Execware LLC v. BJ's Wholesale Club Inc.

Filing 27

MEMORANDUM ORDER re (26 in 1:14-cv-00240-LPS, 18 in 1:14-cv-00235-LPS, 24 in 1:14-cv-00233-LPS, 25 in 1:14-cv-00234-LPS) REPORT AND RECOMMENDATION is ADOPTED in part and REJECTED in part; (8 in 1:14-cv-00233-LPS) (8 in 1:14-cv-00240-LPS) (8 in 1:14-cv-00234-LPS) (9 in 1:14-cv-00235-LPS) MOTIONS to Dismiss are DENIED without prejudice to renew as summary judgment motions, after claim construction and discovery. Signed by Judge Leonard P. Stark on 9/30/15. Associated Cases: 1:14-cv-00233-LPS, 1:14-cv-00234-LPS, 1:14-cv-00235-LPS, 1:14-cv-00240-LPS (ntl)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
EXECWARE, LLC,
Plaintiff,
v.

C.A. No. 14-233-LPS

BJ'S WHOLESALE CLUB, INC.,
Defendant.

EXECWARE, LLC,
Plaintiff,
v.

C.A. No. 14-234-LPS

BLUE NILE, INC.,
Defendant.
EXECWARE, LLC,
Plaintiff,
v.

C.A. No. 14-235-LPS

BUY.COM INC.,
Defendant.

EXECWARE, LLC,
Plaintiff,
C.A. No. 14-240-LPS

v.
NORDSTROM, INC.,
Defendant.

MEMORANDUM ORDER
WHEREAS, Magistrate Judge Burke issued a 41-page Report and Recommendation (the
"Report") (D.I. 24), 1 dated July 15, 2015, recommending denial of Defendants BJ's Wholesale
Club, Inc., Blue Nile, Inc., Buy.com Inc., Dollar General Corp., and Nordstrom, Inc.' s
(collectively, "Defendants") motions to dismiss for failure to state a claim under Rule 12(b)(6) of
the Federal Rules of Civil Procedure, which argue that U.S. Patent No. 6,216,139(the"'139
patent'') is directed to non-patent-eligible subject matter under 35 U.S.C. § 101 ("Motions") (D.I.
8; C.A. No. 14-234 D.I. 8; C.A. No. 14-235 D.I. 9; C.A. No. 14-236 D.I. 9; 2 C.A. No. 14-240
D.I. 8);
WHEREAS, on August 3, 2015, Defendants objected to the Report ("Objections") (D.I.
25; C.A. No. 14-234 D.I. 26; C.A. No. 14-235 D.I. 19; C.A. No. 14-240 D.I. 27), and specifically
objected to (1) the conclusion under step 1 of the framework set forth in Alice Corp. Pty. Ltd. v.

CLS Banklntl'l, 134 S.Ct. 2347 (2014), that the asserted claims are not directed at an abstract

1

Unless otherwise specified, all docket citations are to C.A. No. 14-233.

2

All claims against Dollar General Corp. were dismissed without prejudice (see C.A. No.
14-236 D.I. 29), therefore the motion for C.A. No. 14-236 is no longer pending.
1

idea and (2) the conclusion under step 2 of Alice that the asserted claims contain sufficient
additional elements such that each of the claims contain an inventive concept, making them
patent-eligible. (See D.l. 25 at 3; C.A. No. 14-235 D.I. 19 at 3)3
WHEREAS, on August 17, 2015, PlaintiffExecware, LLC ("Execware" or "Plaintiff')
responded to the Objections (D.I. 26), arguing that Judge Burke "correctly considered and
rejected the arguments raised" in Defendants' objections. (Id. at 1)4
WHEREAS, the Court has considered Defendants' Motions de nova, as they present
case-dispositive issues, see 28 U.S.C. § 636(b)(l); Fed. R. Civ. P. 72(b)(3), and has further
reviewed all of the pertinent filings;
NOW THEREFORE, IT IS HEREBY ORDERED that:
1.

Defendants'.Objections are SUSTAINED IN PART and OVERRULED IN

PART, Judge Burke's Report (D.I. 59) is ADOPTED IN PART and REJECTED IN PART, as
explained below.
2.

Sections I, II, and subsection III.B of the Report, which discuss pertinent
)

background and legal standards, are ADOPTED in all respects, and Defendants' Objections are
OVERRULED to the extent they challenge these sections and subsection of the Report.
3.

Subsection III.A of the Report is ADOPTED in all respects~ and Defendants'

Objections are OVERRULED to the extent they challenge this subsection of the Report.

3

All Defendants except Buy.com, Inc. joined the objections filed in C.A. No. 14-233.
(See D.l. 25 at 1; C.A. No. 14-240 D.I. 27 at 1) The Court will address all of Defendants'
objections together, since all Defendants raise similar or, in many cases, identical arguments.
4

Despite slight differences between Buy.corn's objections (C.A. No. 14-240 D.I. 27) and
the other Defendants' objections (D.I. 25), Plaintiff filed substantively identical responses to both
sets of objections (see D.I. 26; C.A. No. 14-240' D.I. 28).
2

Subsection A correctly determines that addressing § 101 challenges at the Rule l 2(b )(6) stage is
permissible. The Federal Circuit has affirmed District Courts that have granted motions filed
under Rule 12 based on§ 101 challenges. See, e.g., OIP Technologies, Inc. v. Amazon.com, Inc.,
788 F.3d 1359, 1360 (Fed. Cir. 2015); buySAFE, Inc. v. Google, Inc., 765 F.3d 1350, 1355 (Fed.
Cir. 2014).
4.

Subsection III.F of the Report is ADOPTED IN PART to the extent that it finds

claim 1 to be representative of all claims of the '139 patent. Neither Defendants nor Plaintiff
object to this determination. 5 (See D.l. 25 at 10) The Court agrees that claim 1 is representative,
as argued by Defendants. (See D.I. 13 at 10; D.I. 24 at 41) The Supreme Court and Federal
Circuit have analyzed representative claims as part of their§ 101 analyses. See Alice, 134 S. Ct.
at 2359-60 (2014) (finding 208 claims patent-ineligible based on analysis of single,
representative method claim); Content Extraction & Transmission LLC v. Wells Fargo Bank,
Nat. Ass 'n, 776 F.3d 1343, 1348 (Fed. Cir. 2014) (quoting with approval district court's analysis

of representative claim limitations). The remainder of subsection III.F of the Report is
REJECTED IN PAR1,', because the Court does not agree that claim 1 is patent eligible based on
the current record, as discussed below.
5.

With the exception of the aforementioned sections and subsections, the remainder

of the Report is REJECTED IN PART. Defendants' Objections are SUSTAINED IN PART, to
the extent they challenge Judge Burke's conclusions that claim 1 is not directed to an abstract
idea and that claim 1 contains an "inventive concept." See Alice, 134 S.Ct. at 2355. For the
reasons discussed below, Defendants' Motions (C.A. No. 14-233 D.I. 8; C.A. No. 14-234 D.I. 8;

5

Plaintiff did not file any objections to the Report.
3

C.A. No. 14-235 D.I. 9; C.A. No. 14-240 D.I. 8) are DENIED WITHOUT PREJUDICE to renew
as summary judgment motions, after claim construction and discovery.
6.

In Cronos Technologies, LLC v. Expedia, Inc., 2015 WL 5234040, at *2 (D. Del.

Sept. 8, 2015), this Court outlined "several considerations relevant to deciding a Rule 12 motion
that challenges the patent eligibility of multiple patent claims based on analysis of a single
representative claim."
First, are all non-representative claims adequately
represented by the representative claim (i.e., do all of the
challenged claims relate to the same abstract idea and do any of the
non-representative claims add one or more inventive concepts that
would result in patent eligibility)? Second, are there issues of
claim construction that must be decided before resolving the
motion? Finally, is there any set of facts that could be proven
relating to preemption, questions ofpatentability, or whether the
claims "solve a technological problem," that would result in a
determination that one or more of the claims are patent-eligible?
Id. (internal footnotes omitted; emphasis in original). In this case, the Report correctly

determined that claim 1 is representative of all claims of the '139 patent for purposes of deciding
Defendants' Motions.
7.

With respect to the second Cronos consideration - whether there are issues of

claim construction that must be decided before resolving the Motions - the Court disagrees in
this case with the Report's approach of "presum[ing] that the claims are to be construed in the
manner most favorable to Plaintiff." (D.I. 24 at 15 n.9) The Report correctly cites Content
Extraction, 776 F.3d at 1349, for the proposition that "when a Section 101 motion would be well

taken even were a plaintiffs proposed claim construction to be accepted, a court may adopt the
plaintiffs construction (or the construction most favorable to the plaintiff) for the purposes of the

4

motion." (D.I. 24 at 9) (emphasis added) However, in this case, the Report determined that
Defendants' 101 Motions would not be well taken under a construction presumed to be most
favorable to Plaintiffs and, accordingly, recommended denying the Motions. (Id. at 41)
Therefore, the situation is significantly different from Content Extraction, because if the Report's
recommendation were adopted, Defendants' Motions would be denied based on constructions
that may tum out to be incorrectly less favorable to Defendants than the constructions that will
ultimately be adopted after formal claim construction takes place. 6
8.

The ultimate question of the proper construction of a patent is a question of law.

See Teva Pharm. USA, Inc. v. Sandoz, Inc., 135 S. Ct. 831, 837(2015) (citing Markman v.
Westview Instruments, Inc., 517 U.S. 370, 388-91 (1996)). A Court construes the claims by
analyzing the claim language i:n light of the specification and other intrinsic evidence, including
the "prosecution history, if it is in evidence." See Markman, 52 F.3d at 980. In some cases, "the
district court will need to look beyond the patent's intrinsic evidence and to consult extrinsic
evidence in order to understand, for example, the background science or the meaning of a term in
the relevant art during the relevant time period." Teva, 135 S. Ct. at 841. In some cases, the
meaning of claim language is clear from the face of the patent, without needing to resort to
consultation of the prosecution history (which may not be in evidence at the Rule 12 stage) or
extrinsic evidence (which cannot be considered at the Rule 12 stage). See Bancorp Servs., L.L.C.
v. Sun Life Assur. Co. of Canada (US.), 687 F.3d 1266, 1273-74 (Fed. Cir. 2012). This case does

6

The Court need not decide whether the Content Extraction approach - that is, resolving
§ 101 motions prior to claim construction based on applying a patentee's preferred construction is appropriate only when the party challenging patentability would prevail either way. Today the
Court decides only that, in the instant case, applying Plaintiffs' presumed most favorable
construction is not the approach the Court deems most appropriate for proceeding here.
5

not fall into the category of cases where the challenged claims are so clear on their face that
formal claim construction is unnecessary.
9.

Claim construction is necessary in this case before determinations can be made

under either step of the Alice inquiry. See 134 S. Ct. at 2355. Under Alice, courts must first
determine if the claims at issue are directed to a patent-ineligible concept, see id. - in this case,
an "abstract idea." (See D.I. 24 at 14 n.8) If so, the next step is to look for 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." Id.
(internal quotation marks omitted). Relevant to the first step of the Alice inquiry, the Court
agrees with the Report's conclusion that "step a is the 'most important aspect' of claim l." (D.I.
24 at 28) (quoting Internet Patents Corp. v. Active Network, Inc., 790 F.3d 1343, 1348 (Fed. Cir.
2015)) Thus, if claim 1 is directed to an abstract idea, it would most likely be an abstract idea
that is substantially reflected by step a - i.e., a user interface.
10.

However, in concluding that the "improved user interface" embodied by step a of

claim l "contains sufficient particularity such that it is not directed to an abstraction," the Report
relies on a construction of claim 1 that may read in limitations from the specification. (See, e.g.,
D.I. 24 at 22) (discussing steps band c and construing them in light most favorable to Plaintiffby
"following the example set forth in Figure 3") But the Report (because it is simply presuming)
does not explain why reading in limitations from the specification would be proper in construing
this claim term. "We do not read limitations from the specification into claims; we do not
redefine words. Only the patentee can do that. To constitute disclaimer, there must be a clear
and unmistakable disclaimer." Thorner v. Sony Computer Entm 't Am. LLC, 669 F.3d 1362,

6

1366-:-67 (Fed. Cir. 2012).
11.

In this case, the Report relied on constructions that were "most favorable to

Plaintiff," but it is unclear what factual or legal determinations may be baked into these "most
favorable" constructions. The Report invokes the "most favorable" standard four times in its
step-1 analysis under Alice. Because the claim meaning is apparently uncertain enough to tum
on multiple uses of this standard, and because the parties were not afforded an opportunity to
explain why it may or may not be appropriate to read in limitations from the specification into
certain of the steps comprising claim 1, the Court determines that formal claim construction is
necessary before deciding whether claim 1 is directed to an abstract idea.
12.

Regarding the third Cronos consideration-whether there are facts relevant to

patent eligibility - the Federal Circuit has encouraged District Courts to evaluate "considerations
analogous to those of [35 U.S.C.] §§ 102 and 103" as part of a "pragmatic analysis of§ 101" at
the motion to dismiss stage. See Active Network, 790 F.3d at 1347. "Courts have found
guidance in deciding whether the allegedly abstract idea (or other excluded category) is indeed
known, conventional, [or] routine ... by drawing on the rules of patentability." Id. The Court
agrees with Plaintiff that, in this case, "it is premature [to rule on § 101 eligibility] because
Execware has had no opportunity to plan or take discovery on numerous factual issues embedded
in the§ 101 inquiry." (D.I. 10 at 6) Thus, the Court determines that any renewed motion under§
101 must be filed as a summary judgment motion only after the parties have been afforded an
opportunity to take discovery related to any factual issues that may affect the § 101 inquiry.
13.

The Report utilizes a "majority of the limitations" inquiry from Ultramercial, Inc.

v. Hulu, LLC, 772 F.3d 709, 715 (Fed. Cir. 2014), as one of the "methods of analysis undertaken

7

by the Federal Circuit in a few of [its] recent cases." (D.I. 24 at 20) The Court agrees with
Defendants' objection to use of this inquiry in the present case. (See D.I. 25 at 5-6) In
Ultramercial, the Federal Circuit determined that "the concept embodied.by the majority of the

limitations describes only the abstract idea of showing an advertisement before delivering free
content." 772 F.3d at 715. However, in performing this analysis, the Federal Circuit was
analyzing the claims at issue as

an "ordered combination of steps."

Id. In other words, the Court

was analyzing the claims as a whole "to ascertain whether their character as a whole [was]
directed to excluded subject matter." Active Network, 790 F.3d at 1346. In this case, as the
Report correctly concluded (and as discussed, supra at ,-r 9), the "character as a whole" of claim 1
is clear from reading the specification (i.e., "step a is the 'most important aspect' of claim 1"),
and resort to the "majority of the limitations" inquiry is unnecessary and potentially misleading,
given that steps b through e of claim 1 cover database functionality that, while certainly
technical, may have been "widely available" and, thus, "conventional." (See D.I. 24 at 3)
("[C]omputer database management systems and spreadsheet programs with data-sorting
capability ha[d] been widely available[.]") (quoting '139 patent at 2:6-8)7
14.

The Report also cites the step-1 analysis in DDR Holdings, LLC v. Hotels. com,

L.P., 773 F.3d 1245 (Fed. Cir. 2014), as a "method of analysis" to be used in this case. This

Court previously addressed the appropriateness of using DDR Holdings as a model for step-1
analysis in Gammino v. Am. Tel. & Tel. Co., 2015 WL 5234028 (D. Del. Sept. 8, 2015):

As the Report observes (seep. 28 n.18), Activ~ Networks arguably uses a "different
approach" than Ultramercial III. As the Report also correctly notes, "the law in this area is still
evolving." (Id. at p. 29)
7

8

[I]t is unclear whether DDR Holdings turned on an analysis
under step 1 of [Alice]. In fact, the Federal Circuit stated inDDR
Holdings that "[i]dentifying the precise nature of the abstract idea"
there was "not as straightforward as in Alice or some of our other
recent abstract idea cases," and the Court appeared to rely primarily
on its step-2 analysis in deciding the case: "as discussed below,
under any of these characterizations of the abstract idea, the
[patent-in-suit]'s claims satisfy [Alice] step two." Id. at 1257.
Thus, the Federal Circuit's step-1 analysis inDDR Holdings may
have been dicta. In addition, to the extent DDR Holdings made a
determination under step 1, the Federal Circuit did not precisely
articulate the abstract idea to which the patent claims were
directed. Therefore, Plaintiffs reliance on DDR Holdings for its
step-1 analysis is questionable.
Id. at *5 (footnote omitted). In light of the uncertainty as to the significance of the step-1
analysis in DDR Holdings, the Court determines that the Federal Circuit's guidance in Active
Network, 790 F.3d at 1346, provides the most useful guidance - out of the three "methods of
analysis" identified in the Report- for determining whether claim 1 is directed to an abstract
idea. See also generally Intellectual Ventures I LLC v. Capital One Fin. Corp., 2015 WL
5165442, at * 16-18 (D. Md. Sept. 2, 2015) (analyzing whether patent claim limitation relating to
user interface is directed to abstract idea under Mayo step 1).
15.

Regarding the second step of Alice, the Report acknowledges that "its

determination with regard to preemption is contingent here on viewing the claims in the light
most favorable to the patentee. In this case, that has resulted in a narrow construction of 'query
dialog box' that is limited to a 'dialog box' as described in the specification. " 8 (D .I. 24 at 3 8
n.23) Again, the Report does not give any reasons why, when this claim term is eventually

8

As the Supreme Court articulated in Alice, the focus of the second step of the Alice test
is whether the claims "disproportionately t[ie] up the use of the underlying ideas." 134 S.Ct. at
2354 (internal quotation marks omitted; emphasis added). This is the "preemption" concern that
the Supreme Court referred to in Alice.
9

construed, it will be construed with limitations read into it from the specification. For the
reasons already discussed, supra, formal claim construction, including formal construction of the
term "query dialog box," is necessary before a determination can be made as to whether claim 1
includes an "inventive concept" sufficient to make it patent-eligible under step 2 of Alice.
16.

In addition, the Court agrees with Plaintiff that the "factual issues" identified in

Plaintiffs answering brief (D .I. 10 at 6) relevant to the step-2 analysis of Alice could be
important, if not dispositive, of the patent-eligibility of claim 1. In particular, discovery must be
allowed to explore facts related to, e.g., preemption, questions of patentability, 9 or whether the
claims "solve a technological problem" 10 that could result in a determination that the claims are
patent-eligible.

9

See Active Network, 790 F .3d at 134 7 ("Courts have found guidance in deciding whether
the allegedly abstract idea (or other excluded category) is indeed known, conventional, and
routine, or contains an inventive concept, by drawing on the rules ofpatentability.").
·

10

See Alice, 134 S. Ct. at 2358.
10

Accordingly, for the reasons stated above, Defendants' Motions, all of which are based on
the contention that Plaintiffs' patent is ineligible for patentability, are DENIED WITHOUT
PREJUDICE to renew as summary judgment motions, after claim construction and discovery
have taken place. 11

i~~(~

September 30, 2015
Wilmington, Delaware

HON. LEONARD P. STARK
UNITED STATES DISTRICT JUDGE

11

As the motion to dismiss stage of these cases has now been completed, any renewed
challenge to patentability under § 101 will proceed before Judge Stark, consistent with the
referral orders entered in these cases. (See, e.g., C.A. 14-233 D.I. 14)
11