Tenon & Groove LLC et al v. Plusgrade SEC et al

Filing 67

REPORT AND RECOMMENDATIONS- GRANTING 20 MOTION for Summary Judgment. Please note that when filing Objections pursuant to Federal Rule of Civil Procedure 72(b)(2), briefing consists solely of the Objections (no longer than ten (10) pages) and the Response to the Objections (no longer than ten (10) pages). No further briefing shall be permitted with respect to objections without leave of the Court. Objections to R&R due by 1/23/2015. Signed by Judge Sherry R. Fallon on 1/6/2015. (lih)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
TENON & GROOVE, LLC and
OPTIONTOWN LLC,
Plaintiffs,
v.
PLUSGRADE S.E.C. a/k/a PLUSGRADE
L.P. and PLUSGRADE U.S. LLC,

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

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

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

2

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 iii! 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 ifthe movant shows that there is no genuine

dispute as to any material fact and the movant is entitled to judgment as a matter oflaw." 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' ifthe 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
3

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)(l)(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 a/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, Plus grade 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
4

establish the invalidity of a patent is clear and convincing evidence. See WMS Gaming Inc. v.

Int'/ Game Tech., 184 F.3d 1339, 1355 (Fed. Cir. 1999). "Whether a claim is drawn to patenteligible 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'/ v. Alice

Corp. Pty. Ltd, 717 F.3d 1269, 1277 (Fed. Cir. 2013), aff'd, Alice Corp. Pty. Ltd v. CLS Bank
Int'/, --- 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. Kappas, 561 U.S. 593, 594 (2010); see also Alice Corp. Pty. Ltd v. CLS Bank Int'/, 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

1

The parties do not dispute that the patents at issue in the present litigation are directed to
machines and processes pursuant to§ 101, and Plusgrade's motion for summary judgment
addresses only the abstract ideas exception to the statutory categories. (D.I. 21)
5

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)(quoting Diamond v. Diehr, 450 U.S. 175, 187 (1981)).
If the court determines that a patent claims an abstract idea, the court must then look to

the rest of the claim to see ifthere is an '"inventive concept' - i.e., an element or combination of
elements that is 'sufficient to ensure that the patent in practice amounts to significantly more
than a patent upon the [ineligible concept] itself."' Alice, 134 S. Ct. at 2355 (quoting Mayo, 132
S. Ct. at 1298); see also Accenture Global Servs., GmbH v. Guidewire Software, Inc., 728 F.3d
1336, 1341 (Fed. Cir. 2013). "This two-stage inquiry requires examination of claim elements
'both individually and as an ordered combination."' buySAFE, Inc. v. Google, Inc., 765 F.3d
1350, 1353 (Fed. Cir. 2014) (quoting Alice, 134 S. Ct. at 2355). The Supreme Court has held
that "[s]imply appending conventional steps, specified at a high level of generality, [is] not
enough to supply an inventive concept." Alice, 134 S. Ct. at 2357 (holding that the abstract idea
of "intermediated settlement" was a "fundamental economic process" and therefore was not
patent-eligible); see also Bilski, 561 U.S. at 611 (holding that the patent-ineligible abstract idea
of "hedging, or protecting against risk" was a "fundamental economic practice"). Furthermore,
"the prohibition against patenting abstract ideas cannot be circumvented by attempting to limit
the use of the formula to a particular technological environment or adding insignificant
postsolution activity." Bilski, 561 U.S. at 610-11 (internal quotation marks omitted).
To determine whether a patent claims an abstract idea, courts frequently apply the
machine-or-transformation test. See Bilski, 561 U.S. 593; Ultramercial, Inc. v. Hulu, LLC, 772
6

F.3d 709, 716 (Fed. Cir. Nov. 14, 2014). The Supreme Court has cautioned, however, that the
machine-or-transformation test is not the sole test for patent eligibility. See id Accordingly,
courts must also examine the abstract nature of the claims more generally:
[I]n applying the§ 101 exception, [the Court] must distinguish between patents
that claim the building blocks of human ingenuity and those that integrate the
building blocks into something more thereby transforming them into a patenteligible invention. The former would risk disproportionately tying up the use of
the underlying ideas and are therefore ineligible for patent protection. The latter
pose no comparable risk of pre-emption, and therefore remain eligible for the
monopoly granted under our patent laws.

Alice, 134 S. Ct. at 2354-55; see also CyberSource Corp. v. Retail Decisions, Inc., 654 F.3d
1366, 1371 (Fed. Cir. 2011). Plusgrade contends that the asserted claims are not patent-eligible
because they: (1) fail the machine-or-transformation test; and (2) are more generally directed to
an abstract idea. (D.I. 21 at 9-20)
A.

Machine-or-Transformation 2

2

Tenon & Groove characterizes the machine-or-transformation test as "outdated" following the
Supreme Court's recent decision in Alice. (D.I. 56 at 1) Although the Supreme Court did not
expressly identify the machine-or-transformation test in its analysis, the second prong of the
framework set forth in Alice takes into consideration whether a computer transforms an
otherwise abstract idea into an inventive concept. Alice, 134 S. Ct. at 2357(concluding that
generic computer implementation fails to transform an abstract idea into a patent-eligible
invention). The Supreme Court did not expressly overrule its prior precedents applying the
machine-or-transformation test, nor did the Supreme Court characterize the machine-ortransformation test as "outdated." In light of the arguments presented by the parties on summary
judgment, and the Supreme Court's declaration in Bilski that the machine-or-transformation test
"may be a useful and important clue or investigative tool," the court conducts an analysis
applying the machine-or-transformation test in addition to its application of the two-pronged test
for patent eligibility set forth in Alice. Bilski, 561 U.S. at 594; see also Ultramercial, 772 F.3d at
716; Bancorp Servs., L.L.C. v. Sun Life Assurance Co. of Can., 687 F.3d 1266, 1278 (Fed. Cir.
2012).
7

Under the machine-or-transformation test, a process claim is patent eligible if: "(1) it is
tied to a particular machine or apparatus, or (2) it transforms a particular article into a different
state or thing." Bilski, 561 U.S. at 600 (internal citations omitted). The parties do not dispute the
transformation prong; therefore, the court's analysis is limited to the machine prong of the test.
"[T]o impart patent-eligibility to an otherwise unpatentable process under the theory that
the process is linked to a machine, the use of the machine must impose meaningful limits on the
claim's scope." CyberSource, 654 F.3d at 1375 (internal quotation marks omitted). The Federal
Circuit has stated that a machine will only impose a meaningful limit on the scope of a claim
when it plays a significant part in "permitting the claimed method to be performed, rather than
function[ing] solely as an obvious mechanism for permitting a solution to be achieved more
quickly, i.e., through the utilization of a computer for performing calculations." SiRF Tech., Inc.
v. ITC, 601 F .3d 1319, 1333 (Fed. Cir. 2010). A computer is not a significant part of the process

ifthat process can be performed without a computer. See CyberSource, 654 F.3d at 1375
("[M]erely claiming a software implementation of a purely mental process that could otherwise
be performed without the use of a computer does not satisfy the machine prong of the machineor-transformation test.").
The Federal Circuit has explained that, "[t]o salvage an otherwise patent-ineligible
process, a computer must be integral to the claimed invention, facilitating the process in a way
that a person making calculations or computations could not." Bancorp Servs., L.L.C. v. Sun Life
Assur. Co. of Can., 687 F.3d 1266, 1278. Cf SiRF Tech., 601 F.3d at 1332 (concluding that a

GPS receiver was integral to the claims at issue and the machine-or-transformation test was
therefore met). Computer components employed for basic functions, such as storage,
transmitting and receiving information, only allow an abstract idea to be performed more quickly
8

and do not impose a meaningful limit on the scope of the claim. Joao Bock Transaction Sys.,
LLC v. Jack Henry & Assocs., Inc., C.A. No. 12-1138-SLR, 2014 WL 7149400, at *7 (D. Del.
Dec. 15, 2014) (citing Bancorp, 687 F.3d at 1278); see also IP Learn, LLC v. Kl 2 Inc., C.A. No.
11-1026-RGA, --- F. Supp. 3d ----, 2014 WL 7206380, at *7 (D. Del. Dec. 17, 2014) ("Merely
because calculations are more efficient on a computer is not enough.").
The patents-in-suit do not pass the machine-or-transformation test. Tenon & Groove
alleges that Plusgrade has failed to come forward with any evidence showing that a human can
perform the steps in the asserted claims. (D.I. 24 at 20) However, the specifications themselves
reveal that the processes may be performed mentally by a human, expressly stating that the
inventions "eliminate[] manual, time-consuming processes and replace[] those with an efficient,
automatic process." 3 ('409 patent at col. 25:29-30; '536 patent at col. 45:61-62) The Federal
Circuit has stressed that "[m]erely using a computer to perform more efficiently what could
otherwise be accomplished manually does not confer patent-eligibility." See buySAFE, Inc. v.

3

The declaration of Tenon & Groove's expert, Dr. Barry Smith, Ph.D. (the "Smith
Declaration"), is insufficient to overcome the intrinsic evidence in the specifications. (D.I. 24 at
20; D.I. 25, Ex. 1) The Smith Declaration explains that the claimed processes cannot be
performed mentally due to the complexity of the calculations, the high volume of data, and the
speed with which the calculations must be performed. (D.I. 25, Ex. 1 at~~ 27-33) These
assertions are not persuasive. See Content Extraction & Transmission LLC v. Wells Fargo Bank,
Nat'! Assoc., --- F.3d ----, 2014 WL 7272219, at *3 (Fed. Cir. Dec. 23, 2014) (rejecting an
argument that the use of a scanner in addition to a generic computer is not drawn to an abstract
idea merely because human minds are unable to process and recognize the information). The
Smith Declaration generically characterizes the calculations as complex without identifying any
particular calculation incapable of being performed by a human. (Id.) Moreover, although the
Smith Declaration attempts to challenge portions of the specification cited by Plusgrade, it
notably fails to address the portion of the specifications explaining that the inventions
"eliminate[] manual, time consuming processes." Tenon & Groove cites no authority that would
compel the court to credit the Smith Declaration over the specifications of the patents-in-suit.
9

Google, Inc., 964 F. Supp. 2d 331, 336 (D. Del. 2013) (citing Bancorp Servs., L.L.C. v. Sun Life
Assur. Co. of Can., 687 F.3d 1266, 1279 (Fed. Cir. 2012)), ajf'd, 765 F.3d 1350 (Fed. Cir. 2014).
The specifications provide that achieving an optimal upgrade for customers and the airline,
which is a primary purpose of the invention, requires the use of human judgment. (' 409 patent at
col. 10:6-7; '536 patent at col. 29:63-64) The Federal Circuit has held that "the patent statute
does not allow patents on particular systems that depend for their operation on human
intelligence alone." In re Comiskey, 554 F.3d 967, 980 (Fed. Cir. 2009); see also IP Learn, 2014
WL 7206380, at *5 (concluding that the patent-in-suit described an unpatentable abstract idea
because the Background section identified educational practices that were "decades" old and
stated that "[t]he present invention relates generally to learning and more particularly to using a
computer to enhance learning.").
The specifications also indicate that the collection of customer preference information
may be performed over the Internet, 4 but note that "other communication media may be used, as
well, for all or part of the system or steps. For example, customer information may be taken over
the phone or in person or via any other means. And a sale can similarly be completed by
telephone or in person." ('409 patent, col. 3:47-51; '536 patent, col. 5:8-12) Data-gathering
steps alone cannot bring a claim into compliance with § 101, because humans have historically
4

The Federal Circuit has suggested that the Internet's status as a "machine" for purposes of the
machine-or-transformation test is highly questionable. See Ultramercial, 772 F.3d at 716
("[T]he Internet is not sufficient to save the patent under the machine prong of the machine-ortransformation test. It is an ubiquitous information-transmitting medium, not a novel
machine."); CyberSource Corp. v. Retail Decisions, Inc., 654 F.3d 1366, 1370 (Fed. Cir. 2011);
see also buySAFE, 964 F. Supp. 2d at 335. To qualify as an "inventive concept" under Alice, the
patent must "specify how interactions with the Internet are manipulated to yield a desired result .
. ." DDR Holdings, LLC v. Hotels.com, L.P., --- F.3d ----, 2014 WL 6845152, at *12 (Fed. Cir.
Dec. 5, 2014).
10

gathered and stored data mentally or with pen and paper. See Jn re Grams, 888 F.2d 835, 840
(Fed. Cir. 1989); see also Accenture Global Servs., GmbH v. Guidewire Software, Inc., 800 F.
Supp. 2d 613, 619 (D. Del. 2011) (holding that claims which are directed to concepts for
organizing data fail the machine-or-transformation test).
Nor do the patents-in-suit become patent-eligible because they recite a general purpose
computer. The '409 patent recites a "data store," an "output device," an "optimizer system," and
"servers," which are employed for basic computer functions such as receiving, storing, and
outputting data, and performing calculations. ('409 patent, col. 37:38 - 38:13; 39:26-40:25)
The '536 patent similarly recites a "computer system," a "data store," and "data processors" used
to receive inputs, process information, provide customer options, and record data. ('536 patent,
col. 226:36 - 227:6) These patent claims "implicate the use of a machine, but a machine does
not impose any limit on the claimed methods themselves." Accenture Global Servs., GmbH v.
Guidewire Software, Inc., 691 F. Supp. 2d 577, 596-97 (D. Del. 2010) (concluding that terms
such as data processing system, searchable claim database, and storage means "do not imply a
specific computer having any particular programming - they are descriptive of a general
computer system at best."); see also DealerTrack, Inc. v. Huber, 674 F.3d 1315, 1333 (Fed. Cir.
2012) (noting that patent-in-suit failed to specify how the computer hardware and database were
"specifically programmed" to perform the claimed steps); Joao Bock, 2014 WL 7149400, at *7
("The computer components are being employed for basic functions, including storage,
transmitting and receiving information, and, the court concludes that such components are not
'specific' or 'special purpose' computers."). The concept of applying a series of conditions for
purposes of optimizing a transaction is well-known, and implementing this concept with the

II

generalized computer recited in the patents-in-suit is insufficient to establish patent eligibility.
For these reasons, the '409 and '536 patents fail the machine-or-transformation test.

B.

Abstract Idea

The Supreme Court has cautioned that the machine-or-transformation test is not
dispositive in a§ 101 inquiry. Bilski, 561 U.S. at 603. Therefore, the court proceeds to examine
more generally the abstract nature of the claims. See CyberSource, 654 F.3d at 1371. To
distinguish "patents that claim laws of nature, natural phenomena, and abstract ideas from those
that claim patent-eligible applications of those concepts," the court must first determine whether
the claims are drawn to a patent-ineligible concept. Alice, 134 S. Ct. at 2355. If so, the court
must then search for an "inventive concept," taking into consideration the "elements of each
claim both individually and 'as an ordered combination' to determine whether the additional
elements 'transform the nature of the claim' into a patent-eligible application." Id (quoting

Mayo, 132 S. Ct. at 1297).
Applying the framework set forth in Alice, it is apparent that the claims of the patents-insuit are drawn to unpatentable subject matter. With respect to the first step of the analysis, the
'409 and '536 patents are directed to the unpatentable fundamental concept of using a computer
to facilitate negotiations between an airline and its customer that results in a contract for a
product upgrade. 5 The specifications state that the inventions "eliminate[] manual, time-

5

The patent at issue in the present case is distinguishable from the patent addressed in the
Federal Circuit's recent ruling in DDR Holdings, LLC v. Hotels.com, L.P., --- F.3d ----, 2014 WL
6845152, at *10 (Fed. Cir. Dec. 5, 2014). Specifically, the Federal Circuit concluded that the
patent in DDR Holdings was directed to addressing a business challenge particular to the
Internet, namely, retaining website visitors. The Federal Circuit expressly noted that the claims
"do not merely recite the performance of some business practice known from the pre-Internet
world along with the requirement to perform it on the Internet. Instead, the claimed solution is
12

consuming processes and replace[] those with an efficient, automatic process." ('409 patent at
col. 25 :29-30; '536 patent at col. 45 :61-62) However, "neither the limitation nor anything in the
specification provides any detail as to how that function is performed." Loyalty Conversion Sys.
Corp. v. Am. Airlines, Inc., --- F. Supp. 2d ----, 2014 WL 4364848, at *7 (E.D. Tex. Sept. 3,
2014) (holding that two patents directed to the conversion of loyalty award points of one vendor
into loyalty award points of another vendor were not patentable under section 101 ). Moreover,
Tenon & Groove's letter submission dated July 11, 2014 states that "the Asserted Claims are
directed toward improvements on computer systems and processes to optimize revenue
generation based on interactions between air carriers and their customers that result in
conditional agreements ... " which means implementing on a generic computer the abstract
concept of optimizing transactions based on certain conditions. (D.I. 54 at 2-3)
The concept of using a computer to "optimize revenue generation based on interactions
between air carriers and their customers based on their relative perception of value regarding
certain product enhancement options that are based on and dictated by unknown future events,"
has no concrete or tangible form. (D.I. 54 at 2-3); See Ultramercial, 772 F.3d at 715 (concluding
that certain additional limitations added a degree of particularity, but the concept described by
the majority of the limitations described only an abstract idea of showing an advertisement
before delivering free content). Although certain dependent claims restrict the field of use to the
airline industry, this limitation is insufficient to establish patent eligibility under § 101. See
necessarily rooted in computer technology in order to overcome a problem specifically arising in
the realm of computer networks." Id In the present case, the recited use of a computer to
facilitate negotiations between an airline and its customer, resulting in a contract for a product
upgrade, is a fundamental economic or longstanding commercial practice that is not unique to
the Internet, and the specification explicitly provides that the claimed processes can be
performed manually. ('409 patent at col. 25:29-30; '536 patent at col. 45:61-62)
13

Parker v. Flook, 437 U.S. 584, 589-90 (1978) (limiting an abstract idea to one field of use or
adding token postsolution components does not make a concept patentable).
At the second step of the analysis, the court considers whether the '409 and '536 patents
embody an inventive concept. An airline's capacity to track variables, including the preferences
of multiple passengers, flight availability, and the perceived value for an upgrade option, is not
an inventive concept. Like the risk hedging in Bilski, and the concept of intermediated
settlement in Alice, the concept of using a computer to optimize negotiations between an airline
and its customer, to each obtain the best economic results given certain conditions, is "a
fundamental economic practice long prevalent in our system of commerce." Alice, 134 S. Ct. at
2356 (internal quotation marks omitted); see also Content Extraction & Transmission LLC v.

Wells Fargo Bank, Nat'/ Assoc., --- F.3d ----, 2014 WL 7272219, at *3 (Fed. Cir. Dec. 23, 2014)
(concluding that the concept of collecting data, recognizing certain data within the collected data
set, and storing the recognized data in a memory was well-known); buySAFE, 765 F.3d at 135455 ("The claims in this case do not push or even test the boundaries of the Supreme Court
precedents under section 101. The claims are squarely about creating a contractual relationship a 'transaction performance guaranty' - that is beyond question of ancient lineage.").
Moreover, the claimed concept is not directed to any specific device or system, nor is it
limited to a concrete application. See buySAFE, 964 F. Supp. 2d at 337, ajj"d, 765 F.3d 1350,
1355 (Fed. Cir. 2014) ("The claims' invocation of computers adds no inventive concept. The
computer functionality is generic - indeed, quite limited ... That a computer receives and sends
the information over a network - with no further specification - is not even arguably
inventive."). As instructed by the Federal Circuit in DDR Holdings, (1) "recitation of generic
computer limitations does not make an otherwise ineligible claim patent-eligible; (2)
14

"mathematical algorithms, including those executed on a generic computer, are abstract ideas;"
(3) "some fundamental economic and conventional business practices are also abstract ideas;"
and (4) general use of the Internet "to perform an abstract business practice (with insignificant
added activity)" does not pass muster under§ 101. DDR Holdings, 2014 WL 6845152, at **9,
12. The computers recited in the patents-in-suit do not "play a significant part in permitting the
claimed method to be performed." Fort Props., Inc. v. Am. Master Lease LLC, 671F.3d1317,
1323 (Fed. Cir. 2012) (internal quotations omitted). As previously stated at§ IV.A, supra, the
claims recite only a general purpose computer performing "purely conventional" functions.

Alice, 134 S. Ct. at 2359 (quoting Mayo, 132 S. Ct. at 1298). "Given the ubiquity of computers,
wholly generic computer implementation is not generally the sort of' additional featur[ e]' that
provides any 'practical assurance that the process is more than a drafting effort designed to
monopolize the [abstract idea] itself."' Id at 2358 (quoting Mayo, 132 S. Ct. at 1297).
The '409 patent recites a "data store," an "output device," an "optimizer system," and
"servers," which are employed for basic computer functions such as receiving, storing, and
outputting data, and performing calculations. ('409 patent, col. 37:38 - 38:13; 39:26 -40:25)
The '536 patent similarly recites a "computer system," a "data store," and "data processors" used
to receive inputs, process information, provide customer options, and record data. ('536 patent,
col. 226:36 - 227:6) However, the recitation of specific hardware elements is insufficient to
confer specificity. See Alice, 134 S. Ct. at 2360 (concluding that the recitation of "specific
hardware" consisting of a "data processing system," a "communications controller," and a "data
storage unit" were "purely functional and generic."); see also Cloud Satchel, 2014 WL 7227942,
at *8; Content Extraction & Transmission, 2014 WL 7272219, at *4 (holding that the use of
existing scanning and processing technology did not transform the claims into a patent-eligible
15

application). "Nothing in the claims purports to improve the functioning of the computer itself,
and the computer components of the claims add nothing that is not already present in the steps of
the claimed methods, other than the speed and convenience of basic computer functions such as
calculation, communication, and the display of information." Loyalty Conversion, 2014 WL
4364848, at *9 (citing Dealertrack, Inc. v. Huber, 674 F.3d 1315, 1333 (Fed. Cir. 2012)).
In light of the foregoing authorities, it is not necessary for the court to give weight to the
parties' submissions regarding the status of Tenon & Groove's continuation applications before
the United States Patent & Trademark Office. (D.I. 58; D.I. 59) For these reasons, I recommend
that the court grant Plusgrade's motion for summary judgment.

V.

CONCLUSION
For the foregoing reasons, I recommend that the court grant Plusgrade's motion for

summary judgment. (D.I. 20)
This Report and Recommendation is filed pursuant to 28 U.S.C. § 636(b)(l)(B), Fed. R.
Civ. P. 72(b)(1 ), and D. Del. LR 72.1. The parties may serve and file specific written objections
within fourteen (14) days after being served with a copy of this Report and Recommendation.
Fed. R. Civ. P. 72(b). The failure of a party to object to legal conclusions may result in the loss
of the right to de novo review in the district court. See Henderson v. Carlson, 812 F.2d 874,
878-79 (3d Cir. 1987); Sincavage v. Barnhart, 171 F. App'x 924, 925 n.1 (3d Cir. 2006).

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The parties are directed to the Court's Standing Order For Objections Filed Under Fed. R.
Civ. P. 72, dated October 9, 2013, a copy of which is available at
http://www.ded.uscourts.govI court-info/local-rules-and-orders/general-orders.

Dated: January 6, 2015

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