Intellectual Ventures I LLC v. Erie Indem. Co.

• Decision Date: 07 March 2017
• Docket Number: 2016-1128, 2016-1132
• Parties: INTELLECTUAL VENTURES I LLC, Intellectual Ventures II LLC, Plaintiffs-Appellants v. ERIE INDEMNITY COMPANY, Erie Insurance Exchange, Erie Insurance Property & Casualty Company, Erie Insurance Company, Flagship City Insurance Company, Erie Family Life Insurance Company, Old Republic General Insurance Group, Inc., Old Republic Insurance Company, Old Republic Title Insurance Group, Inc., Old Republic National Title Insurance Company, Defendants-Appellees
• Court: U.S. Court of Appeals — Federal Circuit

850 F.3d 1315

INTELLECTUAL VENTURES I LLC, Intellectual Ventures II LLC, Plaintiffs-Appellants

v.ERIE INDEMNITY COMPANY, Erie Insurance Exchange, Erie Insurance Property & Casualty Company, Erie Insurance Company, Flagship City Insurance Company, Erie Family Life Insurance Company, Old Republic General Insurance Group, Inc., Old Republic Insurance Company, Old Republic Title Insurance Group, Inc., Old Republic National Title Insurance Company, Defendants-Appellees

2016-1128, 2016-1132

United States Court of Appeals, Federal Circuit.

Decided: March 7, 2017

Christian John Hurt , Nix Patterson & Roach LLP, Dallas, TX, argued for plaintiffs-appellants. Also represented by Derek Tod Gilliland , Daingerfield, TX.

Gregory H. Lantier , Wilmer Cutler Pickering Hale and Dorr LLP, Washington, DC, argued for defendants-appellees Erie Indemnity Company, Erie Insurance Exchange, Erie Insurance Property & Casualty Company, Erie Insurance Company, Flagship City Insurance Company, Erie Family Life Insurance Company. Also represented by Richard Anthony Crudo, James Quarles, III ; Monica Grewal , Boston, MA; David Charles Marcus , Los Angeles, CA.

Vernon M. Winters , Sidley Austin LLP, San Francisco, CA, argued for defendants-appellees Old Republic General Insurance Group, Inc., Old Republic Insurance Company, Old Republic Title Insurance Group, Inc., Old Republic National Title Insurance Company. Also represented by Alexander David Baxter ; Erik John Carlson , Los Angeles, CA; Russell E. Cass , Chicago, IL.

Before Prost, Chief Judge, Wallach and Chen, Circuit Judges.

Prost, Chief Judge.

Intellectual Ventures I LLC and Intellectual Ventures II LLC (collectively, "IV") appeal from a final decision of the United States District Court for the Western District of Pennsylvania finding all claims of U.S. Patent No. 6,510,434 ("'434 patent"), U.S. Patent No. 6,519,581 ("'581 patent"), and U.S. Patent No. 6,546,002 ("'002 patent") ineligible under 35 U.S.C. § 101, and dismissing IV's infringement claims of the '581 patent for lack of standing. For the reasons discussed below, we affirm-in-part, vacate-in-part, and remand-in-part.

I

IV sued Erie Indemnity Company, Erie Insurance Exchange; Erie Insurance Property & Casualty Company; Erie Insurance Company; Flagship City Insurance Company; Erie Family Life Insurance Company (collectively, "Erie"); Old Republic General Insurance Group, Inc.; Old Republic Insurance Company; Old Republic Title Insurance Group, Inc.; Old Republic National Title Insurance Company; Highmark, Inc.; Hm Insurance Group, Inc.; Hm Life Insurance Company; Highmark Casualty Insurance Company; and Hm Casualty Insurance Company (collectively, "Appellees"), alleging infringement of the '581 patent, the '434 patent, and the '002 patent (collectively, "patents-in-suit") in the United States District Court for the Western District of Pennsylvania. In response, Appellees moved to dismiss IV's '581 patent infringement claims under Rule 12(b)(1) for lack of standing. Appellees also moved under Rule 12(b)(6), arguing that the claims of the '581, '434, and '002 patents are directed to ineligible subject matter under 35 U.S.C § 101.

After concluding that IV did not own the rights to the '581 patent, the district court granted Appellees' motion under 12(b)(1) for lack of standing. In reaching this conclusion, the district court found that a particular assignor did not assign any rights in or to the then-pending application to the '581 patent, thus breaking a chain in ownership of the patent. J.A. 24. Moreover, the district court dismissed IV's infringement claims under Rule 12(b)(6), finding that all claims of the three patents-in-suit were ineligible under § 101. J.A. 77. In its appeal, IV argues that the district court erred in dismissing its claims under Rule 12(b)(1) and 12(b)(6). We have jurisdiction under 28 U.S.C. § 1295(a)(1).

II

On appeal, IV raises a number of issues regarding the proceedings below: (1) IV appeals the district court's dismissal of its infringement claims of the '581 patent for lack of standing and its determination that the '581 patent is directed to ineligible subject matter under § 101 ; (2) IV appeals the district court's determination that the '434 patent is directed to ineligible subject matter under § 101 ; and (3) IV appeals the district court's determination that the '002 patent is directed to ineligible subject matter under § 101. We take each issue in turn.

A

First, we consider the district court's dismissal of IV's infringement claims under Rule 12(b)(1) as they relate to the '581 patent. Our review of the district court's dismissal for lack of standing under 12(b)(1) is de novo. Abbott Point of Care Inc. v. Epocal, Inc. , 666 F.3d 1299, 1302 (Fed. Cir. 2012). We apply state law to contractual disputes and interpretations of the parties' patent assignment agreements.¹ Semitool, Inc. v. Dynamic Micro Sys. Semiconductor Equip. GmbH , 444 F.3d 1337, 1341 (Fed. Cir. 2006). For this particular dispute, California law applies. See Erie Resp. Br. 6 (noting that the parties executed the agreement underlying this matter in California); Appellants' Br. 18 (recognizing party agreement that California law governs). Because contract interpretation is a legal determination, the parties' contract dispute is reviewed without deference on appeal. Semitool , 444 F.3d at 1341.

The '581 patent issued from a continuation patent application of U.S. Patent No. 6,236,983 ("'983 patent").² After a series of assignments, the rights to the '581 patent (then, a pending application) and the '983 patent were assigned to AllAdvantage.com. J.A. 837–54. This assignment agreement expressly assigned the '983 patent and any continuation of that patent to AllAdvantage.com. The parties do not dispute that this assignment covered the then-pending application to the '581 patent and that AllAdvantage.com owned both that application and its parent (the '983 patent ) upon execution of this agreement. See, e.g. , Erie Resp. Br. 5–6. Less than six months later, AllAdvantage.com assigned various patents (including the '983 patent ) and certain pending applications to Alset. J.A. 805–06 ("the Alset Agreement"). Although this agreement expressly identified the various patents and pending applications subject to assignment—including the '983 patent and several of its pending foreign patent application counterparts—it did not explicitly list the '581 patent's then-pending application. Id .

In addition to its express identification and assignment of particular assets, this agreement included a more general grant clause: "Assignor, does hereby assign unto Assignee, all right, including common law rights, title and interest in the United States of America ... in and to said patents together with the goodwill of the business symbolized by said patents and applications and registrations thereof." J.A. 806. Approximately one year after the execution of this agreement, the U.S. Patent and Trademark Office ("PTO") issued the '581 patent. Several years later, Alset assigned the '581 patent to an IV entity that later recorded that assignment with the PTO. J.A. 862–64. In light of this framework, the district court held that Alset did not convey title to the '581 patent. J.A. 24. We conclude that the Alset Agreement did not include an assignment of rights to the '581 patent and therefore affirm the district court's Rule 12(b)(1) dismissal on that ground.

Under Title 35, only patentees and their successors in title to a patent may bring an action for infringement. 35 U.S.C. §§ 261, 281. IV argues that although the Alset Agreement did not expressly identify the '581 patent's then-pending application, the agreement transferred title because the parties intended for the assignment to cover this asset. To demonstrate intent, IV identifies two portions of the agreement's general grant clause it believes support its position (reproduced below with emphasis added to the two areas of IV's focus): "Assignor, does hereby assign unto Assignee, all right, including common law rights, title and interest in the United States of America ... in and to said patents together with the goodwill of the business symbolized by said patents and applications and registrations thereof." J.A. 806. Specifically, IV argues that the "in and to said patents" and "goodwill of the business symbolized by said patents" portions of this clause each—individually and independently—support its position. We disagree.

Under California law, "[a] contract must be so interpreted as to give effect to the mutual intention of the parties as it existed at the time of contracting, so far as the same is ascertainable and lawful." Cal. Civ. Code § 1636 (West 2016). "The language of a contract is to govern its interpretation, if the language is clear and explicit, and does not involve an absurdity." Id. § 1638. When (as here) "a contract is reduced to writing, the intention of the parties is to be ascertained from the writing alone, if possible." Id. § 1639. A court also may consider evidence extrinsic to a contract under certain circumstances. See, e.g. , Wolf v. Superior Court , 114 Cal.App.4th 1343, 8 Cal.Rptr.3d 649, 656 (2004) (citing the California Supreme Court).

At the outset, first we must determine whether and to what extent the parties' extrinsic evidence affects the meaning of these two portions of this clause. "Where the meaning of the words used in a contract is disputed, the ... court must provisionally receive any proffered extrinsic evidence which is relevant to show whether the contract is reasonably susceptible of a particular meaning."

Id. at 655 (citation and internal quotation marks omitted) (citing the California Supreme Court). Thus, contract interpretation under California law is a two-step process. "First the court provisionally receives (without actually admitting) all credible evidence concerning the parties' intentions to determine ‘ambiguity,’ i.e., whether the language is ‘reasonably...