SCVNGR, Inc. v. DailyGobble, Inc.

• Decision Date: 02 March 2017
• Docket Number: C.A. 1:16–cv–00134–M–LDA
• Citation: 238 F.Supp.3d 263
• Parties: SCVNGR, INC. d/b/a LevelUp, Plaintiff, v. DAILYGOBBLE, INC. d/b/a Relevant, Defendant.
• Court: U.S. District Court — District of Rhode Island

238 F.Supp.3d 263

SCVNGR, INC. d/b/a LevelUp, Plaintiff,

v.DAILYGOBBLE, INC. d/b/a Relevant, Defendant.

C.A. 1:16–cv–00134–M–LDA

United States District Court, D. Rhode Island.

Signed March 2, 2017

Rachelle R. Green, Cervenka Green Antonelli LLC, Providence, RI, Brian C. Carroll, SCVNGR, Inc., Boston, MA, for Plaintiff.

Matthew Thomas Oliverio, Raymond A. Marcaccio, Oliverio & Marcaccio, LLP, Providence, RI, Hao Ni, Neal Massand, Stevenson Moore, Ni, Wang & Massand, PLLC, Dallas, TX, for Defendant.

MEMORANDUM AND ORDER

JOHN J. McCONNELL, JR., United States District Judge.

Plaintiff SCVNGR, Inc. d/b/a/ LevelUp ("LevelUp") brought the instant action against Defendant DailyGobble, Inc. d/b/a/ Relevant ("Relevant") for patent infringement. The patent at issue, United States Patent No. 8,924,260 ("the '260 patent"), provides for an improved POS system through the use of sentinels—that is, a first data sequence and second data sequence. A POS terminal equipped with the ability to recognize and process the sentinels can distinguish a data stream with the sentinels from other data inputs as well as interrupt a current process of the POS terminal to process a transaction. Relevant has moved for judgment on the pleadings, arguing that LevelUp's '260 patent is an abstract idea and therefore patent ineligible.

BACKGROUND

LevelUp designs applications for restaurants that combine a reward's program and payment method into one quick-response code ("QR Code"). A consumer can both receive rewards and initiate payment through the presentment of a single QR Code on her mobile device. The application eliminates the need for a consumer to provide a QR Code for a rewards program and a separate payment form. In order to process a QR Code transaction, LevelUp encodes the data stream with sentinels, a system for which LevelUp received the '260 patent.

LevelUp filed the complaint in this action, alleging that Relevant is infringing on LevelUp's '260 patent. ECF NO. 1. After LevelUp moved for a preliminary injunction, ECF No. 12, and the Court granted that motion, ECF No. 29, Relevant filed the instant motion for judgment on the pleadings, ECF No. 34. Relevant reasserts an argument—that the relevant claims in the '260 patent are directed towards patent-ineligible subject matter—previously briefed at the preliminary injunction stage, ECF No. 20 at 12–16; ECF No. 21 at 7–12, and rejected in this Court's granting of the preliminary injunction.

Mobile payment processing occurs through a mobile device's communication with an optical or near-field communication reader. The mobile device, once scanned, sends an electronic token to the POS terminal. Then, the POS terminal combines this token with other payment information, such as the price of the transaction and the name of the merchant, and sends the information to the payment processor.

The '260 patent encodes the data stream with a "sentinel" at the beginning and the end of the data stream. The sentinels bracket the token data to differentiate it from other data within the data stream (i.e., metadata) and other data streams. The sentinels can provide multiple functional applications. Claims 1–2 concern the "interrupt protocol," which causes the POS terminal to interrupt its current task upon receipt of the first sentinel. After interruption, the POS terminal begins processing the payment information contained in the data stream. And after receiving the second sentinel, the POS terminal completes the transaction. Claims 11–12 are for a POS terminal configured to process a transaction as set forth by the method in Claims 1–2. The image below illustrates the patent '260 method of processing transactions through multiple data inputs.

The figure depicts a POS terminal receiving data streams from three different inputs—a scanner, reader, and touch screen. The data stream from the scanner contains two "LU" sentinels, and the data stream between the two sentinels contains the "interrupt" "data-handling protocol."

The claims at issue are as follows:

1. A method of processing a transaction at a point-of-sale (POS) terminal, the method comprising the steps of:

receiving, by the POS terminal, a stream of data from a credential reader;

recognizing, by the POS terminal, a first data sequence in the received data stream;

in response to the recognized first data sequence, handling, by the POS terminal, transaction data coming in sequence after the first the data sequence according to a data-processing protocol stored on the POS terminal;

recognizing, by the POS terminal, a second data sequence in the received data stream;

in response to the recognized second data sequence, terminating, by the POS terminal, data handling according to the data-processing protocol; and

completing, by the POS terminal, a transaction based on the transaction data,

wherein the data-processing protocol comprises, by the POS terminal:

interrupting execution of a current task; and

combining the transaction data with item-purchase data received at the POS terminal and transmitting the data to a transaction-processing server for approval.

2. The method of claim 1, wherein the first data sequence is identical to the second data sequence.

11. A terminal for processing transactions at the point of sale, the terminal comprising:

a communications interface;

a computer memory;

an input port for receiving data from a credential reader; and

a processor configured to (i) recognize a first data sequence in a data stream received from the credential reader via the input port, (ii) retrieve from the computer memory a data-processing protocol in response to the recognized first data sequence, (iii) execute the data-processing protocol and handle, in accordance therewith, transaction data coming in sequence after the first data sequence, (iv) recognize a second data sequence in the received data stream and, in response thereto, terminating data handling according to the data-processing protocol, and (v) complete a transaction based on the transaction data,

wherein execution of the data-processing protocol by the processor causes interruption of a concurrently executing task and immediate transmission of the combined data, followed by resumed execution of the interrupted task.

12. The terminal of claim 11, wherein the processor is configured to complete the transaction by combining the transaction data with purchase data including item-purchase data and causing transmission, via the communications interface, of the combined data to a transaction processor.

LEGAL STANDARD

LevelUp urges the Court to apply the clear and convincing evidence standard to the motion for judgment on the pleadings. In Ultramercial, Inc. v. Hulu, LLC , the Federal Circuit applied the clear and convincing evidence standard to patent eligibility challenges, but that case has since been vacated by the Supreme Court. 722 F.3d 1335, 1342 (Fed. Cir. 2013), vacated sub nom. WildTangent, Inc. v. Ultramercial, LLC , ––– U.S. ––––, 134 S.Ct. 2870, 189 L.Ed.2d 828 (2014). On remand, the Federal Circuit's opinion never addressed whether the clear and convincing evidence standard still applies, Ultramercial, Inc. v. Hulu, LLC , 772 F.3d 709 (Fed. Cir. 2014), but the concurrence asserted that no presumption of eligibility attaches, Id. at 720–21 (Mayer, J., concurring). Importantly, patent eligibility is a question of law. OIP Techs., Inc. v. Amazon.com, Inc. , 788 F.3d 1359, 1362 (Fed. Cir. 2015). And as Justice Breyer stated, "[T]he evidentiary standard of proof applies to questions of fact and not to questions of law." Microsoft Corp. v. I4I Ltd. P'ship , 564 U.S. 91, 114, 131 S.Ct. 2238, 180 L.Ed.2d 131 (2011) (Breyer, J., concurring). Because the outcome does not turn on the application of a presumption of patentability, the Court need not take a stance on the issue.

The Court reviews a motion for judgment on the pleadings under a similar standard as a Rule 12(b)(6) motion. Downing v. Globe Direct LLC , 682 F.3d 18, 22 (1st Cir. 2012). "[A] 'court may not grant a defendant's Rule 12(c) motion unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.' " Curran v. Cousins , 509 F.3d 36, 43 (1st Cir. 2007) (quoting Rivera–Gomez v. de Castro , 843 F.2d 631, 635 (1st Cir. 1988) ).

DISCUSSION

In order for a patent to receive protection, it must be patentable under 35 U.S.C. § 101. Section 101 states that "any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof" may be eligible for patent protection. Three areas, however, remain patent ineligible: laws of nature, natural phenomena, and abstract ideas. Alice Corp. Pty. Ltd. v. CLS Bank Int'l , ––– U.S. ––––, 134 S.Ct. 2347, 2354, 189 L.Ed.2d 296 (2014). In analyzing patent eligibility under § 101, courts distinguish the "building blocks of human ingenuity" from claims that "integrate the building blocks into something more." Id. In Alice , the Supreme Court announced a two-part test for distinguishing between patent-eligible and patent-ineligible subject matter. At the first step, the Court determines "whether the claims at issue are directed to one of those patent-ineligible concepts." Id. at 2355. In doing so, "the claims are considered in their entirety to ascertain whether their character as a whole is directed to excluded subject matter." Internet Patents Corp. v. Active Network, Inc. , 790 F.3d 1343, 1346 (Fed. Cir. 2015). If the Court answers the first step in the affirmative, the Court proceeds to the second step and "consider[s] the elements of each claim both individually and 'as an ordered combination' to determine whether the additional elements 'transform the nature of the claim' into a patent-eligible application." Alice , 134 S.Ct. at 2355 (quoting Mayo Collaborative Servs. v. Prometheus Labs., Inc., 566 U.S. 66, 78–79, 132 S.Ct. 1289, 182 L.Ed.2d 321 (2012) ).

A. Step One

The Court begins its analysis at step one of the...