Personalized Media Commc'ns, LLC v. Netflix Inc.

• Decision Date: 28 July 2020
• Docket Number: 1:20-cv-3708-GHW
• Citation: 475 F.Supp.3d 289
• Parties: PERSONALIZED MEDIA COMMUNICATIONS, LLC, Plaintiff, v. NETFLIX INC., Defendant.
• Court: U.S. District Court — Southern District of New York

475 F.Supp.3d 289

PERSONALIZED MEDIA COMMUNICATIONS, LLC, Plaintiff,

v.NETFLIX INC., Defendant.

1:20-cv-3708-GHW

United States District Court, S.D. New York.

Signed July 28, 2020

Joseph Samuel Grinstein, James Patrick Redmon, Joseph Samuel Grinstein, Rocco Magni, Susman Godfrey L.L.P., Houston, TX, Andrey Belenky, Kheyfits Belenky LLP, Arun Srinivas Subramanian, Geng Chen, Tamar Elizabeth Lusztig, Ravi Bhalla, Susman Godfrey LLP, New York, NY, Dmitry Kheyfits, Kheyfits Belenky LLP, San Francisco, CA, Elizabeth L. DeRieux, Sidney Calvin Capshaw, III, Capshaw DeRieux, LLP, Gladewater, TX, Floyd G. Short, Rachel S. Black, Susman Godfrey L.L.P., Seattle, WA, Meng XI, Susman Godfrey LLP, Los Angeles, CA, Timothy Robert DeWitt, 24IP Law Group USA, PLLC, Annapolis, MD, for Plaintiff.

Jennifer Haltom Doan, Darby Vincent Doan, Kyle Randall Akin, Haltom & Doan, Alyssa Margaret Caridis, Orrick Herrington & Sutcliffe LLP, Los Angeles, CA, Clement S. Roberts, Karen Johnson-McKewan, Karen G. Johnson-McKewan, Sarah Kate Mullins, Orrick, Herrington & Sutcliffe LLP, San Francisco, CA, Erin Marie Boyd Leach, Orrick Herrington & Sutcliffe, LLC, Irvine, CA, for Defendant.

MEMORANDUM OPINION AND ORDER

GREGORY H. WOODS, United States District Judge:

Streaming television shows over the internet has exploded in popularity in recent years. Given the COVID-19 pandemic, it has become a virtual necessity for many. Netflix Inc. ("Netflix") is one of the leading purveyors of online streaming services. Personalized Media Communications, LLC ("PMC") alleges that Netflix infringed some of its patents. These patents, which were filed in the 1980s, relate to controlling, processing, and displaying television signals.

Arguing that PMC's patents are directed to abstract ideas, Netflix now moves for judgment on the pleadings. Because PMC has alleged that each of the three patents challenged by Netflix contains an inventive concept that was not well understood, routine, and conventional when they were filed, Netflix's motion is DENIED.

I. BACKGROUND¹

Netflix is a well-known corporation that "provides subscription services that permit its users to search for and to watch streaming video content over an internet connection." Compl. ¶ 4. PMC "was founded by inventor and PMC Chairman John Harvey." Id. ¶ 23. Harvey and "his co-inventor James Cuddihy" filed the three patents at issue here in the 1980s. Id. ¶¶ 15-16, 18, 23. The first patent is U.S. Patent No. 7,769,344 (the " ‘344 Patent"). Dkt No. 69-2; see also Compl. ¶ 16. The second patent is U.S. Patent No. 8,601,528 (the " ‘528 Patent"). Dkt No. 69-3; see also Compl. ¶ 18. The third patent is U.S. Patent No. 7,747,217 (the " ‘217 Patent"). Dkt No. 69-4; see also Compl. ¶ 15. The patents share the same name, "Signal Processing Apparatus and Methods," and share a common specification. The patents are generally directed to controlling, processing, and displaying television signals.

PMC sued Netflix for patent infringement in the Eastern District of Texas. Dkt No. 1. PMC alleges that "[t]he technology claimed in this case relates to adaptive video streaming, which enables content providers like Netflix to serve each user the highest possible quality video over the Internet." Compl. ¶ 14. Judge Rodney Gilstrap in the Eastern District of Texas issued a claim construction order in a related case. Personalized Media Commc'ns, LLC v. Google LLC , No. 2:19-cv-89 (JRG), 2020 WL 1666462 (E.D. Tex. Apr. 3, 2020). After the court issued the claim construction order, the parties jointly moved to transfer the case to the Southern District of New York. Personalized Media Commc'ns, LLC v. Google LLC , No. 2:19-cv-90 (JRG), Dkt No. 192. Judge Gilstrap granted the motion. Id. , Dkt No. 194.

Netflix now moves for judgment on the pleadings, arguing that the patents are ineligible under 35 U.S.C. § 101 (" Section 101"). Dkt Nos. 57-58. PMC opposed the motion, Dkt No. 69, and Netflix replied, Dkt No. 78.

II. LEGAL STANDARD

"Under § 101, patents may be granted for ‘any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.’ " Cellspin Soft, Inc. v. Fitbit, Inc. , 927 F.3d 1306, 1314 (Fed. Cir. 2019), cert. denied sub nom. Garmin USA, Inc. v. Cellspin Soft, Inc. , ––– U.S. ––––, 140 S. Ct. 907, 205 L.Ed.2d 459 (2020) (quoting 35 U.S.C. § 101 ). "[T]his statutory text includes an important but implicit exception for laws of nature, natural phenomena, and abstract ideas. Claims for these categories of inventions are not patent eligible." Id. (citing Alice Corp. Pty. Ltd. v. CLS Bank Int'l , 573 U.S. 208, 216, 134 S.Ct. 2347, 189 L.Ed.2d 296 (2014) ); see also CardioNet, LLC v. InfoBionic Inc. , 955 F.3d 1358, 1367 (Fed. Cir. 2020) ("The Supreme Court has identified three types of subject matter that are not patent-eligible: ‘[l]aws of nature, natural phenomena, and abstract ideas[.]’ " (quoting Alice , 573 U.S. at 216, 134 S.Ct. 2347 )); Le Roy v. Tatham , 55 U.S. 156, 175, 14 How. 156, 14 L.Ed. 367 (1852) ("[A] principle is not patentable. A principle, in the abstract, is a fundamental truth; an original cause; a motive; these cannot be patented, as no one can claim in either of them an exclusive right.").

"These categories of subject matter have been excluded from patent-eligibility because they represent ‘the basic tools of scientific and technological work.’ " Koninklijke KPN N.V. v. Gemalto M2M GmbH , 942 F.3d 1143, 1149 (Fed. Cir. 2019) (quoting Ass'n for Molecular Pathology v. Myriad Genetics, Inc. , 569 U.S. 576, 589, 133 S.Ct. 2107, 186 L.Ed.2d 124 (2013) ); see also Nat. Alts. Int'l, Inc. v. Creative Compounds, LLC , 918 F.3d 1338, 1342 (Fed. Cir. 2019) (describing "laws of nature, natural phenomena, and abstract ideas" as " ‘building blocks of human ingenuity’ " (quoting Alice , 573 U.S. at 216-17, 134 S.Ct. 2347 )). And "[t]hese exceptions exist because monopolizing the basic tools of scientific work ‘might tend to impede innovation more than it would tend to promote it.’ " Illumina, Inc. v. Ariosa Diagnostics, Inc. , 952 F.3d 1367, 1371 (Fed. Cir. 2020) (quoting Mayo Collaborative Servs. v. Prometheus Labs., Inc. , 566 U.S. 66, 71, 132 S.Ct. 1289, 182 L.Ed.2d 321 (2012) ). The Supreme Court has described this as an "exclusionary principle." Alice , 573 U.S. at 216, 134 S.Ct. 2347. And "[t]he ‘concern that drives this exclusionary principle is one of pre-emption.’ " Koninklijke , 942 F.3d at 1149 (quoting Alice , 573 U.S. at 216, 134 S.Ct. 2347 ). So courts should be wary of patents that threaten to "pre-empt use of [an] approach in all fields" thereby "effectively grant[ing] a monopoly over an abstract idea." Bilski v. Kappos , 561 U.S. 593, 612, 130 S.Ct. 3218, 177 L.Ed.2d 792 (2010).

But "too broad an interpretation of this exclusionary principle could eviscerate patent law. For all inventions at some level embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas." Nat. Alts. , 918 F.3d at 1342 (quoting Mayo , 566 U.S. at 71, 132 S.Ct. 1289 ). Thus, a court must also be sure not to "describ[e] the claims ... at a high level of abstraction and untethered from the language of the claims" for that would "all but ensure[ ] that the exceptions to § 101 swallow the rule." Enfish, LLC v. Microsoft Corp. , 822 F.3d 1327, 1337 (Fed. Cir. 2016).

"To distinguish between eligible and ineligible patent claims, the Supreme Court has fashioned a two-step test," often called the Alice / Mayo inquiry. Cellspin , 927 F.3d at 1314 (citing Alice , 573 U.S. at 217-18, 134 S.Ct. 2347 ); see also Mayo , 566 U.S. at 72-73, 77-79, 132 S.Ct. 1289. "At step one of the Alice / Mayo framework, [courts] ask whether the claim at issue is ‘directed to a patent-ineligible concept[.]’ " Cellspin , 927 F.3d at 1314-15 (quoting Alice , 573 U.S. at 218, 134 S.Ct. 2347 ) (alterations omitted). The inquiry is whether the "claims ‘in their entirety’ " are " ‘directed to excluded subject matter’ "—that is, a laws of nature, a natural phenomenon, or an abstract idea. CardioNet , 955 F.3d at 1367 (quoting McRO, Inc. v. Bandai Namco Games Am. Inc. , 837 F.3d 1299, 1312 (Fed. Cir. 2016) ); see also Koninklijke , 942 F.3d at 1149 (describing this inquiry as "look[ing] at the ‘focus of the claimed advance over the prior art’ ") (quoting Affinity Labs of Tex., LLC v. DIRECTV, LLC , 838 F.3d 1253, 1257 (Fed. Cir. 2016) ); BASCOM Glob. Internet Servs. v. AT&T Mobility LLC , 827 F.3d 1341, 1348 (Fed. Cir. 2016) (holding that courts must examine the "basic thrust" of the claim at Alice step one).

At Alice step one, there is "an important common-sense distinction between ends sought and particular means of achieving them, between desired results (functions) and particular ways of achieving (performing) them."

Elec. Power Grp. v. Alstom S.A. , 830 F.3d 1350, 1356 (Fed. Cir. 2016) ; see also Am. Axle & Mfg. v. Neapco Holdings LLC , 939 F.3d 1355, 1364 (Fed. Cir. 2019) (invoking the "distinction between results and means" at Alice step one). Claims that use such " ‘result-based functional language’ without describing how the[ir] goal[s] ... [are] achieved" are directed to abstract ideas. Koninklijke , 942 F.3d 1143, 1153 (Fed. Cir. 2019) (quoting Two-Way Media Ltd. v. Comcast Cable Commc'ns, LLC , 874 F.3d 1329, 1337 (Fed. Cir. 2017) ). "Indeed, the essentially result-focused, functional character of claim language has been a frequent feature of claims held ineligible under § 101 [.]" Elec. Power Grp. , 830 F.3d at 1356. Claims must therefore "ha[ve] the specificity required to transform a claim from one claiming only a result to one claiming a way of achieving it." Ericsson Inc. v. TCL Commc'n Tech. Holdings Ltd. , 955 F.3d 1317, 1328 (Fed. Cir. 2020) (quoting SAP Am., Inc. v. InvestPic, LLC , 898 F.3d 1161, 1167 (Fed. Cir. 2018)), cert. denied , ––– U.S. ––––, 139 S. Ct. 2747, 204 L.Ed.2d 1134 (2019).

"If the claims are not directed to a patent-ineligible concept under Alic...