Nomadix, Inc. v. Hospitality Core Services LLC

Filing 47

ORDER DENYING MOTIONS TO DISMISS 34 , 35 by Judge Dean D. Pregerson . (lc). Modified on 4/3/2015 (lc).

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UNITED STATES DISTRICT COURT

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CENTRAL DISTRICT OF CALIFORNIA

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NOMADIX, INC.,

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Plaintiff,

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v.
HOSPITALITY CORE SERVICES
LLC, d/b/a BLUEPRINT RF,

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Defendant.
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Case No. CV 14-08256 DDP (VBKx)
ORDER ON MOTIONS TO DISMISS
[Dkt. Nos. 34 & 35]

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Presently before the Court are two motions to dismiss portions

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of Plaintiff’s First Amended Complaint (“FAC”), which alleges

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patent infringement.

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patents under 35 U.S.C. § 101 and failure to state a claim for

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infringement under 35 U.S.C. § 271.

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(the “Sec. 101 Motion”) and 35 (the “Sec. 271 Motion”).)

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heard oral arguments and reviewed the parties’ submissions, the

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Court adopts the following order.

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I.

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The motions argue invalidity of the asserted

(Respectively, Dkt. Nos. 34
Having

BACKGROUND
Plaintiff holds United States patents numbered 6,636,894 (“the

’894 patent”), 6,226,677 (“the ‘677 patent”), 6,868,399 (“the

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’399 patent”), 8,156,246 (“the ’246 patent”), 8,266,266 (“the ’266

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patent”), 8,266,266 (“the ’266 patent”), 8,364,806 (“the

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’806 patent”), 8,788,690 (“the ’690 patent”).

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patents – especially ‘399 and ‘6901 – disclose methods for charging

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internet users in places like hotels by redirecting them to a

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webpage that can interface with a "property management system"

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("PMS"), which is a kind of legacy computer system that charges for

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things like phone calls.

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hotel (or other internet-providing venue) can charge customers for

(FAC at 3-4.)

(Opp’n to Sec. 101 Mot. at 1-2.)

These

The

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internet service using their traditional PMS, in a manner that is

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"transparent" to the end user, without the customer having to

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install special billing software.

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(Id.)

These methods involve the use of pre-existing or “off-the-

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shelf” components whose patents are not necessarily owned by

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Plaintiff, with the exception of a “gateway device” manufactured by

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Plaintiff.

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8,788,690, fig. 3 (showing the “Nomadic router,” a gateway device,

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integrated into a larger system that uses a generic “host device”

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and “communications device” and implements “standard” interfaces

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and network algorithms).)

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(See, e.g., Decl. Alan Laquer, Ex. 1, U.S. Patent No.

Defendant manufactures gateway devices in the United States

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and sells them in the United States and abroad.

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The thrust of Plaintiff’s infringement allegations appears to be

(FAC, ¶ 34-36.)

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These appear to be the primary patents at issue in these
motions. (See Sec. 101 Motion at 1; Sec. 271 Motion at 20-23; Sec.
271 Reply at 2-3.) However, the Sec. 271 Motion does appear to be
directed, in part, at the other patents as well. (See Sec. 271
Mot. at 14 (“The claims for divided infringement under all patents
requiring the Dominion gateway ‘in combination with’ other
components provided by other parties should therefore be
dismissed.”).)
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that Defendant makes its gateway devices with the intention that

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they be slotted into systems that infringe on Plaintiff’s patented

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systems, in the place where the “Nomadic router” or other device

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manufactured by Plaintiff would normally be.

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(“[W]ith knowledge of the ‘894 patent, Blueprint RF has provided

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products and components knowing that they, alone or as material

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components in combination with other components, infringe the ‘894

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patent, and contributed to others’ infringement . . . .”).)

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Plaintiff also alleges that Defendant directly infringes the

(E.g., FAC, ¶ 57

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patents when it uses such systems in the course of testing the

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installation of its gateway devices.

(E.g., Id. at ¶ 58.)

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Defendant brings these motions to dismiss arguing that the

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‘399 and ‘690 patents are invalid, and that the claims FAC as a

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whole should be dismissed as either inadequately pleaded or not

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possible as a matter of law.

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“Sec. 101 Motion”) and 35 (the “Sec. 271 Motion”).)

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II.

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(Respectively, Dkt. Nos. 34 (the

LEGAL STANDARD
An order to survive a motion to dismiss for failure to state a

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claim, a complaint need only include “a short and plain statement

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of the claim showing that the pleader is entitled to relief.”

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Atl. Corp. v. Twombly, 550 U.S. 544, 55 (2007) (quoting Conley v.

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Gibson, 355 U.S. 41, 47 (1957)).

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“sufficient factual matter, accepted as true, to state a claim to

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relief that is plausible on its face.”

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662, 678 (2009) (quoting Twombly, 550 U.S. at 570).

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considering a Rule 12(b)(6) motion, a court must “accept as true

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all allegations of material fact and must construe those facts in

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A complaint must include

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Ashcroft v. Iqbal, 556 U.S.
When

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the light most favorable to the plaintiff.”

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F.3d 443, 447 (9th Cir. 2000).

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III. DISCUSSION

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A.

Resnick v. Hayes, 213

Motion to Dismiss on Grounds of Invalidity (the “Sec. 101

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Motion”)

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The Court acknowledges the arguments Defendant has advanced in

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the Sec. 101 Motion.

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field.

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right now, (Dkt. Nos. 39-1, 39-2), the exact functioning of the

However, patent law is a fact-intensive

Although the Court has the patents in question before it

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patented systems has not yet been fully briefed.

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entitled to a presumption of validity, and individual claims in a

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patent are presumed valid even if other claims in the same patent

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are ruled invalid.

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construction is not an inviolable prerequisite to a validity

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determination under § 101,” usually it will “be desirable – and

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often necessary – to resolve claim construction disputes prior to a

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§ 101 analysis, for the determination of patent eligibility

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requires a full understanding of the basic character of the claimed

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subject matter.”

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Canada (U.S.), 687 F.3d 1266, 1273-74 (Fed. Cir. 2012).

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reason, “it will be rare that a patent infringement suit can be

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dismissed at the pleading stage for lack of patentable subject

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matter.”

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(Fed. Cir. 2013) cert. granted, judgment vacated sub nom.

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WildTangent, Inc. v. Ultramercial, LLC, 134 S. Ct. 2870 (2014).

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35 U.S.C. § 282(a).

Patents are

Moreover, while “claim

Bancorp Servs., L.L.C. v. Sun Life Assur. Co. of
For this

Ultramercial, Inc. v. Hulu, LLC, 722 F.3d 1335, 1338

The Court therefore declines, at this stage in the litigation,
to declare the ‘399 and ‘690 patents invalid.

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B.

Motion to Dismiss on Grounds of Failure to Adequately Plead

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Infringement Claims (the “Sec. 271 Motion”)

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Defendant also moves to dismiss Plaintiff’s claims on the

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grounds that they do not properly allege infringement.

Like the

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Sec. 101 Motion, the Sec. 271 Motion raises fact-intensive issues,

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such as whether Defendant must “use” the entire patented system in

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order to install its gateway devices, whether Defendant can receive

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some “benefit” from such testing, whether Defendant’s device or

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features thereof have substantial non-infringing uses, and whether

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the patents are actually directed to a “method” rather than a

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physical system.

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issues will also be better addressed on a more complete factual

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record.

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The Court therefore finds that the infringement

However, in order to better shape the litigation going

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forward, the Court rules on the following legal issues.

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1.

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Specific Intent to Induce Infringement
Defendant argues that Plaintiff does not plead sufficient

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facts to allege induced infringement under 35 U.S.C. § 271(b) or

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export infringement under 35 U.S.C. § 271(f)(1), because the

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Plaintiff does not plead a specific intent on Defendant’s part to

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induce infringement.

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8.)

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(Sec. 271 Mot. at 15-16; Sec. 271 Reply at 7-

The Supreme Court has held that “[e]vidence of active steps

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... taken to encourage direct infringement, such as advertising an

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infringing use or instructing how to engage in an infringing use,

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show an affirmative intent that the product be used to infringe . .

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. .”

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913, 936 (2005).2

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Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S.

Here, Plaintiff has alleged that Defendant provides

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instructions to its customers “instructing them to use the . . .

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Dominion gateways’ captive portal feature and PMS-billing feature.”

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(FAC, ¶ 45.)

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instructions to end-users on how to obtain internet access and that

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Defendant trains hotel employees to assist guests to obtain network

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access.

Similarly, Plaintiff alleges that Defendant provides

(Id.)

Taken with the other allegations that obtaining

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such internet access requires the infringing use of the patented

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systems as a whole, (e.g., id. at ¶ 73-74), these pleadings suffice

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to allege that Defendant took “active steps” to encourage

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infringement, and therefore they are sufficient to allege “an

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affirmative intent that the product be used to infringe.”

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Grokster, 545 U.S. at 936.

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2.

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Affirmative Defenses
Defendant also argues that it has “good-faith defenses” to

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Plaintiff’s allegations of induced infringement – namely, that the

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patents are invalid – and that Plaintiff has not addressed those

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defenses in its FAC.

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plead on the subject of an anticipated affirmative defense.”

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United States v. McGee, 993 F.2d 184, 187 (9th Cir. 1993).

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Plaintiff need do or should do at the pleading stage is to allege

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facts which, if true, would plausibly state a claim for relief.

However, a plaintiff “is not required to

All

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Grokster is a copyright rather than a patent case, but the
Federal Circuit cites it for the standard in patent cases as well.
DSU Med. Corp. v. JMS Co., 471 F.3d 1293, 1305 (Fed. Cir. 2006).
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3.

Whether to Consider “Features” of Defendant’s Device, Or Only

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the Whole Device, When Assessing “Substantial Non-Infringing

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Uses”

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A claim for contributory infringement is a claim that the

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defendant sells a component “especially made or especially adapted

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for use in” a machine or process that infringes a patent.

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U.S.C. § 271(c).

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infringement, however, if the component in question is “suitable

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for substantial noninfringing use.”

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The defendant is not liable for contributory

Id.

Defendant argues that

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Plaintiff does not plead sufficient facts to allege contributory

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infringement under 35 U.S.C. § 271(c), because the FAC does not

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plausibly allege that Defendant’s gateway devices have no

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substantial non-infringing uses.

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The parties seem to agree that this question turns on the

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level of analysis: Defendant’s gateways, taken as a whole device,

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may have substantial non-infringing uses, because they can be used

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to access the internet or other networks even if their “captive

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portal” and “PMS billing” features are not used.

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17 & n.18)

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portal and PMS billing features of the gateway are especially

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adapted for infringing uses and do not have substantial non-

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infringing uses.

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escape liability for contributory infringement by embedding

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infringing features in a larger product that has non-infringing

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uses, citing Ricoh Co. v. Quanta Computer Inc., 550 F.3d 1325, 1338

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(Fed. Cir. 2008).

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(Sec. 271 Mot. at

On the other hand, Plaintiff argues that the captive

Plaintiff further argues that Defendant cannot

Defendant argues that Ricoh does not apply, because “the noninfringing uses are integral gateway operations,” and so do not
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constitute an “additional, separable feature” that is non-

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infringing.

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1337).)

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yet produced evidence showing what operations are “integral” to

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gateway operation), as a rule of law it produces an untenable

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result.

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device with specific features clearly designed to enable

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infringement of a patent – features utterly unnecessary to its non-

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infringing uses – and escape liability for contributory

(Sec. 271 Reply at 10 (quoting Ricoh, 550 F.3d at

Apart from this being partly a factual claim (no party has

Under Defendant’s theory, a manufacturer may build a

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infringement to the extent that there are non-infringing features

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that are “integral” to the functioning of the larger product.

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For this proposition, Defendant cites to Vita-Mix Corp. v.

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Basic Holding, Inc., 581 F.3d 1317 (Fed. Cir. 2009).

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the defendant manufactured a blender equipped with a “stir stick”

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that could be used in either an infringing way or a non-infringing

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way.

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use was separate from the stir stick itself, because it relied on

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“additional, separable features” of the blender, such as a “ball

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and socket joint, interrupted ribbing, and rubber o-ring.”

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The court held that those features were not “separable,” but were

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“directly related” and “useful only” to the non-infringing use of

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the stir stick.

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use of the stir stick – the feature in question – was not

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insubstantial.

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Id. at 1327-28.

Id.

In Vita-Mix,

The plaintiff argued that the non-infringing

Id.

Thus the court found that the non-infringing

But what Vita-mix did not hold is that a feature with no

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substantial non-infringing use cannot be evaluated as a separate

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component if it relies on other, non-infringing features that are

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“integral” to the functioning of the device as a whole.
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To use the

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blender in Vita-mix as an analogy, nothing in that case suggests

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that the stir stick cannot be evaluated as a separate feature

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solely because it works in conjunction with the blending feature of

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the machine, which is non-infringing.

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would seem to vitiate Ricoh: in most cases involving complex

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electronic machinery the infringing feature is likely to rely on

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certain underlying operations, such as a power supply or an

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operating system, that enable non-infringing uses as well.

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Such a reading of Vita-mix

Additionally, although Ricoh spoke of a “separable” non-

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infringing feature, 550 F.3d at 1337, later cases confirm that the

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key inquiry is whether the infringing feature is separable from the

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product into which it has been “embedded.”

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Microsoft Corp., the Federal Circuit found that an embedded XML

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editor, rather than Microsoft Word as a whole, was the relevant

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“material or apparatus” under the statute because “some versions of

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Word 2003 included the custom XML editor, while others did not.”

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598 F.3d 831, 849 (Fed. Cir. 2010).

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Technologies, Inc. v. Gateway, Inc., the court found that a date-

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picking tool, and not Microsoft Outlook as a whole, could infringe

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a patent, because Microsoft could have sold Outlook without the

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date-picker and “offered the date-picker for sale as a separate

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download.”

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In i4i Ltd. P'ship v.

Similarly, in Lucent

580 F.3d 1301, 1320 (Fed. Cir. 2009).

Thus, if the “captive portal” and “PMS billing” features have

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no substantial non-infringing use, and if they are so isolated from

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the non-infringing uses of the gateway device as a whole that the

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device could be sold without those features, then those features

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can be the relevant “components” or “apparatuses” for purposes of

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analyzing substantial non-infringing uses under § 271(c).
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Whether these conditions are met is, of course, a factual

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determination best left for later in the litigation.

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4.

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Whether All Components of the System Must Be Exported
A claim for export infringement lies under § 271(f)(1) when a

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defendant exports “all or a substantial portion of the components

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of a patented invention” and actively induces their combination

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into a patented system outside the United States.

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Defendant argues that Plaintiff has not alleged that Defendant
exported “multiple components” for assembly abroad.

(Sec. 271

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Motion at 18:19-20.)

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§ 271(f)(1) requires that a defendant have, itself, exported

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multiple components, that argument is not correct.

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only requires the defendant to have exported a “substantial

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portion” of the components of a patented system to be assembled

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outside the United States.

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the statute, but the Federal Circuit has held that “liability under

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§ 271(f)(1) may attach for export of a single component” – at least

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when the component is a “main” and “major” component of the

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patented device and the device “would be inoperable” without it.

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Promega Corp. v. Life Technologies Corp., 773 F.3d 1338, 1356 (Fed.

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Cir. 2014).

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To the extent that Defendant is arguing that

Sec. 271(f)(1)

“Substantial portion” is not defined by

In its reply, Defendant argues instead that all the components

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of the infringing system must be exported from the United States,

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whether manufactured or sold by the defendant or not: “The Federal

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Circuit has specifically held that both components of the

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infringing combination must be exported ‘for assembly’ abroad . . .

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.”

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Devices, Inc., 375 F.3d 1113, 1117 (Fed. Cir. 2004).)

(Sec. 271 Reply at 14:14-15 (citing Pellegrini v. Analog

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But this

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seems to be a misreading of Pellegrini, which held that the

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defendant’s product must be physically exported from the United

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States but said nothing about components manufactured and sold

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abroad by others.

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375 F.3d at 1117-18.

Plaintiff need not allege that all components in the system

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were exported from the United States; the key question is whether

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Defendant exported its products for integration into an infringing

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abroad.

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IV.

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CONCLUSION
The motions to dismiss are DENIED.

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IT IS SO ORDERED.

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Dated: April 3, 2015
DEAN D. PREGERSON
United States District Judge

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