GeoComply Sols. v. Xpoint Servs.

• Decision Date: 10 February 2023
• Docket Number: Civil Action 22-1273-WCB
• Parties: GEOCOMPLY SOLUTIONS INC., Plaintiff, v. XPOINT SERVICES LLC, Defendant.
• Court: U.S. District Court — District of Delaware

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GEOCOMPLY SOLUTIONS INC., Plaintiff, v. XPOINT SERVICES LLC, Defendant.

Civil Action No. 22-1273-WCB

United States District Court, D. Delaware

February 10, 2023

MEMORANDUM OPINION AND ORDER

WILLIAM C. BRYSON UNITED STATES CIRCUIT JUDGE

In this patent infringement action, defendant Xpoint Services LLC (“Xpoint”) has moved to dismiss the complaint filed by plaintiff GeoComply Solutions Inc. (“GeoComply”) under Federal Rule of Civil Procedure 12(b)(6) on two grounds. Dkt. No. 16. First, Xpoint contends that the claims asserted against it are directed to subject matter rendered patent-ineligible under 35 U.S.C §101. Second, Xpoint contends that GeoComply's complaint does not sufficiently allege infringement of any of the asserted claims. For the reasons set forth below, the motion to dismiss is GRANTED with respect to the portion of Xpoint's motion based on 35 U.S.C. § 101 and GRANTED IN PART with respect to the portion of Xpoint's motion based on infringement.

I. Background

GeoComply has developed software that is used by online gaming providers to determine the location of persons who attempt to use the providers' software applications. Many online gaming services, including sports betting services, are legal in some jurisdictions and illegal in others. Some users who are located in a jurisdiction in which activities such as sports betting are prohibited may attempt to “spoof” or otherwise mask their locations to make it appear that they are in a jurisdiction in which such activities are legal. GeoComply's products purport to enable online gaming providers to determine a user's actual location and grant access only to those users who are located in a jurisdiction in which the provider's services are legal.

GeoComply owns U.S. Patent No. 9,413,805 (“the '805 patent”). The patent is generally directed to methods for determining the location of the device a user employs when interacting with an online gaming service. GeoComply has asserted the '805 patent against Xpoint in this action.

Xpoint, a direct competitor of GeoComply, offers similar geolocation services for online gaming providers. In this action, GeoComply alleges that Xpoint provides geolocation services to a third party, PlayStar N.J. LLC, which operates the “PlayStar online casino.” Dkt. No. 1 ¶¶ 1519. GeoComply alleges that Xpoint's provision of geolocation services to PlayStar infringes GeoComply's rights in the '805 patent. Id. ¶ 20.

Claim 1 of the '805 patent recites as follows:

1. A method for determining a geo-location, the method comprising:

transmitting a request to a first server by a first device;

collecting geolocation data associated with the first device in response to the request, the geolocation data collected by a module stored in memory and executed by a processor on the first device, the first device in communication with the first server which provides a service over a network;

identifying that one or more selected programs are present at the first device;

transmitting the geolocation data and programs [sic] and a list of the present selected programs to a second server;

receiving a geolocation message from the second server, the geolocation message generated at least in part from the geolocation data and a list of the present selected programs; and

providing the received geolocation message to the first server.

In simpler terms, the steps of claim 1 can be summarized as follows: (1) a request is sent from a user's device to a first server; (2) in response to the request, geolocation data associated with the user's device is collected by a program stored on the user's device; (3) a determination is made whether certain programs are stored on the user's device; (4) geolocation data for the user's device and a list of the programs of interest that are stored on the user's device are sent to a second server;^[1] (5) a geolocation message, based on the geolocation data and the list of stored programs, is generated by the second server; and (6) the geolocation message is then sent to the first server.

Of the remaining claims of the '805 patent, dependent claims 2 and 3 of the '805 patent specify environments in which the method of claim 1 is configured to perform. In particular, dependent claim 2, although clumsily worded, appears to limit claim 1 by reciting that the user's device is a mobile device and the geolocation data is collected by an application installed on the mobile device. Dependent claim 3, although equally clumsily worded, appears to limit claim 1 by reciting that the geolocation data is collected by a network browser plug-in installed on the user's device. Dependent claims 4 through 6 limit claim 1 by providing that the collection of data includes “remote devices in the proximity of” the user's device (claim 4), “device data from the network at the location of” the user's device (claim 5), and “building information from within the building of” the user's device (claim 6).^[2] Dependent claims 7 and 8 limit claim 1 by providing that the programs present on the user's device include a “proxy application” (claim 7) and a “screen sharing program” (claim 8). Dependent claim 9 limits the geolocation message recited in claim 1 by requiring it to be “in the form of a binary message indicating a pass or fail of” the user's device regarding a geolocation requirement. Independent claim 10 recites a “non-transitory computer readable storage medium” having a program that is configured to perform steps that track the steps recited in claim 1.

The feature of claim 1 that is the principal focus of GeoComply's briefing is the third method step: identifying whether certain programs are present on the device. With respect to that step, the specification of the '805 patent discloses that certain “undesirable programs” may be present on a user's device and that those programs may be considered in the verification of a user's location. '805 patent, col. 1, ll. 34-38. Two examples of such programs are “screen sharing program[s]” and “proxy program[s],” which the '805 patent discloses can be detected using a “[s]creen sharing protection module” and a “[p]roxy detection module,” respectively. Id. at col. 3, ll. 42-53. Because those programs can be used to make it appear that the user's device is located in a place other than its true location, the '805 patent specification explains that a device's location data may be less reliable if the device has one or more of those programs installed. If one of those programs is detected on a user's device, the specification adds, the program can be blocked or its presence can be considered when verifying the user's location. See id. at col. 2, ll. 1-10, col. 3, ll. 42-67, col. 6, ll. 58-64.

Shortly after GeoComply filed its complaint, Xpoint filed its motion to dismiss, contending that the asserted claims of the '805 patent are directed to patent-ineligible subject matter and that GeoComply's complaint has failed to adequately plead infringement under its two theories of divided direct infringement and contributory infringement. I held oral argument on the motion on January 31, 2023.

II. Legal Standard

Under Federal Rule of Civil Procedure 12(b)(6), a complaint should be dismissed if it “fail[s] to state a claim upon which relief can be granted.” The Third Circuit has instructed district courts to conduct a “two-part analysis” in evaluating a motion to dismiss for failure to state a claim. Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009). First, the district court must separate the factual and legal elements of the claims. Id. That is, the court “must accept all of the complaint's well-pleaded facts as true, but may disregard any legal conclusions” set forth in the complaint. Id. at 210-11. Second, the court “must then determine whether the facts alleged in the complaint are sufficient to show that the plaintiff has a ‘plausible claim for relief.'” Id. at 211 (quoting Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009)).

Patent eligibility under 35 U.S.C. § 101 is a question of law, based on underlying facts. See Aatrix Software, Inc. v. Green Shades Software, Inc., 882 F.3d 1121, 1125 (Fed. Cir. 2018); Berkheimer v. HP Inc., 881 F.3d 1360, 1364-65 (Fed. Cir. 2018). Disputes over eligibility can be, and frequently are, resolved on a Rule 12(b)(6) or Rule 12(c) motion “where the undisputed facts, considered under the standards required by that Rule, require a holding of ineligibility under the substantive standards of law.” SAP Am., Inc. v. InvestPic, LLC, 898 F.3d 1161, 1166 (Fed. Cir. 2018) (citing cases).

III. Patent Eligibility Under 35 U.S.C § 101

A. Principles

Section 101 of the Patent Act defines patent-eligible subject matter. It states: “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 therefore, subject to the conditions and requirements of this title.” 35 U.S.C. § 101. The Supreme Court has interpreted that provision to carve out exceptions to that broad characterization of patentable subject matter for “[l]aws of nature, natural phenomena, and abstract ideas.” Alice Corp. Pty. v. CLS Bank Int'l, 573 U.S. 208, 216 (2014) (quoting Ass'n for Molecular Pathology v. Myriad Genetics, Inc., 569 U.S. 576, 589 (2013)).

The framework for determining whether a patent is directed to an unpatentable abstract idea is well settled. The Supreme Court's decision in Alice established the now-familiar two-step test for patentability in that context. The first step entails determining whether the claim at issue is directed to an “abstract idea.” The second step entails determining whether the claim contains an “inventive concept” that removes the claimed subject matter from the...