Intellectual Ventures I LLC v. Capital One Fin. Corp., Case No. PWG–14–111.

• Citation: 127 F.Supp.3d 506
• Decision Date: 02 September 2015
• Docket Number: Case No. PWG–14–111.
• Parties: INTELLECTUAL VENTURES I LLC, et al., Plaintiffs, v. CAPITAL ONE FINANCIAL CORP., et al., Defendants.
• Court: U.S. District Court — District of Maryland

127 F.Supp.3d 506

INTELLECTUAL VENTURES I LLC, et al., Plaintiffs,

v.CAPITAL ONE FINANCIAL CORP., et al., Defendants.

Case No. PWG–14–111.

United States District Court, D. Maryland, Southern Division.

Signed Sept. 2, 2015.

Michael Edward McCabe, Jr., Bryan D. Bolton, Funk and Bolton PA, Baltimore, MD, Clayton Walter Thompson, II, David L. Alberti, Ian Neville Feinberg, Jeremiah Armstrong, Marc Belloli, Margaret Elizabeth Day, Nickolas Bohl, Sal Lim, Vinay Malik, Yakov Zolotorev, Feinberg Day Alverti and Thompson LLP, Menlo Park, CA, Daniel J. Weinberg, Rachel B. Kinney, Robert E. Freitas, Freitas Angell and Weinberg LLP, Redwood Shores, CA, David Taylor Rudolph, Eric B. Fastiff, Lieff Cabraser Heimann and Bernstein LLP, San Francisco, CA, for Plaintiffs.

Mary Catherine Zinsner, Lesley Whitcomb Fierst, Syed Mohsin Reza, Troutman Sanders LLP, Tysons Corner, VA, Matthew Moore, Adam M. Greenfield, Elizabeth V. Johnson, Gabriel K. Bell, Latham and Watkins LLP, Washington, DC, Andrew Jay Graham, James P. Ulwick, Kramon and Graham PA, Baltimore, MD, Brent P. Ray, David W. Higer, Joel Merkin, Kenneth R. Adamo, Kristina Hendricks, Megan M. New, Ryan M. Hubbard, Vishesh Narayen, Kirkland and Ellis LLP, Kristopher Davis, Latham and Watkins, Chicago, IL, Christopher St. John Yates, Latham & Watkins LLP, San Francisco, CA, Clement Naples, Latham and Watkins LLP, New York, NY, Ethan Y. Park, Jeffrey G. Homrig, Katherine M. Schon, Michelle Patricia Woodhouse, Patricia Young, Latham and Watkins LLP, Menlo Park, CA, Megan C. Rahman, Robert A. Angle, Christopher J. Forstner, Dabney J. Carr, IV, Troutman Sanders LLP, Richmond, VA, Paul E. McGowan, Troutman Sanders LLP, Atlanta, GA, for Defendants.

MEMORANDUM OPINION

PAUL W. GRIMM, District Judge.

This patent litigation concerns four patents¹ that Plaintiffs/Counter–Defendants Intellectual Ventures I LLC and Intellectual Ventures II LLC (together, "Intellectual Ventures companies" or "IV") own and claim Defendants/Counterclaimants Capital One Financial Corp., Capital One Bank (USA), N.A., and Capital One, N.A. (collectively, "Capital One companies"), are infringing. The Capital One companies admit use but insist that the patents are invalid. Currently pending are the parties' cross-motions for summary judgment on patent invalidity under 35 U.S.C. § 101, and the Special Master's Reports and Recommendations on the motions, in which he recommends findings of patent validity as to the '081 Patent and the '002 Patent, and findings of invalidity as to the '409 Patent and the '084 Patent.² The Capital One companies also filed, as a supplement to their summary judgment motion and their objections to the Special Master's Report and Recommendation on the '081 & '002 Patents, ECF No. 337, the Federal Circuit's recent decision in Intellectual Ventures I LLC v. Capital One Fin. Corp., 792 F.3d 1363 (Fed.Cir.2015). I have considered the parties' oral arguments and reviewed the record, including the supplemental briefing I requested from counsel, and decided de novo all of the parties' objections to the Special Master's Reports and Recommendations, pursuant to Fed.R.Civ.P. 53(f)(3)-(4). With regard to the '081 & '002 Patents, the Special Master gave careful consideration to the facts and the parties' arguments, and therefore I will adopt his factual findings. However, when he issued his Report and Recommendation, he did not have the benefit of Intellectual Ventures I, 792 F.3d 1363, which is particularly relevant when evaluating the validity of the '081 and '002 Patents. Nor did he address in any depth the increasing number of cases that have been decided by the Federal Circuit and District Courts around the country that have been decided since the Supreme Court's recent decisions in Alice Corp. Pty. Ltd. v. CLS Bank Int'l, –––U.S. ––––, 134 S.Ct. 2347, 189 L.Ed.2d 296 (2014), and Mayo Collaborative Servs. v. Prometheus Labs., Inc., ––– U.S. ––––, 132 S.Ct. 1289, 182 L.Ed.2d 321 (2012), that have found patents that are highly analogous to the '081 and ' 002 patents to be invalid for abstractness under 35 U.S.C. § 101. Therefore, I must reject the Special Master's conclusions of law as to the ' 081 & '002 Patents, grant Defendants' motions as to these patents, and deny Plaintiffs' motions as to these patents. The motions regarding the'409 & ' 084 Patents remain pending.³

I. SUMMARY JUDGMENT STANDARD

Summary judgment is proper when the moving party demonstrates, through "particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations ... admissions, interrogatory answers, or other materials," that "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a), (c)(1)(A) ; see Baldwin v. City of Greensboro, 714 F.3d 828, 833 (4th Cir.2013). If the party seeking summary judgment demonstrates that there is no evidence to support the nonmoving party's case, the burden shifts to the nonmoving party to identify evidence that shows that a genuine dispute exists as to material facts. See Celotex v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). A "genuine" dispute of material fact is one where the conflicting evidence creates "fair doubt"; wholly speculative assertions do not create "fair doubt." Cox v. Cnty. of Prince William, 249 F.3d 295, 299 (4th Cir.2001) ; see also Miskin v. Baxter Healthcare Corp., 107 F.Supp.2d 669, 671 (D.Md.1999). And, the existence of only a "scintilla of evidence" will not defeat a motion for summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251–52, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Instead, the evidentiary materials submitted must show facts from which the finder of fact reasonably could find for the party opposing summary judgment. Id.

II. PATENT ELIGIBILITY

"[F]our independent categories of inventions or discoveries ... are eligible for protection [under the Patent Act, 35 U.S.C. § 101 ]: processes, machines, manufactures, and compositions of matter." Bilski v. Kappos, 561 U.S. 593, 601, 130 S.Ct. 3218, 177 L.Ed.2d 792 (2010). Patent laws are to be " ‘given wide scope’ " to "ensure that ‘ "ingenuity should receive a liberal encouragement." ’ " Id. (quoting Diamond v. Chakrabarty, 447 U.S. 303, 308–09, 100 S.Ct. 2204, 65 L.Ed.2d 144 (1980) (quoting 5 Writing of Thomas Jefferson 75–76 (H. Washington ed. 1871))). Nonetheless, "[l]aws of nature, natural phenomena, and abstract ideas are not patentable" because they

are the basic tools of scientific and technological work. [M]onopolization of those tools through the grant of a patent might tend to impede innovation more than it would tend to promote it, thereby thwarting the primary object of the patent laws We have repeatedly emphasized this ... concern that patent law not inhibit further discovery by improperly tying up the future use of these building blocks of human ingenuity.

Alice Corp. Pty. Ltd. v. CLS Bank Int'l, ––– U.S. ––––, ––––, 134 S.Ct. 2347, 2354, 189 L.Ed.2d 296 (2014) (quotation marks and citations to Ass'n for Molecular Pathology v. Myriad Genetics, Inc., 569 U.S. ––––, ––––, 133 S.Ct. 2107, 2116, 186 L.Ed.2d 124 (2013), and Mayo Collaborative Servs. v. Prometheus Labs., Inc., ––– U.S. ––––, ––––, ––––, 132 S.Ct. 1289, 1293, 1301, 182 L.Ed.2d 321 (2012), omitted).

"[D]etermining whether the section 101 exception for abstract ideas applies involves distinguishing between patents that claim the building blocks of human ingenuity—and therefore risk broad pre-emption of basic ideas—and patents that integrate those building blocks into something more, enough to transform them into specific patent-eligible inventions." Versata Dev. Grp., Inc. v. SAP Am., Inc., 793 F.3d 1306, 1332 (Fed.Cir.2015).

Alice and Mayo provide the two-step framework for analyzing patent eligibility. See Alice, 134 S.Ct. at 2355 ; Mayo, 132 S.Ct. at 1294–97. In a nutshell, at the first step, the court "determine[s] whether the claims at issue are directed to one of [the] patent-ineligible concepts." Alice, 134 S.Ct. at 2355 ; see Intellectual Ventures I, 792 F.3d at 1366. The relevant patent-ineligible concept here is abstract ideas, a " ‘category [that] embodies "the longstanding rule" that "[a]n idea of itself is not patentable." ’ " Intellectual Ventures I, 792 F.3d at 1366 (quoting Alice, 134 S.Ct. at 2355 (quoting Gottschalk v. Benson, 409 U.S. 63, 67, 93 S.Ct. 253, 34 L.Ed.2d 273 (1972) )). At the second step, the court examines the abstract idea identified at step one to assess whether the elements of the claims, individually and as a whole, transform the nature of the idea into a "patent eligible application" through the addition of an "inventive concept." Alice, 134 S.Ct. at 2355.

A. Step One Analysis

In Alice, 134 S.Ct. at 2357, the Court did not "delimit the precise contours of the ‘abstract idea’ category." But, the Federal Circuit has stated that, "[a]pplying the guidance of Bilski, Mayo, and Alice, " it "ascertain[s] the basic character of the subject matter" at step one to determine whether there is an abstract idea. Internet Patents Corp., 790 F.3d 1343, 1348 (Fed.Cir.2015) ; see Ultramercial, 772 F.3d at 714 (considering "the abstract idea at the heart of" the patent at issue); Accenture, 728 F.3d at 1344 (same). Additionally, "it is often useful to determine the breadth of the claims in order to determine whether the claims extend to cover a ‘fundamental ... practice long prevalent in our system....’ " Intellectual Ventures I, 792 F.3d at 1369 (quoting Alice, 134 S.Ct. at 2356 ). In Diamond v. Diehr, 450 U.S. 175, 187, 101 S.Ct. 1048, 67 L.Ed.2d 155 (1981), for example, the Court concluded that the claims were not overly broad because the patentees did not seek "to pre-empt the use of [the well-known mathematical] equation" that their invention employed, but rather sought "only to foreclose from others the use of that equation in conjunction...