Hybrid Audio, LLC v. ASUS Computer International, Inc. et al

Filing 71

ORDER re 49 Motion to Dismiss. Signed by Judge James Donato on 7/11/2019. (jdlc3S, COURT STAFF) (Filed on 7/11/2019)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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HYBRID AUDIO, LLC,
Plaintiff,

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United States District Court
Northern District of California

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Case No. 3:17-cv-05947-JD
ORDER RE MOTION TO DISMISS

v.

Re: Dkt. No. 49
ASUS COMPUTER INTERNATIONAL, et
al.,
Defendants.

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In this patent dispute, Asus Computer International and ASUSTeK Computer Inc.

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(together, “Asus”) move to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6).

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Dkt. No. 49. The motion is denied.

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BACKGROUND
The patent-in-suit is U.S. Reissue Patent No. RE40,281 (“’281 patent”), entitled “Signal

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Processing Utilizing a Tree-Structured Array.” Dkt. No. 1 ¶¶ 10-15. It is a reissue of U.S. Patent

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No. 6,252,909, and a reexamnination certificate was issued in December 2015. Id. The original

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patent was issued on June 26, 2001, and claimed priority to September 21, 1992. Dkt. No. 1-2 at

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1. The patent expired on September 21, 2012. Dkt. No. 1 ¶ 16. The claimed invention “relates to

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audio compression and decompression systems,” Dkt. 1-2 at 1:22-23, and is alleged to be a

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component of the MP3 audio format, Dkt. No. 1 ¶ 22; Dkt. No. 1-4 at 1.

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Hybrid Audio, LLC (“Hybrid Audio”) filed this patent infringement suit against Asus in

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April 2016, seeking royalties from when Asus received notice of the patent, January 5, 2011, to

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the expiration date, September 21, 2012, among other relief. Dkt. No. 1 ¶ 18. The previous owner

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of the ’281 patent was prevented from seeking royalties during the pendency of a patent

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reexamination from June 2012 to December 2015. Id. at ¶ 16.

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The case was filed in the District of Massachusetts and transferred to this district in

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October 2017 under 28 U.S.C. § 1406(a), after the Supreme Court published TC Heartland LLC v.

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Kraft Foods Group Brands LLC, 137 S. Ct. 1514 (2017). Dkt. Nos. 25, 27, 30. Hybrid Audio

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asserts that Asus infringed claims 5-6, 9-13, 15-22, 24-30, 32-35, 38-42, 45-49, 50, 51, 53, 55-61,

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63 and 65-121 of the ’281 patent in multiple products and services that utilize the MP3 audio file

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format. Dkt. No. 1 ¶¶ 24, 33.
Asus moved to dismiss for patent ineligibility under 35 U.S.C. § 101 and Alice Corp. Pty.

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Ltd. v. CLS Bank International, 573 U.S. 208 (2014). Dkt. No. 49. Asus says that the ’281 patent

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states claims that are nothing more than an unadorned abstract idea in the form of mathematical
algorithms, with no saving inventive concept. See id. at 7-8. But the plain language of the patent

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United States District Court
Northern District of California

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and other sources “properly considered on a motion to dismiss, such as the complaint,” Aatrix

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Software, Inc. v. Green Shades Software, Inc., 882 F.3d 1121, 1128 (Fed. Cir. 2018), demonstrate

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that the claims are “directed to a specific improvement to the way computers operate,” Enfish,

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LLC v. Microsoft Corp., 822 F.3d 1327, 1336 (Fed. Cir. 2016), and therefore constitute a non-

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abstract patent-eligible invention.
DISCUSSION

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I.

LEGAL STANDARDS
Rule 8(a)(2) of the Federal Rules of Civil Procedure requires the complaint to provide “a

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short and plain statement of the claim showing that the pleader is entitled to relief.” To meet that

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rule and survive a Rule 12(b)(6) motion to dismiss, a plaintiff must allege “enough facts to state a

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claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).

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This does not impose a probability requirement at the pleading stage. It simply calls for enough

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“factual content that allows the court to draw the reasonable inference that the defendant is liable

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for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550

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U.S. at 556). The plausibility analysis is “context-specific” and not only invites, but “requires the

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reviewing court to draw on its judicial experience and common sense.” Id. at 679.

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The Federal Circuit has “repeatedly recognized that in many cases it is possible and proper
to determine patent eligibility under 35 U.S.C. § 101 on a Rule 12(b)(6) motion. In many cases,
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too, evaluation of a patent claim’s subject matter eligibility under § 101 can proceed even before a

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formal claim construction.” Genetic Techs. Ltd. v. Merial L.L.C., 818 F.3d 1369, 1373-74 (Fed.

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Cir. 2016) (citations omitted); see also Aatrix, 882 F.3d at 1125. But as the circuit has recently

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emphasized, the question of eligibility may be determined at the pleadings stage “only when there

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are no factual allegations that, taken as true, prevent resolving the eligibility question as a matter

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of law.” Aatrix, 882 F.3d at 1125 (citing FairWarning IP, LLC v. Iatric Sys., Inc., 839 F.3d 1089,

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1097 (Fed. Cir. 2016)); see also Cellspin Soft, Inc. v. Fitbit, Inc., No. 18-2178, 2019 WL 2588278,

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at *10 (Fed. Cir. June 25, 2019) (vacating Rule 12(b)(6) and Rule 12(c) dismissals where

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complaint made plausible and “well-pleaded allegations” of eligibility). This is particularly true

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for the element of an inventive concept, which raises a question of fact that can be resolved in a

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United States District Court
Northern District of California

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motion to dismiss only if the answer may be found in the complaint, the patent, and matters

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subject to judicial notice. Aatrix, 882 F.3d at 1128.

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To be sure, a patentee cannot avoid dismissal for ineligible claims purely on the basis of

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conclusory or generalized statements, and fanciful or exaggerated allegations that later prove to be

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unsupported may lead to fee shifting or other sanctions. See Cellspin, 2019 WL 2588278, at *8

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(“While we do not read Aatrix to say that any allegation about inventiveness, wholly divorced

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from the claims or the specification, defeats a motion to dismiss, plausible and specific factual

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allegations that aspects of the claims are inventive are sufficient.”); Berkheimer v. HP Inc., 890

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F.3d 1369, 1373 (Fed. Cir. 2018) (Moore, J., concurring in denial of rehearing en banc) (“[I]f the

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allegations in the complaint about the invention as claimed ultimately lack evidentiary support or

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if the case is exceptional, district courts can award attorneys’ fees to the accused infringer under

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either Rule 11 or [35 U.S.C.] § 285 to compensate the accused infringer for any additional

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litigation costs it incurs.”). But the inquiry in a motion to dismiss is focused on the contents of the

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complaint and the plain words of the patent that is incorporated by reference. To the extent claim

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construction issues might arise, the Court should adopt the patentee’s proposed constructions.

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Aatrix, 882 F.3d at 1125; IPLearn-Focus, LLC v. Microsoft Corp., No. 14-cv-00151-JD, 2015 WL

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4192092, at *3 (N.D. Cal. July 10, 2015), aff’d, 667 F. App’x 773 (Fed. Cir. July 11, 2016).

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Here, the Rule 12(b)(6) evaluation has been substantially streamlined by the complaint and

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the parties’ arguments. Plaintiff does not object to resolving the Section 101 question in the

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context of defendants’ motion and neither side has called for claim construction as part of the

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eligibility inquiry. No construction disagreements were identified in the briefs. Consequently, the

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Section 101 inquiry may properly be made at this stage of the case.

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For the merits of the Section 101 issue, the scope of patentable subject matter includes

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“any new and useful process, machine, manufacture, or composition of matter, or any new and

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useful improvement thereof.” 35 U.S.C. § 101. The “laws of nature, physical phenomena, and

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abstract ideas” are “specific exceptions to § 101’s broad patent-eligibility principles.” Bilski v.
Kappos, 561 U.S. 593, 601 (2010) (citation omitted). These exclusions are intended to guard

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United States District Court
Northern District of California

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against undue preemption of innovation and invention. Alice, 573 U.S. at 216 (citing U.S. Const.

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art. I, § 8, cl. 8). The Court must “distinguish between patents that claim the ‘buildin[g] block[s]’

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of human ingenuity and those that integrate the building blocks into something more,” because

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overbroad patent protection “would risk disproportionately tying up the use of the underlying

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ideas.” Id. at 217 (alterations in original) (internal quotation marks and citation omitted).

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Hybrid Audio proposes that the recent decision in Henry Schein, Inc. v. Archer and White

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Sales, Inc., 139 S. Ct. 524 (2019), has changed this well-mapped terrain. As Hybrid Audio puts it,

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the “decision in Henry Schein calls into question whether the judicial exceptions to patentable

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subject matter courts have recognized -- laws of nature, natural phenomena, and abstract ideas --

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are similarly inconsistent with the plain text of Section 101.” Dkt. No. 70 at 2. That is an

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idiosyncratic reading of Henry Schein, and the Court sees no indication in the opinion that the

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Supreme Court intended to change the Alice landscape. In any event, the question need not be

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taken up in detail because the Court finds patent eligibility.

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Alice established a two-part test for the Section 101 inquiry. First, the Court determines

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“whether the claims at issue are directed to a patent-ineligible concept” such as an abstract idea,

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law of nature or natural phenomenon. Alice, 573 U.S. at 218. It is often “sufficient to compare

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claims at issue to those claims already found to be directed to an abstract idea in previous cases”

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for purposes of the step one analysis. Enfish, 822 F.3d at 1334; see also Alice, 573 U.S. at 221.
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The “purely functional nature of the claim confirms [whether the patent] is directed to an

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abstract idea, not to a concrete embodiment of that idea.” Affinity Labs of Tex., LLC v.

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Amazon.com, Inc., 838 F.3d 1266, 1269 (Fed. Cir. 2016); see also SAP Am., Inc. v. InvestPic,

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LLC, 898 F.3d 1161, 1167 (Fed. Cir. 2018) (describing “abstract” as turning on “the specificity

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required to transform a claim from one claiming only a result to one claiming a way of achieving

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it”); BSG Tech LLC v. BuySeasons, Inc., 899 F.3d 1281, 1287 (Fed. Cir. 2018) (“For an

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application of an abstract idea to satisfy step one, the claim’s focus must be something other than

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the abstract idea itself.”). But oversimplifying the claims should be avoided because “[a]t some

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level, ‘all inventions . . . embody, use, reflect, rest upon, or apply laws of nature, natural
phenomena, or abstract ideas.’” Alice, 573 U.S. at 217 (second alteration in original) (internal

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United States District Court
Northern District of California

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citation omitted).

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If a patent is directed to a patent-ineligible concept, the second step in Alice is to look for

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an “‘inventive concept’ -- i.e., an element or combination of elements that is sufficient to ensure

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that the patent in practice amounts to significantly more than a patent upon the [ineligible concept]

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itself.” Id. at 217-18 (alteration in original) (internal quotation marks and citation omitted). This

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step asks, “[w]hat else is there in the claims before us?” Mayo Collaborative Servs. v. Prometheus

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Labs., Inc., 566 U.S. 66, 78 (2012). The answer must include something “significantly more” than

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the abstract idea itself. BSG Tech, 899 F.3d at 1290. “It is well-settled that mere recitation of

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concrete, tangible components is insufficient to confer patent eligibility to an otherwise abstract

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idea. Rather, the components must involve more than performance of ‘well-understood, routine,

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conventional activit[ies] previously known to the industry.’” In re TLI Commc’ns LLC Patent

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Litig., 823 F.3d 607, 613 (Fed. Cir. 2016) (alteration in original) (quoting Alice, 573 U.S. at 225).

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In addition, merely reducing an abstract concept to a particular technical platform is not enough to

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provide the inventive element needed to support a patent. Elec. Power Grp., LLC, v. Alstom S.A.,

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830 F.3d 1350, 1354 (Fed. Cir. 2016); TriDim Innovations LLC v. Amazon.com, Inc., 207 F. Supp.

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3d 1073, 1080 (N.D. Cal. 2016). “If a claim’s only ‘inventive concept’ is the application of an

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abstract idea using conventional and well-understood techniques, the claim has not been

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transformed into a patent-eligible application of an abstract idea.” BSG Tech, 899 F.3d at 1290-

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91.
The Alice steps are sequential. If the Court finds that “the claims are not directed to an

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abstract idea under step one of the Alice analysis,” it does not need to proceed to the second step.

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Enfish, 822 F.3d at 1339 (citing Alice, 573 U.S. at 217); see also Ancora Techs., Inc. v. HTC Am.,

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Inc., 908 F.3d 1343, 1349 (Fed. Cir. 2018).

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II.

REPRESENTATIVE CLAIMS
The parties have not agreed on a representative claim for the motion. Asus says that

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claims 5 and 18 are representative, Dkt. No. 49 at 9-10, although it also addresses arguments to the

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other claims, albeit in rather cursory form, id. at 26-28. Hybrid Audio rejects treating claims 5 and

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United States District Court
Northern District of California

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18 as representative. Dkt. No. 59 at 21-23. Even so, the Court “may treat a claim as

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representative in certain situations, such as if the patentee does not present any meaningful

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argument for the distinctive significance of any claim limitations not found in the representative

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claim.” Berkheimer v. HP Inc., 881 F.3d 1360, 1365 (Fed. Cir. 2018). While the complaint

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features 104 asserted claims in total, Hybrid Audio does not offer any cogent reason or

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“meaningful argument for the distinctive significance” of the remaining 102. See Dkt. No. 59 at

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21-23. In addition, a plain reading of the patent indicates that claims 5 and 18 are properly treated

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as representative for purposes of evaluating the motion to dismiss. The Central District of

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California reached the same conclusion on the representativeness of claims 5 and 18 in another

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suit involving the ’281 patent. Hybrid Audio, LLC v. Visual Land, Inc., No. 17-cv-08968-RSWL-

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AGR, 2018 WL 1684309, at *3 (C.D. Cal. Apr. 5, 2018).

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Claim 5 claims a method for data compression and recites:
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A signal processing method comprising:

splitting a signal into subbands using a plurality of filter banks
connected to form a tree-structured array having a root node and
greater than two leaf nodes, each node comprising one filter bank
having greater than two filters, and at least one of the leaf nodes
having a number of filters that differs from the number of filters in a
second leaf mode.
Dkt. No. 1-2 at 23:23-30.
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Claim 18 is essentially the reverse and claims a method for data decompression. It recites:

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18.

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synthesizing a signal using a plurality of synthesis filter banks
connected to form a tree-structured array having greater than two leaf
nodes and a root node,

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wherein each of the nodes comprises one synthesis filter bank having
greater than two filters, with at least one of the leaf nodes having a
number of filters that differs from the number of filters in a second
leaf node.

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A signal processing method comprising:

Id. at 25:4-11.
Hybrid Audio claims that the “inventions of the [’281] patent resolve technical problems

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related to the use of signal processing technology.” Dkt. No. 1 ¶ 27. Further, it alleges the

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United States District Court
Northern District of California

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“claims of the [’281] patent recite one or more inventive concepts that are rooted in signal

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processing technology [and] recite an invention that is not merely the routine or conventional use

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of signal processing technology.” Id. at ¶¶ 28-29.

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III.

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THE CLAIMED INVENTION IS PATENTABLE
The Alice inquiry ends at step one on this motion because the representative claims are not

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directed to an abstract idea or other ineligible subject matter. They assert a specific and tangible

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improvement to computer functionality, namely the processing of audio data, that is not abstract.

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See SRI Int’l, Inc. v. Cisco Sys., Inc., 918 F.3d 1368, 1375 (Fed. Cir. 2019); Ancora, 908 F.3d at

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1347-48 (and cases therein). This is not a case where the claims state an abstract idea “for which

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computers are invoked merely as a tool.” Finjan, Inc. v. Blue Coat Sys, Inc., 879 F.3d 1299, 1303

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(Fed. Cir. 2018) (quoting Enfish, 822 F.3d at 1336). Nor is it one where the “basic thrust might

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more easily be understood as directed to an abstract idea” so that analysis of the claimed

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technological improvement should take place at Alice step two. BASCOM Glob. Internet Servs. v.

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AT&T Mobility LLC, 827 F.3d 1341, 1348 (Fed. Cir. 2016).

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Turning to the specifics of step one, the primary task is to ascertain “the focus of the

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claimed advance over the prior art to determine if the claim’s character as a whole is directed to

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excluded subject matter.” Intellectual Ventures I LLC v. Capital One Fin. Corp., 850 F.3d 1332,

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1338 (Fed. Cir. 2017) (internal quotation marks and citation omitted). To that end, the claim may
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be “considered in light of the specification.” Enfish, 822 F.3d at 1335; see also IPLearn-Focus,

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2015 WL 4192092, at *4. For the digital technology involved here, the relevant inquiry is

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“whether the claims are directed to an improvement to computer functionality versus being

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directed to an abstract idea.” Enfish, 822 F.3d at 1335; see also Finjan, 879 F.3d at 1304 (“The

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question, then, is whether [the claim] constitutes an improvement in computer functionality.”).

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The purpose of the ’281 patent is to make better computers, specifically by enabling them

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to process audio signals more accurately and efficiently. Its plain language leaves no reasonable

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doubt that the representative claims are directed to a specific improvement in the way computers

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operate. According to the specification, “it is the object of the present invention to provide an
improved multi-carrier transmission system.” Dkt. No. 1-2 at 2:26-27. It seeks “to allow

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United States District Court
Northern District of California

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playback of high fidelity recordings on the commonly used computer platforms without the

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addition of expensive special purpose hardware.” Id. at 5:4-6. In effect, the ’281 patent makes a

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better radio and not just changes the channel. The patent is also directed to improving the

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capacities of computer networks. Id. at 4:60-63 (Computer “based systems using compressed

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audio and video data promise to provide inexpensive playback solutions and allow distribution of

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program material on digital disks or over a computer network.”).

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Courts have previously recognized the particular advantages to computers that flow from

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the implementation of the ’281 patent as evidence of non-abstractness at Alice’s first step. For

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example, one of the objects of the ’281 patent is “to provide a multi-carrier transmission system

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having a lower computational workload than” other signal processing systems. Id. at 2:28-31.

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The patent accomplishes this, in part, by employing “narrower subchannels at the low frequencies

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and wider subchannels at the higher frequencies in a multicarrier modulation system.” Id. at 8:51-

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54; see also id. at 17:19-21:48 (describing other ways the invention provides “reduced

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computational workload”). Efficient computer processing is indicative of patent-eligible subject

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matter. See Data Engine Techs. LLC v. Google LLC, 906 F.3d 999, 1009 (Fed. Cir. 2018). With

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the ’281 patent, efficiency enables the claimed signal processing systems to be more adaptable to

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diverse system resources scenarios, which is itself a further indication of patentable subject matter

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in the software context. Dkt. No. 1-2 at 5:20-30; see Finjan, 879 F.3d at 1304; Enfish, 822 F.3d at
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1333 (holding patent non-abstract, in part, because invention could be used without “extensive

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modeling and configuration of the various tables and relationships in advance of launching the

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database”).

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Another technical improvement associated with patentable subject matter in this context is

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limiting the need for specialized computer equipment. See Visual Memory LLC v. NVIDIA Corp.,

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867 F.3d 1253, 1259 (Fed. Cir. 2017) (describing non-abstract improvements to computer based

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on “flexibility to operate with multiple different processors”). One of the advantages of the ’281

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patent is that it enables more computers to play higher quality audio under more circumstances

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“without the addition of expensive special purpose hardware.” Dkt. No. 1-2 at 4:53-5:19.
Similarly in Enfish, “more effective storage” was one of the benefits to a computer that led the

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United States District Court
Northern District of California

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Federal Circuit to conclude the self-referential spreadsheet at issue was not abstract under Alice.

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Enfish, 822 F.3d at 1333; see also BSG Tech, 899 F.3d at 1288 (“Both Enfish and Visual Memory

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concerned claims that focused on improved ways in which systems store and access data.”). This

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invention is directed to creating “systems for compressing audio sound tracks to reduce the storage

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and bandwidth requirements.” Dkt. No. 1-2 at 2:46-48.

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Overall, the ’281 patent embodies several types of improvements to computers that have

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been deemed to be non-abstract. See, e.g., Core Wireless Licensing S.A.R.L. v. LG Elecs., Inc.,

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880 F.3d 1356, 1363 (Fed. Cir. 2018) (and cases therein). As in Ancora, the claims here are

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directed to “an improvement in computer functionality that has ‘the specificity required to

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transform a claim from one claiming only a result to one claiming a way of achieving it.’” Ancora,

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908 F.3d at 1349 (quoting InvestPic, 898 F.3d at 1167).

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These characteristics distinguish the ’281 patent from the compression patent determined

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to be ineligible in the unreported decision in Voit Technologies, LLC v. Del-Ton, Inc., 757 F.

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App’x 1000 (Fed. Cir. 2019). The patent in that case did not explain how it improved

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“compression techniques or the functioning of the computer,” and merely used “conventional

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compression techniques to carry out the claimed invention.” Voit, 757 F. App’x at 1003. But like

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the tabbed spreadsheet in Data Engine, the ’281 patent has “a specific structure . . . that performs a

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specific function.” Data Engine, 906 F.3d at 1010-11. Through the process of utilizing bands of
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nonuniform length by splitting, and then synthesizing, signals into filter banks where “at least one

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of the leaf nodes [has] a number of filters that differs from the number of filters in a second leaf

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node,” Dkt. No. 1-2 at 25:9-11 (claim 18), the invention can better approximate audio (more signal

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relative to noise), without the system requirements of the prior art, id. at 3:43-4:63. See also id. at

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11:4-9 (“Ideally, an audio decomposition should exhibit a time and frequency dependency similar

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to that of human hearing. This may be accomplished by relating the frequency divisions or

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subbands of the decomposition to the critical bandwidths of human hearing.”).

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Asus’s suggestion that the ’281 patent is nothing more than a nonpatentable mathematical
algorithm is not persuasive. See Dkt. No. 49 at 21-25; Dkt. No. 61 at 9-15. As Asus recognizes in
its reply brief, Dkt. No. 61 at 12-15, the Supreme Court has long endorsed patenting inventions

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United States District Court
Northern District of California

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that use algorithms to improve a technological process. See Alice, 573 U.S. at 223 (discussing

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Diamond v. Diehr, 450 U.S. 175 (1981)). More recently, the Federal Circuit recognized this

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principle in Thales Visionix Inc. v. United States, 850 F.3d 1343 (Fed. Cir. 2017). Reversing a

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motion for judgment on the pleadings that invalidated a patent for an inertial tracking system, the

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court held that just because “a mathematical equation is required to complete the claimed method

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and system does not doom the claims to abstraction.” Thales, 850 F.3d at 1349. Similar to

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Thales, the mathematical algorithms in the ’281 patent are used to “reduce errors.” Id.; see Dkt. 1-

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2 at 3:26-42.

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While the specification indicates the invention is likely to be “implemented on digital

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computers which may be general purpose computers or special computers designed to more

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efficiently carry out the operations,” Dkt. No. 1-2 at 3:3-5, this does not preclude patentability as

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Asus contends, Dkt. No. 49 at 29, because the claims are directed to an improvement in the

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functioning of a computer. See Enfish, 822 F.3d at 1338. Asus also goes too far in trying to

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portray the computer-centric audio processing in the ’281 patent as nothing more than an activity

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that can be done by a human or “directed to methods or organizing human activity.” Dkt. No. 49

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at 25. That is patently not the case.

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Asus’s reliance on RecogniCorp, LLC v. Nintendo Co., 855 F.3d 1322 (Fed. Cir. 2017), is
equally misdirected. Dkt. No. 49 at 25; Dkt. No. 61 at 10, 14-15. There, the Federal Circuit found
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the patent embodied “standard encoding and decoding, an abstract concept long utilized to

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transmit information.” RecogniCorp, 855 F.3d at 1326. RecogniCorp is not germane because

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“the claims [here] are directed to ‘a specific means or method’ for improving technology [not] to

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an abstract end-result.” Id. (quoting McRO, Inc. v. Bandai Namco Games Am. Inc., 837 F.3d

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1299, 1314 (Fed. Cir. 2016)); see also id. at 1328 (“RecogniCorp has not alleged a particularized

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application of encoding and decoding image data.”). The ’281 patent does not claim standard

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compression, but rather “a specific means or method for improving technology”-- bands of

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nonuniform length. See also Dkt. No. 1-2 at 13:63-67 (noting “that a two level filter bank of the

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type used in the present invention significantly reduces the overall computational workload even

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in situations in which the frequency spectrum is to be divided into uniform bands”).
CONCLUSION

United States District Court
Northern District of California

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Since “it is clear for the reasons stated that the claims are not directed to an abstract idea,”

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the Court need not proceed to Alice step two. Enfish, 822 F.3d at 1339; Ancora, 908 F.3d at 1349.

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The motion to dismiss is denied.

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IT IS SO ORDERED.
Dated: July 11, 2019

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JAMES DONATO
United States District Judge

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