Tenon & Groove, LLC v. Plusgrade

• Decision Date: 06 January 2015
• Docket Number: C.A. No. 12-1118-GMS-SRF
• Court: U.S. District Court — District of Delaware
• Parties: TENON & GROOVE, LLC and OPTIONTOWN LLC, Plaintiffs, v. PLUSGRADE S.E.C. a/k/a PLUSGRADE L.P. and PLUSGRADE U.S. LLC

TENON & GROOVE, LLC and OPTIONTOWN LLC, Plaintiffs,
v.
PLUSGRADE S.E.C. a/k/a PLUSGRADE L.P. and PLUSGRADE U.S. LLC

C.A. No. 12-1118-GMS-SRF

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE

January 6, 2015

REPORT AND RECOMMENDATION

I. INTRODUCTION

Presently before the court in this patent infringement action is the motion for summary judgment of defendants Plusgrade S.E.C. a/k/a Plusgrade L.P. and Plusgrade U.S. LLC (together, "Plusgrade"). (D.I. 20) Plaintiffs Tenon & Groove, LLC and Optiontown (together, "Tenon & Groove") oppose Plusgrade's motion. (D.I. 24) For the following reasons, I recommend that the court grant Plusgrade's motion for summary judgment and dismiss the action.

II. BACKGROUND

Tenon & Groove initiated the present case on September 10, 2012, alleging infringement of U.S. Patent Nos. 7,418,409 ("the '409 patent") and 8,145,536 ("the '536 patent"). The '409 patent discloses methods for the concurrent optimization of value in various types of transactions between sellers and buyers, with applications in the context of the airline industry. The '409 patent contains independent claims 1, 2, and 31. Claim 2 is a process claim. Claim 1 requires a "computer-implemented system" capable of performing the process of claim 2. The parties appear to agree that, for purposes of the summary judgment, there are no material differences

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between claims 1 and 2. Claim 31 corresponds with the language of claim 2, but recites a particular application for seat upgrades. Claim 2 is reproduced below:

A computer-implemented method for concurrent optimization of value in a transaction between at least two entities, comprising:

a. providing a data store containing data representing, with respect to at least one product, at least one option offered by a first of said entities;
b. operating a server with which a second of said entities may interact for at least said option;
c. operating a server to receive inputs for at least said option and to search the data store for eligibility of products for at least said option;
d. displaying the search results;
e. receiving at least one decision of the second entity about the acceptance of at least one of said search results comprising acceptance of an option offered by said first entity; and
f. operating an event optimizer system to receive data at least pertaining to said acceptance, and in response to the occurrence of at least one event selected from a set of multiple predetermined potential events, execute a corresponding event specific response algorithm;

wherein at least one of the servers or the event optimizer system concurrently optimizes a value for at least two entities and determines how the first party will satisfy the accepted option.

('409 patent, claim 2)

The '536 patent is a continuation-in-part of the '409 patent, and discloses computerized applications for generating revenue based on conditional options for products, particularly in the context of the airline industry. The '536 patent contains independent claims 1 and 3. Claim 3 is a process claim. Claim 1 requires a "computer-implemented system" capable of performing the process of claim 3. The parties agree that, for purposes of summary judgment, there are no material differences between claims 1 and 3. Claim 3 is reproduced below:

A computer-implemented method to provide options on products, comprising:

a. operating a computer system to receive at least on [sic] input from a customer defining a request for an option for an upgrade for a product;
b. operating a computer system to provide to a customer an option for a product upgrade upon occurrence of specified conditions accepted by the customer and further on condition that the customer relinquish at least one

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right and a company has the right to enforce said relinquishment upon occurrence of the specified conditions and to provide the upgrade;
c. recording in a computer readable data store the option, the specified conditions and relinquishment terms;
d. operating a computer system to process the information in the computer readable data store and automatically provide the upgrade to the customer when conditions on the upgrade opportunity are satisfied; and
e. recording the provision of the upgrade in a computer readable data source.

('536 patent, claim 3)

Tenon & Groove accuses Plusgrade's computerized "Plusgrade Platform" and "One-Up" systems of infringing certain claims in the asserted patents by making, selling, using, or offering to sell the accused systems to airline customers that offer upgrade options to ticketed airline customers. (D.I. 1 at ¶¶ 14-24) Specifically, Tenon & Groove alleges that Plusgrade's accused systems infringe claims 1-2, 4, 6-7, 10-11, 14-16, 22, 26, and 30 of the '409 patent, and claims 1, 3, 5, 9, 12, 14, 18-19, and 21-22 of the '536 patent.

III. LEGAL STANDARD

"The court shall grant summary judgment if the movant shows 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). Material facts are those that could affect the outcome of the proceeding, and "a dispute about a material fact is 'genuine' if the evidence is sufficient to permit a reasonable jury to return a verdict for the nonmoving party." Lamont v. New Jersey, 637 F.3d 177, 181 (3d Cir. 2011) (quoting Anderson v. Liberty Lobby Inc., 477 U.S. 242, 248 (1986)). Pursuant to Rule 56(c)(1), a party asserting that a fact is genuinely disputed must support its contention either by citing to "particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for the purposes of the motion only), admissions, interrogatory answers, or other materials," or

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by "showing that the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact." Fed. R. Civ. P. 56(c)(1)(A) &(B).

The moving party bears the initial burden of proving the absence of a genuinely disputed material fact. See Celotex Corp. v. Catrett, 477 U.S. 317 (1986). The burden then shifts to the non-movant to demonstrate the existence of a genuine issue for trial. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (1986); Williams v. Borough of West Chester, Pa., 891 F.2d 458, 460-61 (3d Cir.1989). When determining whether a genuine issue of material fact exists, the court must view the evidence in the light most favorable to the nonmoving party and draw all reasonable inferences in that party's favor. See Scott v. Harris, 550 U.S. 372, 380 (2007); Wishkin v. Potter, 476 F.3d 180, 184 (3d Cir. 2007). However, the existence of some evidence in support of the nonmoving party may not be sufficient to deny a motion for summary judgment. Rather, there must be enough evidence to enable a jury reasonably to find for the nonmoving party on the issue. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). If the nonmoving party fails to make a sufficient showing on an essential element of its case on which it bears the burden of proof, the moving party is entitled to judgment as a matter of law. See Celotex Corp. v. Catrett, 477 U.S. at 322.

IV. DISCUSSION

By way of its motion for summary judgment, Plusgrade alleges that the '409 patent and the '536 patent are invalid because they fail to meet the subject matter eligibility requirements of 35 U.S.C. § 101. (D.I. 21) The court analyzes § 101 issues in view of the well-established principle that all issued patent claims receive a statutory presumption of validity. See 35 U.S.C. § 282; Microsoft Corp. v. i4i Ltd. P'ship, 131 S. Ct. 2238 (2011). The standard of proof to

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establish the invalidity of a patent is clear and convincing evidence. See WMS Gaming Inc. v. Int'l Game Tech., 184 F.3d 1339, 1355 (Fed. Cir. 1999). "Whether a claim is drawn to patent-eligible subject matter under 35 U.S.C. § 101 is a threshold inquiry to be determined as a matter of law in establishing the validity of a patent." Cloud Satchel, LLC v. Amazon.com, Inc., --- F. Supp. 3d ----, 2014 WL 7227942, at *3 (D. Del. Dec. 18, 2014) (citing CLS Bank Int'l v. Alice Corp. Pty. Ltd., 717 F.3d 1269, 1277 (Fed. Cir. 2013), aff'd, Alice Corp. Pty. Ltd. v. CLS Bank Int'l, --- U.S. ----, 134 S. Ct. 2347, 189 L. Ed. 2d 296 (2014); In re Bilski, 545 F.3d 943, 950 (Fed. Cir. 2008)).

Section 101 provides that "[w]hoever 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 therefore, subject to the conditions and requirements of this title." 35 U.S.C. § 101. There are three judicially created exceptions to the four statutory categories of patent eligibility set forth in § 101 - "laws of nature, physical phenomena, and abstract ideas."¹ Bilski v. Kappos, 561 U.S. 593, 594 (2010); see also Alice Corp. Pty. Ltd. v. CLS Bank Int'l, 134 S. Ct. 2347, 2354 (2014). A claim directed to one of these exceptions is not eligible for patent protection because "they are the basic tools of scientific and technological work." Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289, 1293 (2012) (quoting Gottschalk v. Benson, 409 U.S. 63, 67 (1972)); see also Assoc. for Molecular Pathology v. Myriad Genetics, Inc., 133 S. Ct. 2107, 2116 (2013). The Supreme Court has recognized that too broad an interpretation of this exclusionary principle could eviscerate patent law because "all

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inventions at some level embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas." Mayo, 132 S. Ct. at 1293; see also Alice, 134 S. Ct. at 2354. For this reason, the Supreme Court recognizes that "'an application of a law of nature . . . to a known structure or process may well be deserving of patent protection.'" Mayo, 132 S. Ct. at 1293-94 (emphasis in original)...