Smart Software, Inc. v. Planningedge, LLC

• Decision Date: 17 June 2016
• Docket Number: Civil Action No. 15-13814-PBS
• Citation: 192 F.Supp.3d 243
• Parties: SMART SOFTWARE, INC., Plaintiff, v. PLANNINGEDGE, LLC, Defendant.
• Court: U.S. District Court — District of Massachusetts

192 F.Supp.3d 243

SMART SOFTWARE, INC., Plaintiff,

v.PLANNINGEDGE, LLC, Defendant.

Civil Action No. 15-13814-PBS

United States District Court, D. Massachusetts.

Signed June 17, 2016

Craig R. Smith, Eric P. Carnevale, Lando & Anastasi, LLP, Cambridge, MA, for Plaintiff.

James G. Wagner, Katherine A. Kelter, Conn, Kavanaugh, Rosenthal, Peisch & Ford, LLP, Boston, MA, Kathleen M. Wade, Richard E. Fee, Fee & Jeffries, PA, Tampa, FL, for Defendant.

MEMORANDUM AND ORDER

Saris, Chief Judge

INTRODUCTION

The plaintiff, Smart Software, Inc., brings this action against the defendant, PlanningEdge, LLC, alleging infringement of its patent claiming a system and method for forecasting intermittent demand to help manage inventory. The defendant has moved to dismiss this case on the ground that the patent claims an abstract idea which is ineligible for patent protection under 35 U.S.C. § 101. After hearing, relying on Alice Corp. Pty. v. CLS Bank Int'l, ––– U.S. ––––, 134 S.Ct. 2347, 189 L.Ed.2d 296 (2014), this Court ALLOWS the defendant's motion to dismiss (Docket No. 23).

FACTUAL BACKGROUND

All facts are drawn from the complaint and attached documents and are treated as true for the purposes of this motion to dismiss.

Smart Software provides software for enterprise-wide demand forecasting, demand planning, and inventory optimization solutions. On March 20, 2001, the United States Patent and Trademark Office (PTO) issued United States Patent No. 6,205,431 (the '431 Patent) entitled "System and Method for Forecasting Intermittent Demand." Smart Software is the holder of the assignment.

The Detailed Description of the Invention in the '431 Patent describes the inventory management problem as follows:

In any inventory management problem, one of the critical goals is to balance the need to have stock on hand to satisfy random demand against the cost of maintaining that stock. Efficient management of this tradeoff requires accurate forecasts of the distribution of the total demand that will arise over a lead time needed for stock replenishment. Unfortunately, the intermittent nature of demand for spare parts or high priced capital goods makes forecasting especially difficult. Since demand alternates sporadically between zero and nonzero values, traditional forecasting methods are typically rendered ineffective.

U.S. Patent No. 6,205,431 col. 4 ll. 30-40 (filed Oct. 29, 1998). The '431 Patent"includes an inventory management system that utilizes the theory of economic order quantities under a continuous review model." Id. at col. 4 ll. 41-43. The "review model determines two quantities for each item, a reorder point and an order quantity" using historical data. Id. at col. 4 ll. 43-45. "When on-hand inventory reaches the reorder point, one orders an amount equal to the order quantity to replenish stock." Id. at col. 4 ll. 45-47.

On August 4, 2015, the plaintiff notified the defendant of its alleged infringing activity. The parties agree that the only patent claims at issue in this case are Claims 1, 10, and 16. The text of the claims follows:

1. A computerized method for forecasting intermittent demand for a lead time, comprising the steps of:

providing a data set of intermittent data comprising a predetermined number of historical demand values;

calculating lead time demand values for the lead time, wherein the calculating step comprises the step of sampling values from the historical demand values;summing the lead time demand values to provide a lead time demand sum; and

repeating the calculating and summing steps a predetermined number of times to provide a distribution of lead time demand sums that forecast intermittent demand for inventory requirements.

10. A program product, having a computer usable medium having computer readable code embodied therein that, when executed, comprises:

means for examining intermittent data comprised of a predetermined number of historical demand values made up of zero and non-zero values;

means for calculating lead time demand values for the lead time, wherein the calculating means samples values from the historical demand values;

means for summing the lead time demand values to provide a lead time demand sum;

looping means for generating a plurality of lead time demand sums;

storing means for storing the plurality of lead time demand sums; and

means for providing the plurality of lead time demand sums that forecast inventory requirements.

16. A computer system, comprising:

a processing unit;

a computer system memory accessible to the processing unit;

a data set comprising intermittent data stored within the computer system memory, wherein the intermittent data is comprised of a plurality of time series values;

a mechanism for examining the intermittent data; and

a mechanism for generating a plurality of series of lead time demand values, wherein each series of lead time demand values is based upon at least one sampling selection from among the time series values.

Id. at col. 16 ll. 13-26, 54-67; col. 17 ll. 1-4, 25-37.

DISCUSSION

I. 12(b)(6) Standard of Review for a § 101 Claim

Generally speaking, to survive a Rule 12(b)(6) motion to dismiss, the factual allegations in a complaint must "possess enough heft" to state a claim to relief that is plausible on its face. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555–57, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "Dismissing a case under Rule 12(b)(6) on the basis of an affirmative defense requires that (i) the facts establishing the defense are definitively ascertainable from the complaint and the other allowable sources of information, and (ii) those facts suffice to establish the affirmative defense with certitude." Nisselson v. Lernout, 469 F.3d 143, 150 (1st Cir.2006) (internal quotation marks omitted). In a patent case, if unpatentability is raised as an affirmative defense under Rule 12, then dismissal is appropriate if the well-pleaded factual allegations in the complaint, construed in the light most favorable to the plaintiff, establish the defense. Kenexa BrassRing, Inc. v. HireAbility.com, LLC, No. CIV.A. 12–10943–FDS, 2015 WL 1943826, at *2 (D.Mass. Apr. 28, 2015). The key question on a motion to dismiss based on patent eligibility is whether the claims in the patent are eligible for patent protection under a "straightforward application" of § 101 case law. See Esoterix Genetic Labs. LLC v. Qiagen, Inc., 133 F.Supp.3d 349, 354, 356 (D.Mass.2015).

The plaintiff argues that it meets the Iqbal/Twombly plausibility standard because a patent is "presumed valid" and "[t]he burden of establishing invalidity of a patent or any claim thereof shall rest on the party asserting such invalidity." 35 U.S.C. § 282. It contends that the defendant cannot meet its burden of proving invalidity by clear and convincing evidence under § 282 without, at a minimum, a claim construction hearing.

The Federal Circuit has rejected a similar argument, holding: "Although the determination of patent eligibility requires a full understanding of the basic character of the claimed subject matter, claim construction is not an inviolable prerequisite to a validity determination under § 101." Content Extraction & Transmission, LLC v. Wells Fargo Bank, Nat'l Ass'n, 776 F.3d 1343, 1349 (Fed.Cir.2014) (affirming the district court's dismissal of the patent claims as "patent-ineligible under § 101 at the pleading stage"); see also OIP Techs., Inc. v. Amazon.com, Inc., 788 F.3d 1359, 1360–62 (Fed.Cir.2015) (affirming dismissal on the pleadings); Ultramercial, Inc. v. Hulu, LLC, 772 F.3d 709, 717 (Fed.Cir.2014) (affirming Rule 12(b)(6) dismissal); Modern Telecom Sys. LLC v. Juno Online Servs., Inc., No. SA CV 14–0348–DOC, 2015 WL 1240182, at *7 (C.D.Cal. Mar. 17, 2015). ("[A]fter Alice, courts have frequently decided patent-eligibility on the pleadings."). However, the Federal Circuit cautioned that "it will ordinarily be desirable—and often necessary—to resolve claim construction disputes prior to a § 101 analysis, for the determination of patent eligibility requires a full understanding of the basic character of the claimed subject matter." Bancorp Servs., LLC v. Sun Life Assurance Co. of Can. (U.S.), 687 F.3d 1266, 1273–74 (Fed.Cir.2012).

Here, the plaintiff fails to identify any claim construction issues that need resolution or any facts in dispute. Nonetheless, it argues that a claim construction hearing is necessary for Claim 10 of the '431 Patent, a means-plus-function claim, under 35 U.S.C. § 112(f).¹ The plaintiff, however, offers no specific claim construction issue involving Claim 10 that would affect this Court's analysis. Other courts have dismissed infringement suits involving patents with means-plus-function claims on the pleadings based on § 101 eligibility. See, e.g., TDE Petroleum Data Sols., Inc. v. AKM Enter., Inc., No. CIV.A. H–15–1821, 2015 WL 5311059, at *6, *9 (S.D.Tex. Sept. 11, 2015) ; In re TLI Commc'ns LLC Patent Litig., 87 F.Supp.3d 773, 804–05 (E.D.Va.2015).

II. Section 101 Eligibility

The defendant argues that the '431 Patent is directed to the abstract idea of forecasting intermittent inventory demand and provides no additional inventive concept to transform the abstract idea into patent-eligible subject matter. The plaintiff responds that its patent merely involves, but is not directed to, an abstract concept, and that the patent applies a statistical method in a novel manner to solve a persistent problem within the field of inventory management.

The patent statute provides: "Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title." 35 U.S.C. § 101.

"The Supreme Court, however, has long interpreted § 101 and its statutory predecessors to contain an implicit exception: laws of nature, natural phenomena, and abstract ideas are not patentable." Content Extraction, 776 F.3d at 1346 (internal quotation marks omitted...