Carfax, Inc. v. Red Mountain Techs., Case No. 1:14–cv–01590–GBL–IDD.

• Decision Date: 30 March 2015
• Docket Number: Case No. 1:14–cv–01590–GBL–IDD.
• Citation: 119 F.Supp.3d 404
• Parties: CARFAX, INC., Plaintiff, v. RED MOUNTAIN TECHNOLOGIES., et al., Defendants.
• Court: U.S. District Court — Eastern District of Virginia

119 F.Supp.3d 404

CARFAX, INC., Plaintiff,

v.RED MOUNTAIN TECHNOLOGIES., et al., Defendants.

Case No. 1:14–cv–01590–GBL–IDD.

United States District Court, E.D. Virginia, Alexandria Division.

Signed March 30, 2015.

Ahmed Jamal Davis, Fish & Richardson PC, Washington, DC, for Plaintiff.

C. Matthew Haynes, Laurin Howard Mills, Ryan Christopher Day, LeClairRyan PC, Alexandria, VA, for Defendants.

MEMORANDUM OPINION AND ORDER

GERALD BRUCE LEE, District Judge.

THIS MATTER is before the Court on Defendants' Red Mountain Technologies, LLC ("Red Mountain"), Bristol West Holdings, Inc., Bristol West Insurance Company, Inc., and Bristol West Casualty Insurance Company, Inc. (collectively, "Bristol West") Motions to Dismiss. (Docs. 36 and 38.) This case arises from Plaintiff Carfax, Inc. ("Carfax")'s, complaint for patent infringement pursuant to 35 U.S.C. § 271, tortious interference under Virginia law, and a declaratory relief pursuant to the Declaratory Judgment Act, 28 U.S.C. §§ 2201 and 2202. (Compl. ¶¶ 1–3.)

There are four issues before the Court. The first issue is whether the Court should grant Defendants Bristol West and Red Mountain's 12(b)(6) Motions to Dismiss patent infringement claims under 35 U.S.C. § 101, for patent invalidity, where Defendants allege that the patent is directed at the abstract non-patent eligible idea of insurance underwriting and accords no inventive step that would make the abstract idea patent eligible. The second issue is whether the Court should grant Defendant Red Mountain's 12(b)(6) Motion to Dismiss Counts I & II for indirect patent infringement under 35 U.S.C. § 271 where Defendants allege that under 35 U.S.C. § 101 and consistent with the Supreme Court's ruling in Alice, the patents are directed towards non-patentable subject matter. The third issue is whether the Court should grant Defendant Red Mountain's 12(b)(6) Motion to Dismiss Count III alleging tortious interference with business expectancy where Defendant alleges that Carfax failed to sufficiently plead the necessary elements under state law. The fourth issue is whether the Court should grant Defendant Red Mountain's 12(b)(1) Motion to Dismiss Count IV for lack of declaratory judgment jurisdiction where Defendant alleges Carfax does not meet the declaratory judgment requirements of Article III "case or controversy" or "immediacy and reality."

The Court GRANTS Defendants Bristol West and Red Mountain's Motions to Dismiss Counts I & II. The Court GRANTS Defendant Red Mountain's Motion to Dismiss Count III with leave to amend and DENIES Count IV. First, as to Counts I and II, the court GRANTS Defendants Bristol West and Red Mountain's 12(b)(6) Motions to Dismiss Counts I & II because, consistent with Alice, the patent claims at issue are not patentable subject matter and defendant may not infringe upon a patent that this Court finds to be invalid. Second, as to Count III, Plaintiff's complaint fails to allege sufficient factual matter that Carfax is reasonably certain it would have realized its business expectancy with Progressive, absent Defendant Red Mountain's alleged tortious interference, or that Carfax was or will be damaged. Third, as to Count IV, Plaintiff meets the requirements for declaratory judgment jurisdiction because Plaintiff has "case or controversy" standing as a(n) supplier/indemnitor, Progressive is potentially currently performing the alleged patent infringement, and the roll-out of Progressive's system using Carfax's vehicle history data is in March 2015.

I. BACKGROUND

Carfax is a Pennsylvania corporation that provides vehicle history data information to businesses, service providers, and government entities under data service contracts with its customers. (Compl. ¶¶ 4, 15.) On August 28, 2012, the United States Patent and Trademark Office issued United States Patent No. 8,255,243 ("the '243 Patent") and United States Patent No. 8,255,244 ("the '244 Patent") both entitled "System and Method for Insurance Underwriting and Rating." (Compl. ¶¶ 16, 17.) Carfax is the owner by assignment of all right, title, and interest in the '243 Patent and the ' 244 Patent. (Compl. ¶¶ 16, 17.)

Red Mountain and Carfax are competitors in the vehicle history data services market. Red Mountain is an Alabama limited liability company that aggregates, markets, and sells vehicle history data to the automobile insurance industry to evaluate risk and assist in underwriting auto insurance policies. (Compl. ¶¶ 5, 18, 28.) On May 20, 2014, the United States Patent and Trademark Office issued United States Patent No. 8,731,977 ("the '977 Patent"), entitled "System and Method for Analyzing and Using Vehicle Historical Data." Red Mountain is the owner by assignment of the '977 Patent. (Compl. ¶ 22.)

Bristol West is an insurance provider and underwriter that uses Red Mountain's vehicle history data services. (Compl. ¶¶ 19, 20.) Prior to becoming a Red Mountain customer, Bristol West was a customer and consumer of Carfax's vehicle history data services.¹ (Compl. ¶ 21.) Progressive Insurance Inc. ("Progressive"), not party to this suit, is also a consumer of the vehicle history data services provided by Carfax and Red Mountain.² (Compl. ¶ 23.)

Carfax filed its Complaint on November 20, 2014, asserting claims of patent infringement pursuant to 35 U.S.C. § 271, tortious interference under Virginia law, and declaratory relief pursuant to the Declaratory Judgment Act, 28 U.S.C. §§ 2201 and 2202. Defendants' Motions to Dismiss are now properly before the Court.

II. DISCUSSION

A. Standard of Review

a. Motion to Dismiss—12(b)(1) Lack of Subject Matter Jurisdiction

Federal Rule of Civil Procedure 12(b)(1) allows a defendant to move for dismissal when the court lacks jurisdiction over the subject matter of the action. FED.R.CIV.P. 12(b)(1). In considering a 12(b)(1) motion to dismiss, the burden is on the plaintiff to prove that federal subject matter jurisdiction is proper. See United States v. Hays, 515 U.S. 737, 743, 115 S.Ct. 2431, 132 L.Ed.2d 635 (1995) (citing McNutt v. Gen. Motors Acceptance Corp., 298 U.S. 178, 189, 56 S.Ct. 780, 80 L.Ed. 1135 (1936) ); Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir.1982). There are two ways in which a defendant may present a 12(b)(1) motion. First, a defendant may attack the complaint on its face when the complaint "fails to allege facts upon which subject matter jurisdiction may be based." Adams, 697 F.2d at 1219. In such a case, all facts as alleged by the plaintiff are assumed to be true. Id.

Alternatively, a 12(b)(1) motion to dismiss may attack the existence of subject matter jurisdiction over the case apart from the pleadings. See Williams v. United States, 50 F.3d 299, 304 (4th Cir.1995) (citing Mortensen v. First Fed. Sav. & Loan Ass'n, 549 F.2d 884, 891 (3d Cir.1977) ); White v. CMA Constr. Co., 947 F.Supp. 231, 233 (E.D.Va.1996). In such a case, the court may consider evidence outside the pleadings and regard the pleadings as mere evidence to determine the existence of jurisdiction. Velasco v. Gov't of Indonesia, 370 F.3d 392, 398 (4th Cir.2004). As a result, plaintiff's allegations find no presumption of truth, and a dispute of material facts will not preclude the trial court from evaluating the merits of claims underlying jurisdiction. U.S. ex rel. Vuyyuru v. Jadhav, 555 F.3d 337, 347 (4th Cir.2009).

b. Motion to Dismiss—12(b)(6) Failure to State a Claim

Federal Rule of Civil Procedure 12(b)(6) enables a defendant to move for dismissal by challenging the sufficiency of the plaintiff's complaint. Fed.R.Civ.P. 12(b)(6). A Rule 12(b)(6) motion should be granted where a plaintiff has failed to "state a plausible claim for relief" under Rule 8(a). Walters v. McMahen, 684 F.3d 435, 439 (4th Cir.2012) (internal quotation marks omitted) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 679, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ). To be facially plausible, a claim must contain "factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Clatterbuck v. City of Charlottesville, 708 F.3d 549, 554 (4th Cir.2013) (quoting Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 ). In order to survive a Rule 12(b)(6) motion, a complaint must contain sufficient factual allegations, taken as true, "to raise a right to relief above the speculative level" and "nudg[e] [the] claims across the line from conceivable to plausible." Vitol, S.A. v. Primerose Shipping Co., 708 F.3d 527, 543 (4th Cir.2013) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). The requirement for plausibility does not mandate a showing of probability but merely that there is more than a mere possibility of the defendant's unlawful acts. Francis v. Giacomelli, 588 F.3d 186, 193 (4th Cir.2009) (quoting Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 ). As a result, a complaint must contain more than "naked assertions" and "unadorned conclusory allegations" and requires some "factual enhancement" in order to be sufficient. Id. (citing Iqbal, 556 U.S. at 678, 129 S.Ct. 1937, and Twombly, 550 U.S. at 557, 127 S.Ct. 1955 ).

The court's Rule 12(b)(6) review involves separating factual allegations from legal conclusions. Burnette v. Fahey, 687 F.3d 171, 180 (4th Cir.2012). In considering a Rule 12(b)(6) motion, a court must give all reasonable inferences to the plaintiff and accept all factual allegations as true. E.I. du Pont de Nemours & Co. v. Kolon Indus., Inc.,

637 F.3d 435, 440 (4th Cir.2011) (citations omitted). Though a court must accept the truthfulness of all factual allegations, it does not have to accept the veracity of bare legal conclusions. Burnette, 687 F.3d at 180 (citing Aziz v. Alcolac, Inc., 658 F.3d 388, 391 (4th Cir.2011) ). A court should also consider documents beyond the complaint including any "documents incorporated into the complaint by reference." Matrix Capital Mgmt. Fund, LP v. BearingPoint, Inc., 576 F.3d 172, 176 (4th Cir.2009) (quoting Tellabs,...