Int'l Bus. Machs. Corp. v. Zillow Grp., Inc.

• Decision Date: 14 July 2021
• Docket Number: C20-851 TSZ
• Citation: 549 F.Supp.3d 1247
• Parties: INTERNATIONAL BUSINESS MACHINES CORPORATION, Plaintiff, v. ZILLOW GROUP, INC.; and Zillow, Inc., Defendants.
• Court: U.S. District Court — Western District of Washington

549 F.Supp.3d 1247

INTERNATIONAL BUSINESS MACHINES CORPORATION, Plaintiff,

v.ZILLOW GROUP, INC.; and Zillow, Inc., Defendants.

C20-851 TSZ

United States District Court, W.D. Washington, at Seattle.

Signed July 14, 2021

Filed July 15, 2021

Brian Leary, Pro Hac Vice, Brian D. Matty, Pro Hac Vice, John Dao, Pro Hac Vice, John M. Desmarais, Pro Hac Vice, Jun Tong, Pro Hac Vice, Karim Z. Oussayef, Pro Hac Vice, William Findlay, Pro Hac Vice, William Vieth, Pro Hac Vice, Alexandra E. Kochian, Pro Hac Vice, Desmarais LLP, New York, NY, Arthur W. Harrigan, Jr., Bryn Resser Pallesen, Tyler Lawrence Farmer, Harrigan Leyh Farmer & Thomsen LLP, Seattle, WA, for Plaintiff.

Daniel J. Shih, Edgar Guy Sargent, Ian B. Crosby, Katherine Marie Peaslee, Susman Godfrey, Seattle, WA, for Defendants.

ORDER

Thomas S. Zilly, United States District Judge THIS MATTER comes before the Court on a motion for judgment on the pleadings brought pursuant to Federal Rule of Civil Procedure 12(c) by defendants Zillow Group, Inc. and Zillow, Inc. (collectively, "Zillow"), docket no. 162. Having reviewed all papers filed in support of, and in opposition to, the motion, the Court enters the following order.

Discussion

In this case, plaintiff International Business Machines Corporation ("IBM") sues Zillow for infringement of seven patents. The matter has been stayed with respect to three of these patents, pending resolution of inter partes review proceedings before the United States Patent and Trademark Office's Patent Trial and Appeal Board ("PTAB"). See Minute Order at ¶ 1 (docket no. 147). As to the remaining four patents, Zillow now moves for judgment on the pleadings¹ on the ground that the patents are not directed to eligible subject matter as required by Section 101 of the Patent Act.²

In Alice Corp. v. CLS Bank Int'l , 573 U.S. 208, 134 S.Ct. 2347, 189 L.Ed.2d 296 (2014), the Supreme Court reminded us that, pursuant to § 101, "[l]aws of nature, natural phenomena, and abstract ideas are not patentable." Id. at 216, 134 S.Ct. 2347. Zillow contends that IBM has obtained four patents concerning abstract ideas and should not be permitted to rely on those patents in asserting infringement claims. Neither the Supreme Court nor the Federal Circuit has provided a "single, succinct, usable definition or test" for an abstract idea. See Amdocs (Israel) Ltd. v. Openet Telecom, Inc. , 841 F.3d 1288, 1294 (Fed. Cir. 2016). Instead, the decisional method applied in and developed under Alice is to examine earlier cases and evaluate whether the current matter is analogous or distinguishable. Id. ; see Interval Licensing LLC v. AOL, Inc. , 896 F.3d 1335, 1350 (Fed. Cir. 2018) (Plager, C.J., concurring in part and dissenting in part) (observing that "the closest our cases come to a definition is to state examples of what prior cases have contained, and which way they were decided"). Various judges have expressed dissatisfaction with this approach,³ but this Court is bound by Alice and its Federal Circuit progeny, and will thus engage in the anecdotal analysis dictated by such precedent.

A. Alice and Its Progeny

The descent into the rabbit hole began long before Alice ; Alice merely applied an already familiar two-step framework in a new context, namely the third exception to § 101, which renders abstract ideas unpatentable. The two-part analysis was developed in relation to the other two § 101 exceptions concerning natural laws and phenomena. In that realm, the first inquiry evaluated the type of discovery sought to be patented, see Parker v. Flook , 437 U.S. 584, 593, 98 S.Ct. 2522, 57 L.Ed.2d 451 (1978), and then, if a well-known principle was at the invention's core, the second phase inquired whether the patent disclosed an "inventive concept," defined as an element or combination of elements "sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the natural law itself." See Mayo Collaborative Servs. v. Prometheus Labs., Inc. , 566 U.S. 66, 72-73, 132 S.Ct. 1289, 182 L.Ed.2d 321 (2012).

An early example of this approach was set forth in O'Reilly v. Morse , 56 U.S. 62, 15 How. 62, 14 L.Ed. 601 (1853), in which the Supreme Court invalidated the eighth claim in one of Professor Samuel Morse's patents. In Morse , the Supreme Court distinguished Morse's eighth patent claim from an English patent allowed to James Beaumont Neilson for an apparatus that blows heated air into a furnace. Id. at 114-16. Neilson's invention was premised on the principle that throwing hot, rather than cold, air into a furnace increases the intensity of the heat, but Neilson did not claim merely the principle, but rather "a mode of applying it ... by interposing a receptable for heated air between the blowing apparatus and the furnace." Id. at 115. In contrast, in his eighth patent claim, Morse sought the exclusive right "to every improvement where the motive power is the electric or galvanic current, and the result is the marking or printing [of] intelligible characters, signs, or letters at a distance," without disclosing the machinery necessary to transmit the current and convert it into marks like the dots and dashes used in Morse Code. Id. at 112, 117. As a result, the Supreme Court found the eighth claim overly broad. Id. at 62, 120.

With the advent of computers, the ability to distinguish between patents claiming natural laws or phenomena and patents revealing an "inventive concept" premised in part on natural laws or phenomena grew more difficult. In Diamond v. Diehr , 450 U.S. 175, 101 S.Ct. 1048, 67 L.Ed.2d 155 (1981), the initial question of what the inventors claimed to have discovered divided the Supreme Court. According to the inventors, their process for molding synthetic rubber involved automatically feeding mold temperatures into a computer, which repeatedly recalculated the cure time by applying a natural law expressed long ago as an equation by Svante Arrhenius. Id. at 178, 101 S.Ct. 1048. Five justices concluded that the inventors claimed a method for constantly measuring the temperature inside a rubber-molding press, while four justices opined that the proposed patent disclosed a method for using a computer to calculate the time that a mold should remain closed during the curing process. See id. at 178-79, 101 S.Ct. 1048 ; id. at 206-08, 101 S.Ct. 1048 (Stevens, J., dissenting).

In ruling that the manufacturing process was patent eligible under § 101, the majority in Diehr reasoned that the inventors were not seeking to patent the Arrhenius equation, but rather their particular process for curing synthetic rubber, which involved installing rubber in a press, closing the mold, constantly measuring the temperature of the mold, constantly recalculating the cure time based on those temperatures (using a computer and the Arrhenius equation), and opening the press at the proper time. Id. at 187, 101 S.Ct. 1048. The dissent, however, observed that the proposed patent taught nothing about the chemistry, raw materials, equipment, or process variables involved in curing synthetic rubber. Id. at 206, 101 S.Ct. 1048. Moreover, it made no reference to any particular species, or any unusual features, of temperature-reading devices, and it could not be understood as disclosing a new approach to measuring the temperature in a mold. Id. at 207, 101 S.Ct. 1048. Justice Stevens, joined by Justices Brennan, Marshall, and Blackmun, dissented because the claimed invention made "no contribution to the art that is not entirely dependent upon the utilization of a computer in a familiar process." Id. at 220, 101 S.Ct. 1048.

Without overruling or even questioning the majority's holding in Diehr, Alice essentially adopted the dissent's reasoning, albeit in the context of abstract ideas, as opposed to natural laws or phenomena. In the same vein as the Diehr dissent, Alice teaches that stating an abstract idea and then adding words to the effect of "apply it" or "apply it on a computer" does not disclose a patent-eligible invention. 573 U.S. at 223, 134 S.Ct. 2347. Alice ’s seemingly simple § 101 analysis is, however, difficult to perform.

Unlike natural laws or phenomena, which have reasonably clear boundaries and which are external to the mental processes of patentees, abstract ideas are potentially limitless and live within "the interstices of someone's brain." See Interval Licensing , 896 F.3d at 1349-50 (Plager, C.J., concurring in part and dissenting in part); see also Versata Dev. Group, Inc. v. SAP Am., Inc. , 793 F.3d 1306, 1331 (Fed. Cir. 2015) (describing the task of delineating the bounds of the first two § 101 exceptions, relating to natural laws and phenomena, as "not particularly difficult," but acknowledging an inherent problem in the third § 101 exception, namely finding "a definition of an ‘abstract idea’ that is not itself abstract"). The same brain that can form an abstract idea can also visualize (perhaps from such abstract idea) and potentially articulate a "new and useful" process, machine, manufacture, or material composition eligible for patenting under § 101. Determining where on this continuum an inventor has landed is the arduous task required by Alice. See Internet Patents Corp. v. Active Network, Inc. , 790 F.3d 1343, 1347 (Fed. Cir. 2015) (recognizing that finding the boundary between abstraction and patent-eligible subject matter is "not always easy"); see also Versata , 793 F.3d at 1336 (recognizing that the case-by-case analysis performed pursuant to Alice is "hardly a clear guidepost for future cases").

In implementing Alice , the Federal Circuit has reached various results, from declaring an entire patent⁴ or just certain claims⁵ of a patent invalid, to concluding that factual questions⁶ precluded a § 101 determination, to ruling that the challenged patent claims either (i) were not directed to an abstract idea,⁷ or (ii) plausibly revealed an inventive concept.⁸ The...