KHN Solutions Inc. v. Vertisense Inc.

Filing 57

ORDER by Judge Haywood S. Gilliam, Jr. DENYING 22 MOTION TO DISMISS. (ndrS, COURT STAFF) (Filed on 9/30/2016)

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1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 KHN SOLUTIONS INC., Case No. 16-cv-00962-HSG Plaintiff, 8 ORDER DENYING MOTION TO DISMISS v. 9 10 VERTISENSE INC., Re: Dkt. No. 22 Defendant. United States District Court Northern District of California 11 12 In this patent infringement action, Defendant Vertisense, Inc. moves to dismiss on the 13 14 ground that the asserted patent claims ineligible subject matter. Dkt. No. 28 (“Mot.”). For the 15 reasons articulated below, the motion is DENIED WITHOUT PREJUDICE. 16 17 I. BACKGROUND For purposes of this motion, the Court accepts the following alleged facts as true. Plaintiff 18 KHN Solutions, Inc. is “dedicated to developing and commercializing cutting-edge, patented 19 technology for measuring blood alcohol content (‘BAC’), [and] monitoring and analyzing 20 intoxication and intoxication patterns specific to a user.” Dkt. No. 1 (“Compl.”) ¶ 9. Since 21 creating the world’s first smartphone breathalyzer, Plaintiff “has become the market leader in 22 portable breathalyzer technology.” Id. ¶ 11. Defendant Vertisense, Inc. “develops, manufactures, 23 assembles, markets, offers for sale, sells, and tests breathalyzer devices,” including the 24 “Alcohoot,” “TRANSIT Connect,” and “INTREPID CONNECT” products (together, the 25 “Accused Products”). Id. ¶¶ 4, 12. 26 On February 26, 2016, Plaintiff filed the current action, asserting that the Accused 27 Products infringe United States Patent 9,076,317 (“the ‘317 Patent”) entitled, “Method and System 28 for Monitoring Intoxication.” Claim one of the ‘317 Patent purports to cover: 1. A method for monitoring intoxication of a user, comprising: receiving a set of signals, derived from a set of breath samples collected from the body of the user at a set of time points, at a sample receiving module; at a processing subsystem, determining a value of an intoxication metric, derived from the set of signals upon receiving information derived from the set of signals by way of a data link coupled to the processing subsystem; at the processing subsystem, generating a predicted temporal profile of the intoxication metric for the user based upon the value of the intoxication metric and the set of time points; at the processing subsystem, generating an analysis of the user’s sobriety based upon the predicted temporal profile; and at a device comprising a user interface, providing a notification to the user based upon the analysis, thus facilitating monitoring of the user’s intoxication. 1 2 3 4 5 6 7 8 9 Dkt. No. 1, Ex. A at 22:11-29. The dependent claims describe receiving supplementary 10 demographic information from the user, administering sobriety tasks, and predicting when the United States District Court Northern District of California 11 12 13 user’s intoxication metric will return to zero. Id. at 22:30-65. Independent claim eight adds “transmitting at least one of the predicted profile, the analysis, and the notification to an entity associated with the user, thus facilitating monitoring of the user’s intoxication.” Id. at 23:22-25. 14 Finally, independent claim fourteen describes training a user to become more aware of his or her 15 actual intoxication state by comparing the user’s self-estimated intoxication state with the user’s 16 actual intoxication state. Id. at 24:4-31. 17 Defendant moves to dismiss on the ground that the ‘317 Patent claims an abstract idea, and 18 is therefore invalid under 35 U.S.C. § 101. 19 20 21 22 II. DISCUSSION A. Legal Standard Federal Rule of Civil Procedure 8(a) requires that a complaint contain “a short and plain statement of the claim showing that the pleader is entitled to relief[.]” A defendant may move to 23 dismiss a complaint for failing to state a claim upon which relief can be granted under Federal 24 25 Rule of Civil Procedure 12(b)(6). “Dismissal under Rule 12(b)(6) is appropriate only where the complaint lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory.” 26 Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008). To survive a Rule 27 12(b)(6) motion, a plaintiff must plead “enough facts to state a claim to relief that is plausible on 28 2 1 its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 540, 570 (2007). A claim is facially plausible 2 when a plaintiff pleads “factual content that allows the court to draw the reasonable inference that 3 the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). 4 Under 35 U.S.C. § 101, an invention is patentable if it claims “any new and useful process, 5 machine, manufacture, or composition of matter, or any new and useful improvement thereof.” 6 Although § 101 is interpreted broadly, the Supreme Court has defined three patent-ineligible 7 concepts: laws of nature, physical phenomena, and abstract ideas. Alice Corp. Pty. v. CLS Bank 8 Int’l, 134 S. Ct. 2347, 2355 (2014) (citing Mayo Collaborative Servs. v. Prometheus Labs., Inc., 9 132 S. Ct. 1289, 1293 (2012)); Diamond v. Chakrabarty, 447 U.S. 303, 308-09 (1980). 10 To determine whether an invention is patentable, courts apply the two-step framework United States District Court Northern District of California 11 articulated by the Supreme Court in Alice. First, a court must “determine whether the claims at 12 issue are directed to one of those patent-ineligible concepts.” Alice, 134 S. Ct. at 2355. If they 13 are, a court must then “consider the elements of each claim both individually and as an ordered 14 combination to determine whether the additional elements transform the nature of the claim into a 15 patent-eligible application.” Id. (internal quotations and citations omitted). 16 The issue of patent invalidity under § 101 presents a question of law. See DDR Holdings, 17 LLC v. Hotels.com, L.P., 773 F.3d 1245, 1255 (Fed. Cir. 2014). Accordingly, a district court may 18 resolve the issue of § 101 patent eligibility on a motion to dismiss. See e.g., Content Extraction & 19 Transmission LLC v. Wells Fargo Bank, 776 F.3d 1343, 1349 (Fed. Cir. 2014) (affirming 20 determination of ineligibility made on motion to dismiss); Ultramercial, Inc. v. Hulu, LLC, 772 21 F.3d 709, 714, 717 (Fed. Cir. 2014) (reviewing determination of ineligibility made on motion to 22 dismiss). However, a court may need to defer the § 101 analysis until after claim construction 23 when a patentee identifies terms requiring construction and explains how resolution of 24 construction disputes is material to resolving the § 101 challenge. See Protegrity USA, Inc. v. 25 Netskope, Inc., No. 15-CV-02515-YGR, 2015 WL 6126599, at *3 (N.D. Cal. Oct. 19, 2015) 26 (“[T]he Court notes that where a patentee fails to explain which terms require construction or how 27 the analysis would change were those constructions adopted, the Court may rule on the validity 28 challenge prior to construing claims.”); see also Morsa v. Facebook, Inc., 77 F. Supp. 3d 1007, 3 1 1012 (C.D. Cal. 2014), aff’d, 622 F. App’x 915 (Fed. Cir. 2015) (“[C]laim construction is a 2 prerequisite to the § 101 inquiry only where claim construction disputes are relevant.”). 3 B. 4 Defendant moves to dismiss Plaintiff’s complaint on the ground that the ‘317 Patent is Analysis 5 directed to the patent-ineligible, abstract idea of “using the results of a breathalyzer test to predict 6 how intoxicated a person will be in the future,” and thus is invalid under § 101. Mot. at 3. 7 Plaintiff responds that the claims of the ‘317 Patent constitute a patentable improvement and 8 transformation of an existing technological process — breath alcohol content analysis using a 9 breathalyzer. Dkt. No. 28 (“Opp’n”) at 17-22; Dkt. No. 52 (“Pl. Supp. Br.”) at 1-2. Moreover, Plaintiff contends, there are factual issues regarding the proper construction of the “receiving” and 11 United States District Court Northern District of California 10 “determining” terms that make dismissal on a Rule 12(b)(6) motion premature. Opp’n at 6, 10. 12 The Court holds that claim construction is necessary to fully understand the basic character of the 13 claimed subject matter, making dismissal premature at this stage. 14 The Federal Circuit has recently issued two decisions, Enfish, LLC v. Microsoft Corp., 822 15 F.3d 1327 (Fed. Cir. 2016), and In re: TLI Communications LLC Patent Litig., 823 F.3d 607 (Fed. 16 Cir. 2016), which provide additional clarification regarding step one of the Alice test. Issued first, 17 Enfish instructs that claims are not directed to an abstract idea if their “plain focus . . . is on an 18 improvement to computer functionality” or computer capabilities. Enfish, 822 F.3d at 1336. 19 Published less than a week later, TLI emphasizes that claims are abstract, however, if they are 20 directed to “the use of conventional or generic technology in a nascent but well-known 21 environment, without any claim that the invention reflects an inventive solution to any problem 22 presented by combining the two.” TLI, 823 F.3d at 612. Thus, claims that describe “a new 23 telephone, a new server, or a new physical combination of the two” are not abstract, but claims 24 that describe a system and methods in “purely functional terms” without “any technical details for 25 the tangible components” are abstract. Id. 26 In the wake of Enfish and TLI, the parties disagree over whether the ‘317 Patent’s claims, 27 when properly construed, are directed at a patent-ineligible concept under step one of the Alice 28 test. Plaintiff asserts that, like the claims in Enfish, the claims of the ‘317 Patent “improve an 4 1 existing technological process of measuring intoxication with a breathalyzer, which only has the 2 capability of determining a user’s current level of intoxication.” Pl. Supp. Br. at 2. Specifically, 3 Plaintiff contends that the “receiving” and “determining” steps of the ‘317 Patent require the use 4 of a physical breathalyzer to “receive” a user’s breath sample and “determine” a user’s 5 intoxication metric. Opp’n at 10-14. Plaintiff argues that the ‘317 Patent then improves upon the 6 traditional breathalyzer by using the breathalyzer’s output to generate a predicted temporal profile 7 and notify the user of his projected future levels of intoxication or the effects of his current level of 8 intoxication. Id.; Pl. Supp. Br. at 2. 9 In contrast, Defendant contends that under its interpretation of the “receiving” and “determining” steps, the ‘317 Patent can be infringed “without using or possessing a 11 United States District Court Northern District of California 10 breathalyzer.” Dkt. No. 51 (“Def. Supp. Br.”) at 2. Defendant argues that the first step of the ‘317 12 Patent can begin with an individual “receiving a set of signals” that has at some point in the past 13 been derived from a breathalyzer, and that the remainder of the ‘317 Patent’s claims only recite 14 the use of a generic processor to manipulate the information received. Id. at 2-3. Defendant 15 argues that under its construction, the ‘317 Patent fails to recite a technological improvement to a 16 breathalyzer, “instead mak[ing] use of the existing computational capabilities of a generic 17 processing system.” Id. 18 Given this dispute, the Court finds claim construction necessary to determine whether the 19 ‘317 Patent is directed at a patentable concept because it claims an improvement to breathalyzer 20 technology. Defendant’s motion is premature because the Court needs to construe material 21 disputed claims in order to fully understand the basic nature of the claimed invention. See 22 Bancorp Servs., L.L.C. v. Sun Life Assur. Co. of Canada (U.S.), 687 F.3d 1266, 1273–74 (Fed. Cir. 23 2012) (“[T]he determination of patent eligibility requires a full understanding of the basic 24 character of the claimed subject matter.”). Specifically, the Court must determine whether, for 25 example, the “receiving,” “determining,” and “processing” steps of the ‘317 Patent recite “the use 26 of conventional or generic technology in a nascent but well-known environment” or describe a 27 truly innovative solution in breathalyzer technology. See TLI, 823 F.3d at 612. 28 5 1 2 III. CONCLUSION The Court finds Defendant’s motion to dismiss on the basis of patent ineligibility under 35 3 U.S.C. § 101 premature, and denies the motion without prejudice. Defendant may bring a 4 renewed motion on § 101 patent ineligibility grounds after the completion of claim construction. 5 The Court sets a case management conference on October 18, 2016, at 2:00 p.m. The 6 parties are directed to meet and confer and file a joint case management statement by October 11, 7 2016. In particular, the parties should discuss whether they agree on a proposed case schedule. 8 9 10 United States District Court Northern District of California 11 12 IT IS SO ORDERED. Dated: September 30, 2016 ______________________________________ HAYWOOD S. GILLIAM, JR. United States District Judge 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 6

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