Parus Holdings Inc. v. Sallie Mae Bank et al

Filing 32

MEMORANDUM OPINION. Signed by Judge Sue L. Robinson on 10/8/2015. Associated Cases: 1:14-cv-01427-SLR, 1:14-cv-01428-SLR, 1:14-cv-01429-SLR(nmfn)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
PARUS HOLDINGS, INC.
Plaintiff,

v.
SALLIE MAE BANK and
NAVIENT SOLUTIONS, INC.,
Defendants.

PARUS HOLDINGS, INC.
Plaintiff,

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v.

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PNC BANK, NATIONAL ASSOCIATION,)
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Defendant.
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PARUS HOLDINGS, INC.
Plaintiff,
V.

SUNTRUST BANK and
SUNTRUST MORTGAGE, INC.,
Defendants.

Civ. No. 14-1427-SLR

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Civ. No. 14-1428-SLR

Civ. No. 14-1429-SLR

John G. Day, Esquire and Lauren E. Maguire, Esquire of Ashby & Geddes, Wilmington,
Delaware. Counsel for Plaintiff. Of Counsel: Frank V. Pietrantonio, Esquire, Jonathan
G. Graves, Esquire and Nathan K. Cummings, Esquire of Cooley LLP.
John W. Shaw, Esquire and Karen E. Keller, Esquire of Shaw Keller LLP, Wilmington,
Delaware. Counsel for Defendants PNC Bank, National Association, SunTrust Bank

and SunTrust Mortgage, Inc. Of Counsel: Lionel M. Lavenue, Esquire of Finnegan,
Henderson, Farbow, Garrett & Dunner, LLP.
Richard L. Horwitz, Esquire, David E. Moore, Esquire, and Bindu A. Palapura, Esquire
of Potter, Anderson & Corroon LLP, Wilmington, Delaware. Counsel for Defendant
Sallie Mae Bank. Of Counsel: Luke K. Pedersen, Esquire of Baker Botts LLP.
Rodger Dallery Smith, II, Esquire of Morris, Nichols, Arsht & Tunnell LLP, Wilmington,
Delaware. Counsel for Defendant Navient Solutions, Inc. Of Counsel: Jason W. Cook,
Esquire of McGuirewoods LLP.

MEMORANDUM OPINION

B,

Dated: October
2015
Wilmington, Delaware

I. INTRODUCTION
On November 21, 2014, plaintiff Parus Holdings, Inc. ("plaintiff') filed patent
infringement actions against defendants PNC Bank, National Association, 1 SunTrust
Bank, SunTrust Mortgage, lnc., 2 Navient Solutions, Inc., and Sallie Mae Bank3
(collectively "defendants") alleging infringement of U.S. Patent Nos. 8,098,600 ("the '600
patent"); 8,843, 120 ("the '120 patent"); 8,838,07 4 ("the '07 4 patent"); and 8,843, 141
("the '141 patent") (collectively "the patents-in-suit"). (D.I. 1) Presently before the court
are defendants' motions to dismiss. (D.I. 8) 4 The court has jurisdiction pursuant to 28
U.S.C. §§ 1331and1338(a).
II. BACKGROUND
Plaintiff Parus Holdings, Inc. is a Delaware corporation having its principal place
of business in Bannockburn, Illinois. Defendant PNC Bank, N.A. is a federally chartered
bank having its principal place of business in Pittsburgh, Pennsylvania. (D.I. 1)
Defendant SunTrust Bank is a bank chartered under the laws of the State of Georgia
with its principal place of business in Atlanta, Georgia. Defendant SunTrust Mortgage,
Inc. is a corporation organized under the laws of the Commonwealth of Virginia with its
principal place of business in Richmond, Virginia. 5 (Civ. No. 14-1429, D.I. 1) Defendant
Sallie Mae Bank is a bank chartered under the laws of the State of Utah having its
principal place of business in Salt Lake City, Utah. Defendant Navient Solutions, Inc.,

1

2

3
4

5

Civ. No. 14-1428. All references are to this action unless otherwise indicated.
Civ. No. 14-1429.
Civ. No. 14-1427.
Civ. No. 14-1427, D.I. 14; Civ. No. 14-1429, D.I. 10.
SunTrust Mortgage, Inc. is a wholly-owned subsidiary of SunTrust Bank.

formerly known as Sallie Mae, Inc., is a corporation organized under the laws of the
State of Delaware with its principal place of business in Newark, Delaware. 6 (Civ. No.
14-1427, D.I. 1)
The patents-in-suit issued from a series of continuation applications based on a
common specification. 7 The patents-in-suit are titled "Computer, Internet and
Telecommunications Based Network." The '600 patent was filed on February 1, 2010
and issued on January 17, 2012. The '120 patent was filed on January 13, 2012 and
issued on September 23, 2014. The '07 4 patent was filed on March 4, 2013 and issued
on September 16, 2014. The '141 patent was filed on July 17, 2013 and issued on
September 23, 2014. 8

Ill. STANDARD OF REVIEW
A motion filed under Federal Rule of Civil Procedure 12(b)(6) tests the sufficiency
of a complaint's factual allegations. Bell At/. Corp. v. Twombly, 550 U.S. 544, 555
(2007); Kost

v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir. 1993). A complaint must contain

"a short and plain statement of the claim showing that the pleader is entitled to relief, in
order to give the defendant fair notice of what the ... claim is and the grounds upon
which it rests." Twombly, 550 U.S. at 545 (internal quotation marks omitted)
(interpreting Fed. R. Civ. P. 8(a)). Consistent with the Supreme Court's rulings in

6

Sallie Mae Bank and Sallie Mae, Inc. were subsidiaries of SLM Corp., which recently
underwent corporate reorganization to spin off, among other things, its federal
education loan servicing business to form Navient Corp. Navient Solutions, Inc., is now
a subsidiary of Navient Corp.
7
All citations are to the '600 patent unless otherwise indicated.
8 The '600 patent is terminally disclaimed back to its parent, U.S. Patent No. 6, 775,264
("the '264 patent"). The '074, '120, and '141 patents are also disclaimed back to the
'264 patent as well as to the '600 patent.

2

Twombly and Ashcroft v. Iqbal, 556 U.S. 662 (2009), the Third Circuit requires a twopart analysis when reviewing a Rule 12(b)(6) motion.

Edwards v. A.H. Cornell & Son,

Inc., 610 F.3d 217, 219 (3d Cir. 2010); Fowler v. UPMC Shadyside, 578 F.3d 203, 210
(3d Cir. 2009). First, a court should separate the factual and legal elements of a claim,
accepting the facts and disregarding the legal conclusions. Fowler, 578 F.3d. at 21011. Second, a court should determine whether the remaining well-pied facts sufficiently
show that the plaintiff "has a 'plausible claim for relief."' Id. at 211 (quoting Iqbal, 556
U.S. at 679). As part of the analysis, a court must accept all well-pleaded factual
allegations in the complaint as true, and view them in the light most favorable to the
plaintiff. See Erickson v. Pardus, 551 U.S. 89, 94 (2007); Christopher v. Harbury, 536
U.S. 403, 406 (2002); Phillips v. Cnty. of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008).
In this regard, a court may consider the pleadings, public record, orders, exhibits
attached to the complaint, and documents incorporated into the complaint by reference.

Tellabs, Inc. v. Makar Issues & Rights, Ltd., 551 U.S. 308, 322 (2007); Oshiver v. Levin,
Fishbein, Sedran & Berman, 38 F.3d 1380, 1384-85 n.2 (3d Cir. 1994).
The court's determination is not whether the non-moving party "will ultimately
prevail" but whether that party is "entitled to offer evidence to support the claims."

United States ex rel. Wilkins v. United Health Grp., Inc., 659 F .3d 295, 302 (3d Cir.
2011 ). This "does not impose a probability requirement at the pleading stage," but
instead "simply calls for enough facts to raise a reasonable expectation that discovery
will reveal evidence of [the necessary element]." Phillips, 515 F.3d at 234 (quoting

Twombly, 550 U.S. at 556). The court's analysis is a context-specific task requiring the
court "to draw on its judicial experience and common sense." Iqbal, 556 U.S. at 663-64.

3

IV. DISCUSSION
A. 35 U.S.C. § 101
Section 101 provides that patentable subject matter extends to four broad
categories, including: "new and useful process[es], machine[s], manufacture, or
composition[s] of matter." 35 U.S.C. § 101; see also Bilski v. Kappas, 561 U.S. 593,
601 (2010) ("Bilski If'); Diamond v. Chakrabarty, 447 U.S. 303, 308 (1980). A "process"
is statutorily defined as a "process, art or method, and includes a new use of a known
process, machine manufacture, composition of matter, or material." 35 U.S.C. § 100(b).
The Supreme Court has explained:
A process is a mode of treatment of certain materials to produce a given
result. It is an act, or a series of acts, performed upon the subject-matter
to be transformed and reduced to a different state or thing. If new and
useful, it is just as patentable as is a piece of machinery. In the language
of the patent law, it is an art. The machinery pointed out as suitable to
perform the process may or may not be new or patentable; whilst the
process itself may be altogether new, and produce an entirely new result.
The process requires that certain things should be done with certain
substances, and in a certain order; but the tools to be used in doing this
may be of secondary consequence.
Diamond v. Diehr, 450 U.S. 175, 182-83 (1981) (internal quotations omitted).
The Supreme Court recognizes three "fundamental principle" exceptions to the
Patent Act's subject matter eligibility requirements: "laws of nature, physical
phenomena, and abstract ideas." Bilski II, 561 U.S. at 601. In this regard, the Court
has held that "[t]he concepts covered by these exceptions are 'part of the storehouse of
knowledge of all men ... free to all men and reserved exclusively to none."' Bilski II, 561
U.S. at 602 (quoting Funk Bros. Seed Co. v. Kato /noculant Co., 333 U.S. 127, 130
(1948)). "[T]he concern that drives this exclusionary principle is one of pre-emption,"

4

that is, '"that patent law not inhibit further discovery by improperly tying up the future use
of' these building blocks of human ingenuity." Alice Corp. Pty. Ltd. v. CLS Bank Int'/, U.S.-, 134 S.Ct. 2347, 2354 (2014) (citing Bilski II, 561 U.S. at 611-12 and Mayo

Collaborative Servs.v. Prometheus Labs., Inc., 566 U.S.-, 132 S.Ct. 1289, 1301
(2012)).
Although a fundamental principle cannot be patented, the Supreme Court has
held that "an application of a law of nature or mathematical formula to a known structure
or process may well be deserving of patent protection," so long as that application
would not preempt substantially all uses of the fundamental principle. Bilski II, 561 U.S.
at 611 (quoting Diehr, 450 U.S. at 187) (internal quotations omitted); In re Bilski, 545
F.3d 943, 954 (Fed. Cir. 2008) ("Bilski f'). The Court has described the
framework for distinguishing patents that claim laws of nature, natural
phenomena, and abstract ideas from those that claim patent-eligible
applications of those concepts. First, we determine whether the claims at
issue are directed to one of those patent-ineligible concepts. If so, we
then ask, "[w]hat else is there in the claims before us?" To answer that
question, we consider 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. We
have described step two of this analysis as a search 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."

Alice, 134 S.Ct. at 2355 (citing Mayo, 132 S.Ct. at 1294, 1296-98). 9

9

The machine-or-transformation test still may provide a "useful clue" in the second step
of the Alice framework. Ultramercial, Inc. v. Hulu, LLC, 772 F.3d 709, 716 (Fed. Cir.
2014) (citing Bilski II, 561 U.S. at 604 and Bancorp Servs., L.L.C. v. Sun Life Assurance
Co. of Can., 687 F.3d 1266, 1278 (Fed. Cir. 2012). A claimed process can be patenteligible under§ 101 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 I, 545 F.3d at 954,
aff'd on other grounds, Bilski II, 561 U.S. 593.

5

"[T]o transform an unpatentable law of nature into a patent-eligible application of
such a law, one must do more than simply state the law of nature while adding the
words 'apply it."' Mayo, 132 S.Ct. at 1294 (citing Gottschalk v. Benson, 409 U.S. 63,
71-72 (1972)) (emphasis omitted). It is insufficient to add steps which "consist of wellunderstood, routine, conventional activity," if such steps, "when viewed as a whole, add
nothing significant beyond the sum of their parts taken separately." Mayo, 132 S. Ct. at
1298. "Purely 'conventional or obvious' '[pre]-solution activity' is normally not sufficient
to transform an unpatentable law of nature into a patent-eligible application of such a
law." Id. (citations omitted). Also, 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 post-solution activity."' Bilski II, 561
U.S. at 610-11 (citation omitted). For instance, the "mere recitation of a generic
computer cannot transform a patent-ineligible abstract idea into a patent-eligible
invention." Alice, 134 S.Ct. at 2358. "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. (citations omitted).
Because computer software comprises a set of instructions, 10 the first step of
Alice is, for the most part, a given; i.e., computer-implemented patents generally involve

abstract ideas. The more difficult part of the analysis is subsumed in the second step of
the Alice analysis, that is, determining whether the claims "merely recite the

10

Or, to put it another way, software generally comprises a method "of organizing
human activity." Intellectual Ventures I LLC v. Capital One Bank (USA), 792 F.3d 1363,
1367-68 (Fed. Cir. 2015) (citing Alice, 134 S.Ct. 2351-52, and Bilski II, 561 U.S. at 599).

6

performance of some business practice known from the pre-Internet world along with
the requirement to perform it on the Internet," or whether the claims are directed to "a
problem specifically arising in the realm of computer technology" and the claimed
solution specifies how computer technology should be manipulated to overcome the
problem. DOR Holdings, LLC v. Hotels.Com, L.P., 773 F.3d 1245, 1257 (Fed. Cir.
2014).
In DOR, for example, the claims at issue involved computer technology directed
at retaining website visitors. 11 In its analysis, the Federal Circuit rejected the notion that
the pre-Internet analog to the claims at issue ended the inquiry, explaining that while

11

In DOR, representative claim 19 of the '399 patent recites:
A system useful in an outsource provider serving web pages offering
commercial opportunities, the system comprising:
(a) a computer store containing data, for each of a plurality of first web
pages, defining a plurality of visually perceptible elements, which visually
perceptible elements correspond to the plurality of first web pages;
(i) wherein each of the first web pages belongs to one of a plurality of
web page owners;
(ii) wherein each of the first web pages displays at least one active link
associated with a commerce object associated with a buying opportunity
of a selected one of a plurality of merchants; and
(iii) wherein the selected merchant, the out-source provider, and the
owner of the first web page displaying the associated link are each third
parties with respect to one other;
(b) a computer server at the outsource provider, which computer server
is coupled to the computer store and programmed to:
(i) receive from the web browser of a computer user a signal indicating
activation of one of the links displayed by one of the first web pages;
(ii) automatically identify as the source page the one of the first web
pages on which the link has been activated;
(iii) in response to identification of the source page, automatically
retrieve the stored data corresponding to the source page; and
(iv) using the data retrieved, automatically generate and transmit to the
web browser a second web page that displays:
(A) information associated with the commerce object associated with
the link that has been activated, and

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the "store within a store" concept ... may have been well-known by the
relevant time frame, that practice did not have to account for the
ephemeral nature of an Internet "location" or the near-instantaneous
transport between these locations made possible by standard Internet
communication protocols, which introduces a problem that does not arise
in the "brick and mortar'' context.
773 F.3d at 1258. In other words, "[a]lthough the claims address[ed] a business
challenge ... , it [was] a challenge particular to the Internet." Id. at 1257. The Court
concluded that, under any of the characterizations of the abstract idea, the claims
satisfied step two of Alice as being
different enough in substance from those in Ultramercial because they do
not broadly and generically claim "use of the Internet" to perform an
abstract business practice (with insignificant added activity). Unlike the
claims in Ultramercial, the claims at issue here specify how interactions
with the Internet are manipulated to yield a desired result - a result that
overrides the routine and conventional sequence of events ordinarily
triggered by the click of a hyperlink....
In sum, [U.S. Patent No. 7,818,399]'s claims are unlike the claims in Alice,
Ultramercial, buySAFE, Accenture, and Bancorp that were found to be
"directed to" little more than an abstract concept. To be sure, the '399
patent's claims do not recite an invention as technologically complex as an
improved, particularized method of digital data compression. But nor do
they recite a commonplace business method aimed at processing
business information, applying a known business process to the particular
technological environment of the Internet, or creating or altering
contractual relations using generic computer functions and conventional
network operation, such as the claims in Alice, U/tramercial, buySAFE,
Accenture, and Bancorp.
Id. at 1258-59 (citing Alice, 134 S.Ct. at 2359; Ultramercial, 772 F.3d 709, 714-16 (Fed.
Cir. 2014); buySAFE, Inc. v. Google, Inc., 765 F.3d 1350, 1355 (Fed. Cir. 2014);
Accenture Global Servs., GmbH v. Guidewire Software, Inc., 728 F.3d 1336, 1344-45

(B) the plurality of visually perceptible elements visually
corresponding to the source page.
773 F.3d at 1249-50 (emphasis added).

8

(Fed. Cir. 2013); Bancorp, 687 F.3d at 1277-78); but see Dealertrack, Inc. v. Huber, 674
F.3d 1315, 1331-35 (Fed. Cir. 2012).
In DOR, the analytical framework (in the context of computer-implemented
inventions) was articulated so as to require that the inventive concept "recite a specific
way" to solve a "particular Internet-centric problem," with the claimed solution being
"necessarily rooted in computer technology," so that the result "is not merely the routine
or conventional use of the Internet." 773 F.3d at 1257, 1259. Since providing that
explanation, the Federal Circuit has not preserved the validity of any other computerimplemented invention under§ 101. 12 For instance, in Intellectual Ventures, a case that
also presented claims directed at websites, 13 the Court explained that, "[a]t step one of
the Alice framework, it is often useful to determine the breadth of the claims in order to
determine whether the claims extend to cover a '"fundamental ... practice long
prevalent in our system."' Intellectual Ventures, 792 F.3d at 1369 (citing Alice, 134 S.

12

See, e.g., Content Extraction and Transmission LLC v. Wells Fargo Bank, Nat'/ Ass'n,
776 F.3d 1343 (Fed. Cir. 2014); Al/voice Devs. US, LLC v. Microsoft Corp., Civ. No.
2014-1258, 2015 WL 2445055, - Fed. Appx. - (Fed. Cir. 2015); OIP Techs., Inc. v.
Amazon.com, Inc., 788 F.3d 1359 (Fed. Cir. 2015); Internet Patents Corp. v. Active
Network, Inc., 790 F.3d 1343 (Fed. Cir. 2015); Intellectual Ventures, 792 F.3d 1363;
Versata Dev. Grp., Inc. v. SAP America, Inc., 793 F.3d 1306 (Fed. Cir. 2015).
13 Representative claim 1 of U.S. Patent No. 7,603,382 recites:

A system for providing web pages accessed from a web site in a manner
which presents the web pages tailored to an individual user, comprising:
an interactive interface configured to provide dynamic web site
navigation data to the user, the interactive interface comprising:
a display depicting portions of the web site visited by the user as a
function of the web site navigation data; and
a display depicting portions of the web site visited by the user as a
function of the user's personal characteristics.
Intellectual Ventures, 792 F.3d at 1368.

9

Ct. at 2356). The Court characterized the claims at issue as relating to "customizing
information based on (1) information known about the user and (2) navigation data." Id.
Likening "[t]his sort of information tailoring" to "providing different newspaper inserts
based upon the location of the individual," id., the Court concluded that the first aspect
of the inventive concept was an abstract idea. The second aspect of the inventive
concept, using "navigation data (i.e., information relating to when the user navigated to
the website) to 'customize' the website," id., the Court again concluded that "[t]ailoring
information based[, e.g.,] on the time of day of viewing is also an abstract, overly broad
concept long-practiced in our society." Id. at 1370. 14
Turning to the second step of Alice, the Intellectual Ventures Court concluded
that the claims at issue presented no inventive concept "that would support patent
eligibility." 15 Id. at 1370. The Federal Circuit explained:
Steps that do nothing more than spell out what it means to "apply it on a
computer" cannot confer patentability. . . . Requiring the use of a
"software" "brain" "tasked with tailoring information and providing it to the

14

In this regard, the observation made by the district court in Paone v. Broadcom Corp.,
Civ. No. 15-0596, 2015 WL 4988279 (E.D.N.Y. Aug. 19, 2015), is worth noting, that (in
the context of encryption technology) it was of
no moment that "[e]ncryption, in general, represents a basic building block
of human ingenuity that has been used for hundreds, if not thousands, of
years." That is because [U.S. Patent No. 6,259, 789] does not claim a
process that can or does involve the encryption of data for some purpose
that is otherwise abstract. Rather, it claims a specific method of doing so.
Id. at *7 (citation omitted) (emphasis omitted).
Despite the "dynamic presentation of data - that is, ... the claimed invention in 'real
time' customizes the web page based on the information it knows about the particular
viewer'' - and despite the claimed "interactive interface," which was "broadly construed
by the district court to mean 'a selectively tailored medium by which a web site user
communicates with a web site information provider."' Intellectual Ventures, 792 F.3d at
1369-70.
15

10

user" provides no additional limitation beyond applying an abstract idea,
restricted to the Internet, on a generic computer.

Id. at 1370-71. In distinguishing DOR, the Intellectual Ventures Court offered the
following analysis:
The patent at issue in [DOR] dealt with a problem unique to the Internet:
Internet users visiting one web site might be interested in viewing products
sold on a different web site, but the owners of the first web site did not
want to constantly redirect users away from their web site to a different
web site .... The claimed solution used a series of steps that created a
hybrid web page incorporating "look and feel" elements from the host web
site with commerce objects from the third-party web site. . . . The patent
at issue in DOR provided an Internet-based solution to solve a problem
unique to the Internet that (1) did not foreclose other ways of solving the
problem, and (2) recited a specific series of steps that resulted in a
departure from the routine and conventional sequences of events after the
click of a hyperlink advertisement. . . . The patent claims [in Intellectual
Ventures] do not address problems unique to the Internet, so DOR has no
applicability.l161

Id. at 1371 (citations omitted).
In reviewing post-A/ice cases such as DOR and Intellectual Ventures, the court is
struck by the evolution of the § 101 jurisprudence, from the complete rejection of
patentability for computer programs 17 to the almost complete acceptance of such, 18 to
the current (apparent) requirements that the patent claims in suit (1) disclose a problem
"necessarily rooted in computer technology," and (2) claim a solution that (a) not only

departs from the "routine and conventional" use of the technology, but (b) is sufficiently

16

But recall the "store within a store" pre-Internet analog rejected in DOR.
See, e.g., 33 Fed. Reg. 15581, 15609-10 (1968), and Justice Steven's dissent in
Diehr, whose solution was to declare all computer-based programming unpatentable,
450 U.S. at 219.
18
State Street Bank & Trust Co. v. Signature Fin. Group, Inc., 149 F.3d 1368 (Fed. Cir.
1998), abrogated by Bilski I, in which "a computer-implemented invention was
considered patent-eligible so long as it produced a 'useful, concrete and tangible
result."' DOR, 773 F.3d at 1255 (citing State Street Bank, 149 F.3d at 1373).
17

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specific so as to negate the risk of pre-emption. See DOR, 773 F.3d at 1257;
Intellectual Ventures, 792 F.3d at 1371. In other words, even though most of the patent
claims now being challenged under§ 101 would have survived such challenges if
mounted at the time of issuance, these claims are now in jeopardy under the
heightened specificity required by the Federal Circuit post-A/ice. Moreover, it is less
than clear how a § 101 inquiry that is focused through the lens of specificity can be
harmonized with the roles given to other aspects of the patent law (such as enablement
under§ 112 and non-obviousness under§ 103), 19 especially in light of the Federal
Circuit's past characterization of § 101 eligibility as a "coarse" gauge of the suitability of
broad subject matter categories for patent protection. Research Corp. Techs., Inc. v.
Microsoft Corp., 627 F.3d 859, 869 (Fed. Cir. 2010). Given the evolving state of the
law, the § 101 analysis should be, and is, a difficult exercise. 20 At their broadest, the
various decisions of the Federal Circuit21 would likely ring the death-knell for patent

19

Indeed, Judge Plager, in his dissent in Dealertrack, suggested that,
as a matter of efficient judicial process I object to and dissent from that
part of the opinion regarding the '427 patent and its validity under§ 101,
the section of the Patent Act that describes what is patentable subject
matter. I believe that this court should exercise its inherent power to
control the processes of litigation ... , and insist that litigants, and trial
courts, initially address patent invalidity issues in infringement suits in
terms of the defenses provided in the statute: "conditions of patentability,"
specifically§§ 102 and 103, and in addition §§ 112 and 251, and not foray
into the jurisprudential morass of§ 101 unless absolutely necessary.

Dealertrack, 674 F.3d at 1335. But see CLS Bank Int'/ v. Alice Corp. Pty., 717 F.3d
1269, 1277 (Fed. Cir. 2013), aff'd, 134 S. Ct. 2347 (2014).
20 And, therefore, not an exercise that lends itself to, e.g., shifting fees pursuant to 35
U.S.C. § 285.
21
See, e.g., Dealertrack, where the claim was about as specific as that examined in
DOR, yet the Federal Circuit found the patent deficient because it did "not specify how
the computer hardware and database [were] specially programmed to perform the
12

protection of computer-implemented inventions, 22 a result not clearly mandated (at least
not yet). On the other hand, to recognize and articulate the requisite degree of
specificity - either in the equipment used 23 or the steps claimed 24 - that transforms an
abstract idea into patent-eligible subject matter is a challenging task. In trying to sort
through the various iterations of the § 101 standard, the court looks to DOR as a
benchmark; i.e., the claims (informed by the specification) must describe a problem and
solution rooted in computer technology, and the solution must be (1) specific enough to
preclude the risk of pre-emption, and (2) innovative enough to "override the routine and
conventional" use of the computer. DOR, 773 F.3d at 1258-59. The pre-emption
concern is generally amenable to review in the context of a motion to dismiss or for
judgment on the pleadings. The second requirement, which may well involve issues of
fact relating to the state of the art in the technological environment involved, is more
appropriately addressed after discovery in the context of a motion for summary
judgment.

B. Claim Construction

steps claimed in the patent," 674 F.3d at 1333-34 (emphasis added). The disclosure of
such programming details would likely nullify the ability of a patentee to enforce the
patent, given the ease with which software can be tweaked and still perform the desired
function.
22 Ironically so, given the national concerns about piracy of American intellectual
property.
23 See, e.g., SiRF Tech., Inc. v. Int'/ Trade Comm'n, 601 F.3d 1319 (Fed. Cir. 2010), a
case where the Federal Circuit found that a GPS receiver was "integral" to the claims at
issue. The Court emphasized 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 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." Id. at 1333.
24 See, e.g., DOR, 773 F.3d at 1257-58; TQP Dev., LLC v. Intuit Inc., Civ. No. 12-180,
2014 WL 651935 (E.D. Tex. Feb. 19, 2014); Paone, 2015 WL 4988279.
13

The Federal Circuit has "never set forth a bright line rule requiring district courts
to construe claims before determining subject matter eligibility." U/tramercial, LLC v.
Hutu, LLC, 657 F.3d 1323, 1325 (Fed. Cir. 2011 ), vacated sub nom. WildTangent, 132

S.Ct. 2431 (2012). Given the gate-keeping nature of§ 101, "claim construction may not
always be necessary for a§ 101 analysis." U/tramercial, 657 F.3d at 1325 (citing Bilski

II, 561 U.S. at 611 (finding subject matter ineligible for patent protection without claim
construction)). In Bancorp, the Federal Circuit reiterated that "claim construction is not
an inviolable prerequisite to a validity determination under§ 101," but it may be
"desirable-and often necessary-to resolve claim construction disputes prior to a §
101 analysis, for the determination of patent eligibility requires a full understanding of
the basic character of the claimed subject matter." Bancorp, 687 F.3d at 1273-74. In
advocating for judicial efficiency, the Federal Circuit recently stated:
From a practical perspective, addressing section 101 at the outset of
litigation will have a number of salutary effects. First, it will conserve
scarce judicial resources. Failure to recite statutory subject matter is the
sort of "basic deficiency," that can, and should, "be exposed at the point of
minimum expenditure of time and money by the parties and the court,"
Bell At/. Corp. v. Twombly, 550 U.S. 544, 558 ... (2007) (citations and
internal quotation marks omitted). Here, for example, the district court
properly invoked section 101 to dismiss Ultramercial's infringement suit on
the pleadings. No formal claim construction was required because the
asserted claims disclosed no more than "an abstract idea garnished with
accessories" and there was no "reasonable construction that would bring
[them] within patentable subject matter." U/tramercial, LLC v. Hutu, LLC,
No. 09-CV-6918, 2010 WL 3360098, at *6 (C.D. Cal. Aug. 13, 2010).
Ultramercial, 772 F.3d at 718-19.

Plaintiff argues that "key claim elements ... have yet to be construed." (D.I. 13
at 19) Specifically, plaintiff states that
the scope of the terms "voice server" ('600 patent, claims 1, 5, and 9),
"speaker-independent" (all claims of the '120, '141, and '074 patents),
14

"speech recognition" (all claims), and "natural" speech and voice (all
claims of the '120, '141, and '074 patents) may be vital to determining
whether these limitations provide a meaningful limitation on the scope of
the claims as a whole.

(Id.) (emphasis added) Plaintiff also argues that "[i]f it is not otherwise clear on its face,
claim construction would be required to determine whether the claims cover the
messaging unification." (Id. at 20) Plaintiff, however, does not proffer a construction
which would affect the analysis of patent eligibility. Plaintiff's arguments below focus on
the broader concepts of the claims and the computer components used to argue for
patent eligibility. The court concludes that it may proceed to the § 101 analysis.

C. The Patents
The present invention is a network system, which is based on
[l]nternet, computing and telecommunications standards, utilizing
computer and [l]nternet technology, an innovative graphical user interface,
integrated communication applications and interactive voice recognition
technology. The present invention is a unified messaging service which
will be accessible from any standard communication device (telephone,
computer or [l]nternet), and will give the user intuitive voice command of
personal, professional and public information.
(2:14-24) The invention is directed to "[s]mall office, home office professionals, most of
whom do not have access to dedicated information management systems or the benefit
of administrative support staff .... " (2:37-40) "The unified messaging service ...
offer[s] a single point of access to all communications, integrated with personal
information management tools and customized public content delivery." (2:32-37) The
invention utilizes two separate sites with "a cluster of servers" (voice servers, mirrored
Sybase database servers and web servers). The computers used "are 200 MHz Intelbased 19" rackmount servers running a combination of Solaris and SCO UNIX
operating systems." The voice server "includes certain functions, such as telephony,

15

automatic speech recognition, text-to-speech, conferencing, etc. Subscribers are
connected to these clusters by either normal telephone connections or by [l]nternet
connections." (3:10-25) The invention "is a compilation of hardware and software" for
voice and fax processing. (5:49-67) 'The system combines state-of-the-art speech
recognition, computer and telephony technology." (6:1-2) The system provides three
ways to handle communications: "voice recognition software using natural voice
recognition (phonemes based), not pattern based as many of the current systems
utilize;" "standard telephone touchtones;" or a secure web site accessed via the
Internet. (4:54-61)
Claim 1 of the '600 patent recites:
A computer and telecommunications network for receiving, sending and
managing information from a subscriber to the network and from the
network to a subscriber comprising:
at least one cluster, said cluster containing at least one voice server,
said voice server containing telephony, speech recognition, text-to-speech
and conferencing functions, such that said subscriber can access said
cluster by a standard telephone connection or by a[n] [l]nternet
connection;
at least one database server, said database server being connected to
said cluster and containing contact lists and administrative data, such that
said subscriber can manipulate and manage said data;
at least one file server, said file server being connected to said cluster;
and
a web server, said web server being connected to said cluster such that
said subscriber can access said network by connecting to said web server
via the [l]nternet;
wherein said network can receive a message from said telephone
connection or said [l]nternet connection and transmit said message to said
subscriber by said telephone or [l]nternet connection, and said network
can receive a message from said subscriber by telephone connection or
[l]nternet connection and transmit said message by telephone connection
or said [l]nternet connection based on commands received from said
subscriber.
(7:45-8:3) Claim 5 recites:

16

A method for receiving, sending and managing information between a
computer and telecommunications network and a subscriber comprising
the steps of:
providing at least one cluster, said cluster containing at least one voice
server, said voice server containing telephony, speech recognition, text-tospeech and conferencing functions, such that said subscriber can access
said cluster by a standard telephone connection or by a[n) [l]nternet
connection;
providing at least one database server, said database server being
connected to said cluster and containing contact lists and administrative
data, such that said subscriber can manipulate and manage said data;
providing at least one file server, said file server being connected to said
cluster; and
providing a web server, said web server being connected to said cluster
such that said subscriber can access said network by connecting to said
web server via the [l]nternet;
receiving a message from said telephone connection or said [l]nternet
connection transmitting said message to said subscriber by said telephone
or [l]nternet connection, based on commands received by the network
from said subscriber.
(8:17-40)

D. Analysis
Applying the analytical framework of Alice, the court first "determine[s] whether
the claims at issue are directed to one of those patent-ineligible concepts," namely, laws
of nature, natural phenomena, and abstract ideas. 134 S.Ct. at 2354-55. Defendants
contend that independent claim 1 of the '600 patent is representative in concept of all 86
claims 25 of the patents-in-suit. Defendants characterize the claims of the patents-in-suit
as "the use of general purpose computers and computer-related components to
automate tasks routinely and conventionally performed by humans in a business
setting," i.e., a way to automate (using a telephone or Internet connection) conventional
tasks performed by an administrative assistant. (D. I. 9 at 1) Plaintiff argues that the

25

Which include 7 independent claims.
17

patents-in-suit "are directed to unifying different types of electronic voice and data
communication systems, and allowing users to operate the systems through natural
speech recognition and commands." (D.I. 13 at 9)
The claim language (which does not recite a unification theory) calls for using a
"computer and telecommunications network for receiving, sending and managing
information from a subscriber to the network and from the network to a subscriber."
Specifically, as described by defendants, the claim focuses on the automated tasks of
(1) receiving messages via a phone or Internet connection and then transmitting those
messages to a subscriber by phone or Internet; and (2) receiving a message from a
subscriber by phone or Internet and then forwarding that message based on rules
established by the subscriber. 26 (D.I. 9 at 5) Although at the time of issuance the
challenges addressed by the patents-in-suit undoubtedly were considered to be
Internet-centric, under the current analytical paradigm (i.e., in hindsight), the fact that
there are pre-Internet analogs to the patent claims suggests methods of organizing
human (business) activity and, therefore, an abstract idea. See, e.g., Intellectual
Ventures, 792 F .3d at 1368 (finding that the claims of the patent-in-suit were directed to
the abstract idea of "tracking financial transactions to determine whether they exceed a
pre-set spending limit (i.e., budgeting)"); Accenture, 728 F.3d at 1339, 1344
(determining that the patent claims were directed to the abstract concept of "generating
tasks to be performed in an insurance organization").

26

Defendants also provided a hypothetical illustrating a human's performance of the
abstract idea. (D.I. 9 at 10-11)
18

Turning to step two of the Alice framework, the specification explains that the
"present invention is a compilation of hardware and software" and lists the hardware
and software components used to automate the processes routinely performed by
administrative assistants. (5:48-67) Focusing on the claim language, 27 defendants
identify the following elements: (1) information being sent and received between a user
(subscriber) and a "computer and telecommunications network," via standard Internet
protocols and/or standard DTMF dial tone lines; (2) generic computer components - a
"voice server " "file server " "database server " and a "web server·" and (3)
'

'

'

'

communications being received, transmitted, and organized "based on commands" from
the user. (D.I. 9 at 14) Defendants argue that the sending and receiving of information
on a "computer and telecommunications network" and the use of generic computer

27

Plaintiff disagrees with the characterization of claim 1 of the '600 patent as
representative, pointing out the differences in "speech recognition limitations" of each
independent claim 1 of the patents-in-suit: Claim 1 of the '07 4 patent claims "natural
speech input" and "speaker-independent speech recognition;" claim 1 of the '120 patent
claims "natural voice spoken commands" and "speaker independent speech
recognition;" claim 1 of the '141 patent claims "natural speech command" and "speaker
independent speech recognition;" and, claim 1 of the '600 patent claims "speech
recognition." Plaintiff concludes that claim 1 of the '600 patent "must be presumed to
differ in meaning and scope." (D.I. 13 at 7-8) Comparing claim 1 of the '074 patentwhich recites in part "[a] method for managing user-related communications by a voiceenabled system driven by natural voice commands received from users, involving the
user-related communications including at least a telephone call, a facsimile message,
an e-mail message and a message containing data" - to claim 1 of the '600 patent
reveals that claim 1 of the '07 4 patent is similarly directed to a method of managing
communications (albeit using "natural speech input") via telephone and Internet
connections. As plaintiff contends, the "speech recognition limitation" in claim 1 of the
'600 patent is broader than the corresponding limitations of each independent claim 1 of
the patents-in-suit; nevertheless, such differences do not change the overall concept of
the patent claims. The court concludes that claim 1 of the '600 patent is representative.
See, Content Extraction, 776 F.3d at 1348 (agreeing with the district court that certain
claims were "representative, because all the claims are 'substantially similar and linked
to the same abstract idea.'").

19

components comprise "generic computer" implementation of the claims. Moreover, the
computer components are used for their basic functions and, therefore, do not confer
inventiveness. (Id. at 14-15)
Plaintiff responds that the patents-in-suit nevertheless satisfy the second prong
of the Alice test as: ( 1) they solve problems that specifically arise in communications
technologies; 28 (2) the claims rely on specialized components and hardware; and (3) the
method claims satisfy the machine-or-transformation test. (D.I. 13 at 12) Plaintiff
focuses on the "unification of networks to enable the system to seamlessly
communicate messages in any format to a user in any other preferred format." (Id. at
13) Plaintiff explains that "a business or system administrator no longer needs to
purchase and maintain multiple separate systems (e.g., fax machines, answering
machines, pagers, office phones, phone conferencing, e-mail system, etc.)," but instead
"can install one unified messaging system with 'integrated telecommunications
applications and interactive voice recognition technology.'" (Id. at 14 (citing the '600
patent, 1:19-20; 2:18-20; 2:32-33; 2:67-3:1; 3:4-6)) As to specialized components,
plaintiff argues that the speech recognition functions "use speaker-independent,
phoneme-based, natural voice recognition that does not require the system to be
trained before recognizing speech,'' which are "not functions of a generic computer or
general purpose computer components." 29 (Id. at 16-17)

28

Plaintiff alleges that the patents-in-suit "address technological problems that were in
their infancy in the mid-1990s when the inventions were developed, and that arose from
differing communications architectures, protocols, networks, and devices." (Id. at 12)
29
Plaintiff provides an expert declaration to support the argument that the speech
recognition tools are not generic, off-the-shelf components, and "had to be interfaced
and integrated into the system by the inventor with extensive software applications to
operate in the manner described in the specification." (D.I. 13 at 16-17; D.I. 14)
20

The pre-emption inquiry focuses on whether the patent "would risk
disproportionately tying up the use of the underlying ideas." Alice, 134 S.Ct. at 2354;
Mayo, 132 S.Ct. at 1294. Plaintiff argues that the abstract idea of "managing business

communications" is not broadly preempted as "[n]ot only is it possible to continue
managing business communications using non-integrated, independent communication
systems, but the requirements of 'speaker-independent' and 'natural' speech
recognition accompanying the claims' system-unification limitations make preemption
concerns in this field specious." (D.I. 13 at 18) Plaintiff's arguments, however, ignore
the claim language. See, e.g., Planet Bingo, LLC v. VKGS LLC, 576 F. App'x 1005,
1008-09 (Fed. Cir. 2014) (rejecting the argument that unclaimed features and "complex
computer code" are relevant for patent-eligibility purposes); Accenture, 728 F.3d at
1345 (stating that "the important inquiry for a § 101 analysis is to look to the claim."). In
the case at bar, the claim language (informed by the specification) does not support
plaintiff's characterization of the computer components as specialized. buySAFE, Inc.,
765 F.3d at 1355 (comparing the claims at issue to the computers in Alice and finding
that the "computer functionality is generic" and "not even arguably inventive," when it
"receives and sends the information over a network-with no further specification.").
Indeed, the claims of the patents-in-suit do not reference any customization of the
"compilation of hardware and software" described by the specification. See, e.g.,
Accenture, 728 F.3d at 1344-46 (finding that recitations of software components did not

However, "the complexity of the implementing software or the level of detail in the
specification does not transform a claim reciting only an abstract concept into a patenteligible system or method." Accenture, 728 F.3d at 1345.
21

confer patent eligibility to claims directed to the abstract concept of "generating tasks to
be performed in an insurance organization").
Nor do the steps claimed provide sufficient specificity to negate the risk of preemption. Organizing business functions based on commands provided by a user is
tantamount to the automation of the management of business communications usually
performed by human administrative assistants (the identified purpose of the invention).
At best, the claims describe using known technology (voice recognition, telephone or
Internet) to enable the "subscriber" to manage a network system made up of known
communications components (e.g., telephone, fax, and answering machine) and
computer components (e.g., servers and computers).
As to the machine or transformation test, plaintiff avers that "the very purpose of
unified messaging is the ability to transform a particular communication into a different
state or communication," e.g., voicemails into text or faxes into e-mails or spoken voice.
(D.I. 13 at 18) Plaintiff explains that "the purpose of natural speech recognition is to
transform spoken words into a function to be executed, data to be stored, or a
configuration to be set." (Id.) However, the patent does not claim the alleged
transformations.
Given the options illustrated in the specification and the broad claim language,
the "inventive concept" of the patents-in-suit does not pass muster under § 101. Even if
the problem addressed were characterized as Internet-centric, the claimed solution is
not described with enough specificity to place meaningful boundaries on the inventive
concept.

V. CONCLUSION

22

For the foregoing reasons, the court grants defendants' motions to dismiss. An
appropriate order shall issue.

23