDIRECT AND WILLFUL INFRINGEMENT SHOULD BE DISMISSED .................................................................................................................... 22A.NetTech’s Indirect and Willful Infringement Allegations .......................................... 22B.NetTech Does Not Allege that Apple Knew of the ’137 Patent Before It Expired .... 23C.NetTech Does Not Adequately Allege Specific Intent for Indirect Infringement ...... 25CONCLUSION ............................................................................................................................. 26Case 2:19-cv-00118-JRG Document 19 Filed 06/20/19 Page 2 of 33 PageID #: 101
  3. iii TABLE OF AUTHORITIES Page(s) Cases Aatrix Software, Inc. v. Green Shades Software, Inc., 882 F.3d 1121 (Fed. Cir. 2018)..................................................................................................9 Affinity Labs of Texas v. Amazon.com Inc., 838 F.3d 1266 (Fed. Cir. 2016)................................................................................................13 Alice Corp. Pty. Ltd. v. CLS Bank Intl., 134 S.Ct. 2347 (2014) ...................................................................................................... passimAm. Vehicular Scis. LLC v. Mercedes-Benz U.S. Int’l, Inc., No. 6:13cv307 MHS-JDL, 2014 WL 10291478 (E.D. Tex. Feb. 7, 2014) .........................2, 26 Apple, Inc. v. Ameranth, Inc., 842 F.3d 1229 (Fed. Cir. 2016)................................................................................................12 Ashcroft v. Iqbal, 556 U.S. 662 (2009) ...................................................................................................................2 Automated Tracking Sols., LLC v. Coca-Cola Co., 723 F. App’x 989 (Fed. Cir. 2018) ............................................................................................9 Babbage Holdings, LLC v. Activision Blizzard, Inc., No. 2:13-cv-750, 2014 WL 2115616 (E.D. Tex. May 14, 2014) ......................................24, 25 Bilski v. Kappos, 561 U.S. 593 (2010) .......................................................................................8, 21 buySAFE, Inc. v. Google, Inc., 765 F.3d 1350 (Fed. Cir. 2014)........................................................................................ passimClinicomp Int’l, Inc. v. Cerner Corp., No. 17cv2479-GPC(BLM), 2018 WL 2229364 (S.D. Cal. May 16, 2018).......................24, 25 Coinstar, Inc. v. Coinbank Automated Sys., Inc., 998 F. Supp. 1109 (N.D. Cal. 1998) ........................................................................................17 Content Extraction & Transmission LLC v. Wells Fargo Bank, Nat’l Ass’n, 776 F.3d 1343 (Fed. Cir. 2014)........................................................................................ passimCore Wireless Licensing S.A.R.L. v. Apple Inc., No. 6:14-cv-752-JRG-JDL, 2015 WL 4910427 (E.D. Tex. Aug. 14, 2015) .....................25, 26 DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245 (Fed. Cir. 2014)................................................................................................14 Case 2:19-cv-00118-JRG Document 19 Filed 06/20/19 Page 3 of 33 PageID #: 102
  4. iv Digitech Image Techs., LLC v. Elecs. For Imaging, Inc., 758 F.3d 1344 (Fed. Cir. 2014)..................................................................................................8 Electric Power Grp., LLC v. Alstom S.A., 830 F.3d 1350 (Fed. Cir. 2016)......................................................................................9, 10, 13 Enfish, LLC v. Microsoft Corp., 822 F.3d 1327 (Fed. Cir. 2016)................................................................................................14 Global-Tech Appliances, Inc. v. SEB S.A., 563 U.S. 754 (2011) .................................................................................................................23 Halo Elecs., Inc. v. Pulse Elecs., Inc., 136 S. Ct. 1923 (2016) .............................................................................................................23 Intellectual Ventures I LLC v. Capital One Bank (USA), 792 F.3d 1363 (Fed. Cir. 2015)..................................................................................................9 Intellectual Ventures II LLC v. Sprint Spectrum, L.P., No. 2:17-cv-00662-JRG-RSP, 2019 WL 1987172 (E.D. Tex. Apr. 4, 2019) ..........................23 Internet Patents Corp. v. Active Network, Inc., 790 F.3d 1343 (Fed. Cir. 2015)..................................................................................................9 Interval Licensing LLC v. AOL, Inc., 896 F.3d 1335 (Fed Cir. 2018).............................................................................................9, 13 Laguna Hermosa Corp. v. United States, 671 F.3d 1284 (Fed. Cir. 2012)..................................................................................................2 Mass. Inst. of Tech. v. Abacus Software, Inc., No. 5:01-cv-344, 2004 WL 5268128 (E.D. Tex. Aug. 24, 2004) ......................................24, 25 Maxon, LLC v. Funai Corp., Inc., 726 F. App’x 797 (Fed. Cir. 2018) ............................................................................................9 Mortg. Grader, Inc. v. First Choice Loan Servs. Inc., 811 F.3d 1314 (Fed. Cir. 2016)................................................................................................15 NobelBiz, Inc. v. Insidesales.com, Inc., No. 6:13-cv-360-MHS, 2014 WL 12378804 (E.D. Tex. Oct. 14, 2014) ...........................23, 26 O’Connor v. Uber Techs., Inc., 58 F. Supp. 3d 989 (N.D. Cal. 2014) .......................................................................................17 OIP Techs., Inc. v. Amazon.com, Inc., 788 F.3d 1359 (Fed. Cir. 2015)........................................................................................ passimCase 2:19-cv-00118-JRG Document 19 Filed 06/20/19 Page 4 of 33 PageID #: 103
  5. v Parker v. Flook, 437 U.S. 584 (1978) .................................................................................................................21 Preservation Wellness Technologies LLC v. Allscripts Healthcare Solutions, No. 2:15-CV-1559-WCB, 2016 WL 2742379 (E.D. Tex. May 10, 2016) ...................... passimPure Data Sys., LLC v. Ubisoft, Inc., 329 F. Supp. 3d 1054 (N.D. Cal. 2018) .............................................................................24, 25 SAP Am. Inc. v. Investpic, LLC, 898 F.3d 1161 (Fed. Cir. 2018)..................................................................................................9 Smart Sys. Innovations, LLC v. Chicago Transit Auth., 873 F.3d 1364 (Fed. Cir. 2017)........................................................................................ passimStandard Havens Prods., Inc. v. Gencor Indus., Inc., 897 F.2d 511 (Fed. Cir. 1990)..................................................................................................17 Superior Indus., LLC v. Thor Global Enters. Ltd., 700 F.3d 1287 (Fed. Cir. 2012)................................................................................................26 In re TLI Communs. LLC Patent Litig., 823 F.3d 607 (Fed. Cir. 2016).......................................................................................... passimTriDim Innovations LLC v. Amazon.com, Inc., 207 F.Supp.3d 1073 (N.D. Cal. 2016) .....................................................................................13 Ultramercial, Inc. v. Hulu, LLC, 772 F.3d 709 (Fed. Cir. 2014)..................................................................................................19 Voter Verified, Inc. v. Election Sys. & Software LLC, 887 F.3d 1376 (Fed. Cir. 2018)..................................................................................................9 Statutes 35 U.S.C. § 101 ...................................................................................................................... passim35 U.S.C. § 154(a)(2) ...............................................................................................................22, 25 Other Authorities Fed. R. Evid. 201 ...........................................................................................................................17 Fed. R. Civ. Prod. 12..............................................................................................................1, 2, 17 Case 2:19-cv-00118-JRG Document 19 Filed 06/20/19 Page 5 of 33 PageID #: 104
  6. 1 INTRODUCTION Defendant Apple Inc. (“Apple”) moves to dismiss Plaintiff Quest NetTech Corp.’s (“NetTech”) First Amended Complaint (“FAC,” ECF No. 5) for failure to state a claim under Rule 12(b)(6). NetTech’s FAC should be dismissed in its entirety because the sole asserted patent (U.S. Reissue Patent No. RE 38,137) does not claim patent eligible subject matter under 35 U.S.C. § 101. Individuals often have multiple financial accounts that they wish to track. But because the account records are not “convenient to carry” and may be associated with different institutions, “labor [is] required to track data” related to account transactions. ’137 Pat. 1:39-58. The NetTech concept is storing account data for two or more accounts on a single “multiple account electronic credit card” that a person can carry. See, e.g., id. claim 10. This is nothing more than the common sense, organizational decision to store an individual’s transaction data on the same instrument used to conduct the transactions. In other words, the ’137 Patent, at its core, is about the simple, abstract idea of storing financial transaction records in a portable and organized manner. This is no different than the age-old ideas of carrying a combined ledger in a briefcase and traveling with two or more check registers in a purse. The purported innovation is simply the use of conventional components that have been known since the inception of the art to perform this abstract idea—essentially “store this information electronically.” In the alternative, Apple moves to dismiss NetTech’s claims for indirect and willful infringement.NetTech’scomplaintcontainsnoallegationsthatAppleknewoftheʼ137Patentbefore it expired. Because knowledge of the patent is an essential element of inducement, contributory infringement, and willfulness, NetTech cannot state a claim for indirect or willful infringement. Case 2:19-cv-00118-JRG Document 19 Filed 06/20/19 Page 6 of 33 PageID #: 105
  7. 2 ISSUES TO BE DECIDED 1)Whether the claims of the ’137 patent are invalid under 35 U.S.C. § 101. 2)Whether NetTech has adequately plead indirect and willful infringement where there is no allegation that Apple knew of the asserted patent before it expired. LEGAL STANDARD Under Rule 12(b)(6), a cause of action should be dismissed “when the facts asserted do not give rise to a legal remedy, or do not elevate a claim for relief to the realm of plausibility.” Laguna Hermosa Corp. v. United States, 671 F.3d 1284, 1288 (Fed. Cir. 2012) (citations omitted). To demonstrate plausibility, a plaintiff must go beyond pleading facts that, when assumed to be true, are “merely consistent with a defendant’s liability” and, instead, must plead facts sufficient to permit the “reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks and citations omitted). A complaint is insufficient to state a claim if it “tenders naked assertion[s] devoid of further factual enhancement.” Id. (internal quotation marks and citations omitted); accord Am. Vehicular Scis. LLC v. Mercedes-Benz U.S. Int’l, Inc., No. 6:13cv307 MHS-JDL, 2014 WL 10291478, at *4 (E.D. Tex. Feb. 7, 2014). ANALYSIS I.THE ’137 PATENT IS INVALID UNDER § 101 All of the claims in the ’137 patent are invalid under § 101. Case 2:19-cv-00118-JRG Document 19 Filed 06/20/19 Page 7 of 33 PageID #: 106
  8. 3 A.Background of the ’137 Patent 1.The ’137 Patent Specification The ’137 patent describes a “smart universal financial data card which allows its holder to keep track of all his financial data and financial transaction data in a highly portable package.” ’137 patent at 2:5-8. But as the specification shows, this “card” was nothing more than the use of basic, conventional hardware and concepts, which were well-known in the field. Credit cards were nothing new in 1995 when the priority application for the ’137 patent was filed. The specification acknowledges that “familiar” credit cards like those from Visa and MasterCard were well-known—their only alleged flaw being that the “amount and types of data” they store was “limited.” Id. at 1:17-23. The ’137 patent also acknowledges that the prior art contained many financial data storage systems, including the ubiquitous Quicken accounting software from Intuit Corporation for “managing data related to financial accounts and transactions.” Id. at 1:39-44. The drawbacks the patent identifies for software like Quicken is that it is not “convenient to carry,” its function “is purely bookkeeping,” and “users would have to manually enter the transaction data.” Id., 1:45-55. Because of this “additional labor required to track data related to transactions, users are often discouraged from consistently using these products to manage their financial data.” Id. at 1:44-57. What the specification alleges as the invention, then, is simply the storage of the information that is commonly kept in software like Quicken on a small electronic device the size of a Visa card. Id. at 1:59-67; 6:67-7:4. The preferred embodiment of the alleged invention of the ’137 patent is the “universal financial data card” (“UFDC”) depicted in Fig. 2: Case 2:19-cv-00118-JRG Document 19 Filed 06/20/19 Page 8 of 33 PageID #: 107
  9. 4 The ’137 patent focuses on the information that the UFDC stores, rather than what the UFDC is. The stated hallmark of the UDFC is its ability to “store, in an organized manner, financial transaction records related to multiple accounts from different financial institutions.” ’137 patent at 5:15-18. This “advantageously reduces the number of cards a user has to carry” and “represents an improvement over the current situation in which the user has to carry one card for each financial account or each financial institution.” Id. at 5:17-22. In contrast to prior art cards, which made “the job of reconciling account balances or financial planning difficult,” the UFDC is said to reduce the “transactional costs (in terms of both time and money)” needed to obtain account information by querying a central data system. Id. at 5:37-49. The UFDC itself is comprised of nothing more than a collection of conventional computer components. All of the components recited in the ’137 patent claims are depicted as generic boxes in Fig. 2: a standard “processor” (302), “memory circuit” (300), “wireless interface” (318), and “frequency select circuit” (324). The specification makes clear that even the named inventor Case 2:19-cv-00118-JRG Document 19 Filed 06/20/19 Page 9 of 33 PageID #: 108
  10. 5 understood them all to be so well-known by persons of ordinary skill in the art that they need not be described in the patent. For example, there is no new processor described—just reference to a standard “micro-controller,” such as one from Intel Corp. Id. at 7:45-48. The same is true of the memory circuit (id. at 7:4-14, referring to standard Intel flash memory) and wireless interface (id. at 7:64-67, referring to standard RF Monolithics, Inc. transmitter and receiver). The frequency select circuit (324) is also simply a conventional component, as it is described in the specification functionally, rather than structurally, and is not described as an inventive component. Id. at 8:1-21. This is confirmed by the inventor’s repeated admission during the prosecution of the ’137 patent that the “specific details of the interface for communicating with a card reader, including the frequency select circuit,” are “not necessary to distinguish [original] claim 1 over the prior art,” and so the frequency select circuit is not an inventive aspect. See Ex. A, 1/8/2001 Declaration at 4; Ex. B, 11/7/2002 Further Supplemental Declaration at 2. Indeed, the removal of the “frequency select circuit” from certain claims was one of the applicant’s bases for filing a reissue application. Id. 2.The ’137 Patent Claims All of the ’137 patent claims are directed to the embodiment shown in Fig. 2, with the UFDC retitled as a “multiple account electronic credit card.” See, e.g., ’137 patent at 5:1-3. The patent contains 35 claims, of which claims 1, 3, 10, and 33 are independent. Claim 1 is representative: 1. A multiple account electronic credit card comprising: a processor for controlling operation of the card; a memory circuit for storing financial transaction records of multiple accounts; a wireless interface for communication with a card reader; a frequency select circuit for communicating with said card reader using any one of a number of preselected frequencies; Case 2:19-cv-00118-JRG Document 19 Filed 06/20/19 Page 10 of 33 PageID #: 109
  11. 6 said memory circuit also storing holder information and secondary account information; wherein said holder information comprises name, address, telephone number and personal identification number and wherein said secondary account information comprises institution name, account number, and account password; wherein said memory circuit is of sufficient size to store financial transaction records related to a predetermined time period and wherein the data in the memory circuit may be transferred to a new multiple account electronic credit card at the end of said predetermined time period. ’137 patent at 20:22-44. As explained in the previous section, the hardware components recited in claim 1—i.e., a “processor,” “a “memory circuit,” a “wireless interface,” and a “frequency select circuit”—are generic computer components that perform generic computer functions that were well-understood, routine, and conventional. None of these components perform actions beyond what they were ordinarily expected to do. For example, the “memory circuit” of claim 1 is merely for “storing” information. The remaining claim limitations serve only to define the particular kinds of information that is stored in memory, list basic size and time conditions for their storage, and acknowledge that the records may be transferred. These are all simply basic, conventional functions of memory—i.e., to store information in a manner that can be retrieved. The remaining independent claims, all of which are also apparatus claims, similarly recite only basic, conventional computer components. For example, independent claim 3 recites that the information is stored on “storage means,” that the information is transferred to a new card by “transfer means,” and that the transfer occurs at the “time of the loss or destruction” of the device. The “storage means” corresponds to the memory circuit (300), discussed previously. The “transfer means” presumably corresponds to the wireless interface (318), which is the only method of transfer discussed in the specification. Accordingly, the structures in the specification that Case 2:19-cv-00118-JRG Document 19 Filed 06/20/19 Page 11 of 33 PageID #: 110
  12. 7 correspond to both means-plus-function limitations are conventional computing components that do not transform claim 1 beyond an abstract idea. Independent claims 10 and 33 are even broader than claim 1 in two ways: (1) they do not recite the “frequency select circuit”; and (2) the stored “holder information” can be any kind of personal information and the “secondary account information” can be any kind of card issuer information. The dependent claims of the ’137 patent all merely recite additional generic computer components (e.g., claim 12 adds a “non-wireless interface” and claim 13 repeats the frequency select circuit already recited in claim 1), or performing the same “idea” in particular contexts (e.g., claim 2 stores the records for “at least one calendar year,” claim 4 transmits the records “in the form of voice data,” and claim 27 adds that the records are stored in “a plurality of data fields”). As both the ’137 patent and its parent ’419 patent were prosecuted nearly two decades ago, long before Alice, neither was considered by the PTO under the current § 101 standard and neither prosecution history discusses § 101 at all. B.Patent Eligibility Under § 101 Title 35 U.S.C. § 101 defines the subject matter eligible for patent protection: “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.” In 2014, the Supreme Court explained a two-step framework for evaluating whether a patent claim is unpatentable under § 101 because it is directed to a law of nature, natural phenomena, or abstract idea. Alice Corp. Pty. Ltd. v. CLS Bank Intl., 134 S.Ct. 2347, 2355 (2014). First, the court determines “whether the claims at issue are directed to a patent-Case 2:19-cv-00118-JRG Document 19 Filed 06/20/19 Page 12 of 33 PageID #: 111
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