SAP Am., Inc. v. Investpic, LLC

• Decision Date: 18 May 2017
• Docket Number: CIVIL ACTION NO. 3:16–CV–02689–K
• Parties: SAP AMERICA, INC., Plaintiff, v. INVESTPIC, LLC, Defendant.
• Court: U.S. District Court — Northern District of Texas

260 F.Supp.3d 705

SAP AMERICA, INC., Plaintiff,

v.INVESTPIC, LLC, Defendant.

CIVIL ACTION NO. 3:16–CV–02689–K

United States District Court, N.D. Texas, Dallas Division.

Signed May 18, 2017

Michael Andrew Bittner, M. Brett Johnson, Thomas M. Melsheimer, Winston & Strawn LLP, Ricardo Joel Bonilla, Fish & Richardson PC, Dallas, TX, Katherine Vidal, Pro Hac Vice, Winston & Strawn LLP, Menlo Park, CA, for Plaintiff.

Michael W. Shore, Alfonso Garcia Chan, Christopher L. Evans, Shore Chan Bragalone Depumpo LLP, Dallas, TX, for Defendant.

MEMORANDUM OPINION AND ORDER

ED KINKEADE, UNITED STATES DISTRICT JUDGE

Before the Court is SAP America, Inc.'s Motion for Judgment on the Pleadings (Doc. No. 57). After careful consideration of the motion, the response, the reply, the notice of supplemental authority, the supporting appendices, the applicable law, and any relevant portions of the record, the Court GRANTS Plaintiff's motion.

1. Background

Plaintiff SAP, America, Inc. ("SAP") filed this suit against Defendant Investpic, LLC ("Investpic"). In its complaint, SAP seeks a declaratory judgment from the Court that its products do not infringe the claims of a patent owned by Investpic and that the claims of that patent are invalid. On October, 18, 2016, Investpic answered and asserted patent infringement counterclaims against SAP. On November 8, 2016, SAP answered the factual allegations of Investpic's counterclaims and then subsequently amended its answer regarding these factual allegations on November 29, 2016. SAP filed the instant motion on February 23, 2017. SAP then filed a second amended answer to Investpic's counterclaims on February 28, 2017.

In its motion, SAP argues that all of the claims of the patent-in-suit are invalid because the claims address subject matter that is not eligible for patent protection under 35 U.S.C. § 101 and Alice Corp. Pty 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. , 566 U.S. 66, 132 S.Ct. 1289, 182 L.Ed.2d 321 (2012) because the claims are directed toward abstract ideas. Investpic responds that the claims are valid because they are not directed toward abstract ideas and, even if they are, the claims incorporate inventive concepts beyond the abstract ideas that result in the claims addressing patentable subject matter.

2. Applicable Law

a. Judgment on the Pleadings

A motion for judgment on the pleadings under Federal Rule of Civil Procedure 12(c) should be granted if the complaint lacks a cognizable legal theory. Doe v. MySpace, Inc. , 528 F.3d 413, 418 (5th Cir. 2008). The central issue in a motion for judgment on the pleadings under Rule 12(c) is "whether, in the light most favorable to the plaintiff, the complaint states a valid claim for relief." Id. Judgment on the pleadings is appropriate only if there are no disputed issues of facts and only questions of law remain. Hughes v. Tobacco Inst., Inc. , 278 F.3d 417, 420 (5th Cir. 2001).

Patent subject-matter eligibility under 35 U.S.C. § 101 is a question of law particularly suitable for resolution at the pleading stage of a patent litigation matter. See Content Extraction and Transmission LLC v. Wells Fargo Bank, NA , 776 F.3d 1343, 1349 (Fed. Cir. 2014). The focus of a 35 U.S.C. § 101 inquiry, even at the pleading stage, is on the claims. Dealertrack Inc. v. Huber , 674 F.3d 1315, 1334 (Fed. Cir. 2012). Claim construction is not required to conduct a 35 U.S.C. § 101 analysis. Content Extraction , 776 F.3d at 1349. Since the focus in a 35 U.S.C. § 101 inquiry is on the claims and claim construction is not necessary for the analysis, subject matter eligibility analysis of the claims may be done at the pleading stage. Id.

b. Subject Matter Eligibility Under 35 U.S.C. § 101.

A patent may be obtained for a "new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, ..." 35 U.S.C. § 101. So generally, processes, machines, manufactures, and compositions of matter are eligible subject matter for patent protection. Alice , 134 S.Ct. at 2354.

But, this subject matter eligibility is subject to three judicially created exceptions that prevent patents on pure concepts. Id. ; Ass'n for Molecular Pathology v. Myriad Genetics, Inc., 569 U.S. 576, 133 S.Ct. 2107, 2116, 186 L.Ed.2d 124 (2013). The three judicially created exceptions to patent subject matter eligibility are laws of nature, natural phenomena, and abstract ideas. Id. A patent claim may not be obtained for an invention that claims a law of nature, natural phenomena, or an abstract idea, even if the claim satisfies the literal requirements of 35 U.S.C. § 101. Id. The judicial exceptions are not patentable because they are "the basic tools of scientific and technological work" and without the exceptions "there would be considerable danger that the grant of patents would tie up the use of such tools and thereby inhibit future innovation." Id.

The Supreme Court has set down a two part test to determine if a patent claim is unpatentable due to one of the three judicial exceptions. Alice , 134 S.Ct. at 2355. First, a court must determine if the claim is directed to a law of nature, natural phenomenon, or abstract idea. Id. If the claim is not directed to one of these three exceptions, then the claim is not subject to a judicial exception and is patentable subject matter, so long as it meets the requirements of 35 U.S.C. § 101. Id. If the claim is directed to a judicial exception, then a court must consider the second part of the test. Id. In the second part of the test, a court must determine if the claim contains something else, besides the judicially created exception. This must be something else that adds to the claim so that it does not assert a claim over the law of nature, natural phenomena, or abstract idea. Id. The requirement for something else ensures that the inventor does not obtain a patent claim over a law of nature, natural phenomena, or abstract idea, which would suppress innovation. Id. The "something else" required is an "inventive concept" or an element or combination of elements that is sufficient to ensure the claim amounts to significantly more than a claim upon the ineligible concept itself. Id.

3. Application of Law to Claims of Patent–In–Suit

In the motion, SAP moves the Court to grant judgment on the pleadings and argues that all claims of the patent-in-suit in this matter are invalid because the claims do not address subject matter that is eligible for patent protection under 35 U.S.C. § 101.

a. The Patent–In–Suit

The patent-in-suit is U.S. Patent 6,349,291 (the '291 Patent"), which was issued on February 19, 2002, and is titled "Method and System for Analysis, Display and Dissemination of Financial Information Using Resampled Statistical Methods." Investpic is the current owner of all right, title, and interest in the '291 Patent.

The '291 Patent discloses the invention of a method and system for statistical analysis, display, and dissemination of financial data over a network. '291 Patent at Abstract. The patent discloses, what it asserts, is a novel method to analyze financial markets. Id. at 1:60–2:4. Among other functions, the invention can be used for predicting financial market trends. Id. The patent asserts that older methods of doing this are not as useful as the method of this invention because older methods rely on assumptions that do not accurately reflect the way financial markets behave. Id. The invention addresses this problem by using a resampled statistical method, which, according to the patent, more accurately reflects financial markets. Id. The invention also includes the features of performing the resampled statistical method over a network and with parallel processors. Id. at 2:4–37.

Modeling prediction uses a probability distribution function to model the possible outcomes of a particular situation. Id. at 1:15–69. According to the patent, the prior art uses a Gaussian distribution as the probability distribution function. Id. A Gaussian distribution is a normal probability distribution function, with a peak at the most common occurrence in a data set and symmetrical tails on each side of the peak representing less likely occurrences. Id. The further away a point is from the center of a normal distribution, the less likely it is that occurrence will happen. Id. So, the tail portions of a normal distribution are much less likely to occur than the center peak. Id.

According to the patent, the use of a Gaussian distribution as a probability distribution function fails to account for the reality of financial markets because financial markets are more prone to experience extreme occurrences than is reflected in a normal distribution. Id. In a normal distribution, the probability of these extreme occurrences is represented by the tails of the distribution, where it is unlikely that the occurrences will actually happen. Id. According to the inventor, this does not reflect the true nature of financial markets. Id. The inventor claims that relying on the underlying assumptions of Gaussian distribution results in poor prediction of financial markets. Id.

The inventor claims that the invention of the patent solved this problem by using a different method to generate a probability distribution function, instead of applying a Gaussian curve to the original data set used for the modeling, the invention uses resampling to generate the sample set for the statistical analysis. Id. at 1:60–3:29. In general, resampling involves generating a data subset from the source data. Id. at 15:34–16:21. The resampled data set can be generated in a number of manners including random selection of the subset or a biased selection the subset. Id. The '291 Patent claims methods and systems that create resampled data sets using a bias parameter. Id. at 16:34–18:65. The bias parameter is used to insert bias into the resampled data set, so that the resampled data...