Smart Meter Technologies, Inc. v. Duke Energy Corporation

Filing 15

MEMORANDUM ORDER denying 7 MOTION to Dismiss for Failure to State a Claim . Signed by Judge Sue L. Robinson on 7/11/2017. (nmfn)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

SMART METER TECHNOLOGIES, INC.
Plaintiff,
v.
DUKE ENERGY CORPORATION,
Defendant.

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) Civ. No. 16-208-SLR
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MEMORANDUM ORDER
At Wilmington this \\'t'day of July, 2017, having reviewed the papers submitted in
connection with defendant's motion to dismiss (D.I. 7), the court issues its decision as
follows:
1. Background. Smart Meter Technologies, Inc. ("plaintiff") is the owner of U.S.
Patent No. 7,058,524 ("the '524 patent"). (D.I. 1 at 118) The '524 patent relates to an
electrical power metering system. (D.I. 1 at 117) Duke Energy Corporation
("defendant") is a "power holding company in the United States, supplying and
delivering energy to approximately 7.4 million U.S. customers." (D.I. 1 at 112 (quotation
omitted)) Plaintiff contends that defendant infringes claim 17 of the '524 patent. (D.I. 1
at 111111-12) Defendant moved to dismiss for failure to state a claim for relief under
Federal Rules of Civil Procedure 12(b)(6). (D.I. 7) The court has jurisdiction pursuant
to 28 U.S.C. §§ 1331 and 1338(a).

2. Standard of Review. A motion filed under Rule 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
Twombly and Ashcroft v. Iqbal, 556 U.S. 662 (2009), the Third Circuit requires a three-

part analysis when reviewing a Rule 12(b)(6) motion. Connelly v. Lane Const. Corp.,
809 F.3d 780, 787 (3d. Cir. 2016). In the first step, the court "must tak[e] note of the
elements a plaintiff must plead to state a claim." Next, the court "should identify
allegations that, because they are no more than conclusions, are not entitled to the
assumption of truth." Lastly, "[w]hen there are well-pleaded factual allegations, a court
should assume their veracity and then determine whether they plausibly give rise to an
entitlement for relief." Id. (citations omitted).
3. Under Twombly and Iqbal, the complaint must sufficiently show that the
pleader has a plausible claim. McDermott v. Clondalkin Grp., 2016 WL 2893844, at *3
(3d Cir. May 18, 2016). Although "an exposition of [the] legal argument" is
unnecessary, Skinner v. Switzer, 562 U.S. 521 (2011 ), a complaint should provide
reasonable notice under the circumstances. Id. at 530. A filed pleading must be "to the
best of the person's knowledge, information, and belief, formed after an inquiry
reasonable under the circumstances," such that "the factual contents have evidentiary
support, or if so identified, will likely have evidentiary support after a reasonable
opportunity for further investigation or discovery." Anderson v. Bd. of Sch. Directors of
Millcreek Twp. Sch. Dist., 574 F. App'x 169, 174 (3d Cir. 2014) (quoting Fed. R. Civ. P.

11 (b)). So long as plaintiffs do not use "boilerplate and conclusory allegations" and
"accompany their legal theory with factual allegations that make their theoretically viable
claim plausible,'' the Third Circuit has held "pleading upon information and belief [to be]
permissible where it can be shown that the requisite factual information is peculiarly

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within the defendant's knowledge or control." McDermott, 2016 WL 2893844, at *4
(quotation marks, citation, and emphasis omitted).
4. 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 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.
5. § 101. Defendant argues that dismissal is appropriate, because "claim 17 is
ineligible for patent protection under 35 U.S.C. § 101." (D.I. 8 at 2) The Patent Act
extends patent protection to "any new and useful process, machine, manufacture, or
composition of matter, or any new and useful improvement thereof ... subject to the
conditions and requirements of this title." 35 U.S.C. § 101. Despite the protections of

§ 101, the Supreme Court has held that, "[e]xcluded from such protection are laws of
nature, natural phenomena, and abstract ideas." Diamond v. Diehr, 450 U.S. 175, 185
(1981 ). The purpose of these exceptions is to protect the "basic tools of scientific and
technological work." Mayo Collaborative Servs. v. Prometheus Labs., Inc.,_ U.S._,
132 S.Ct. 1289, 1293 (2012). In Alice, the Supreme Court endorsed a two-step
"framework for distinguishing patents that claim laws of nature, natural phenomena, and
abstract ideas from those that claim patent-eligible applications of those concepts."
Alice Corp. Pty. Ltd. v. CLS Bank Int'/,_ U.S._, 134 S.Ct. 2347, 2355 (2014). First, the
court must determine if the claims at issue are directed to a patent-ineligible concept.

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Id. If the answer is no, that ends the matter and the defendant's motion is denied. See,
e.g., Enfish, LLC v. Microsoft Corp., 822 F.3d 1327, 1337 (Fed. Cir. 2016) (finding in

step one that the claims were not directed to an abstract idea and, therefore, not
addressing step two). If, however, the answer is yes, then the court must "determine
whether the additional elements transform the nature of the claim into a patent-eligible
application." Alice, 134 S.Ct. at 2355.
6. Alice, Step One. "[T]he 'directed to' inquiry applies a stage-one filter to
claims, considered in light of the specification, based on whether 'their character as a
whole is directed to excluded subject matter."' Enfish, 822 F.3d at 1335 (citing Internet
Patents Corp. v. Active Network, Inc., 790 F.3d 1343, 1346 (Fed.Cir.2015)). While the

Supreme Court "has not established a definitive rule to determine what constitutes an
'abstract idea' .... [, it is] sufficient to compare claims at issue to those claims already
found to be directed to an abstract idea in previous cases." Id. at 1334.
7. The claim. Claim 17 of the '524 patent recites:
A method of measuring power consumption information on a power line
comprising:
measuring current fluctuations in the power line;
calculating power consumption information from the current fluctuations
in a processor;
converting the power consumption information into IP-based power
consumption information in the processor; and
transmitting the IP-based power consumption information from the
processor to a destination autonomously in IP format over an
external power line network.
('524 patent, 10:48-58)
8. Disputed statement of facts. Defendant argues that claim 17 "is directed to
the [] abstract idea of measuring and transmitting power consumption information that
has been performed for years by human meter readers." (D.I. 8 at 2) Defendant

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contends that "[c]laim 17 merely claims a faster, more efficient way of performing the
abstract idea in an Internet-based world using generic computer and power utility
equipment, i.e., a power meter, processor, transceiver, and external power line, for
nothing more than their routine functions, i.e., measuring, calculating, converting, and
transmitting." 1 (Id.) In its accompanying "statement of facts," defendant avers that "[t]he
specification acknowledges that the claimed invention replaces meter reading
personnel with transmission of data over the Internet to achieve a more efficient
method of measuring and transmitting power consumption information for billing
purposes." (D.I. 8 at 3 (emphasis added)( citing '524 patent, 6:45-51 )) The cited text of
the specification states:
Importantly, the power metering systems 10, 110 also allow for the
transmission of data, including power consumption data, across the
Internet. Thus, power consumption information could be transmitted
directly to a power utility by power metering systems 10, 110 for
immediate processing and billing, thereby obviating the need for meter
reading personnel.
('524 patent, 6:45-51 (emphasis added)) The conditional and non-limiting nature of this
language does not support defendant's assertion that "the claimed invention replaces
meter reading personnel." Meanwhile, the specification identifies a number of other
benefits associated with "power metering systems." 2 The specification states that
"appliances within the households connected to the power lines 50, 150 can be

selectively activated and de-activated by power metering systems 10, 110 to maximize

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The specification makes no claims as to being "faster" or "more efficient." While the
specification identifies some technologies as "known," it does not discuss "routine
functions." For the purposes of this motion, absent citation to the record, the court
credits statements about the nature of "the invention" as attorney argument.
2

Plaintiff cites to the '524 patent, 2:45-56, which outlines the embodiments discussed
herein with respect to the specification at 6:45-7:9. (D.I. 9 at 2)

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efficiency." 3 ('524 patent, 6:51-54) "Moreover, the power metering systems 10, 110
allow for the transmission of non-appliance-related data (e.g., standard IP network
traffic) across the power lines 50, 150 and/or networks A-D." ('524 patent, 6:58-61)
The specification explains that:
IP-based traffic could be selectively transmitted between networks A and
B of power line 50 in a first household by power metering system 10.
Similarly, traffic could be selectively transmitted between networks C and
D of power line 150 in a second household by power metering system
110. A power line network connection 170 could be provided between the
two households for allowing the transmission of IP data therebetween,
using a standard power line network protocol (e.g., the HomePlug
protocol) between the power lines 50, 150. In such an arrangement, both
of the power metering systems 10, 110 could be configured to provide
firewall services, so that only desired traffic external to each of the
households is allowed. Further, both IP-based traffic, including IPencapsulated power consumption data, can be shared between the power
metering systems 10, 110 using network 70.
('524 patent, 6:61-7:9) Based upon this language, the court cannot conclude, as
defendant contends, that it is a simple factual matter that "the '524 patent is directed to
the long-standing business practice of power companies-to measure and transmit
power consumption data using generic computer equipment and power meters to
perform conventional, routine steps."4 (D.I. 8 at 3)
9. As a second allegedly factual matter, defendant contends that "the '524 patent
measures and transmits power consumption information using admittedly conventional
technologies." (D.I. 8 at 3) Defendant argues that "the specification makes clear, the
inventor did not invent or improve the function of a power line meter, a transceiver, a

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The court notes that the "efficiency" discussed here is energy efficiency and not
defendant's asserted "more efficient method."
4

According to Local Rule 7.1.3(c)(1 )(E), the "concise statement of facts" shall contain
"supporting references to the record, presenting the background of the questions at
issue." The cited language is presented without citation to the record and appears to be
attorney argument.

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processor, external power lines, or an external power line network (or any other wired or
wireless network)." Defendant discusses how the specification, including figures 1, 5,
and 6, identifies known technologies; however, defendant repeatedly adds the word
"generic" in its statement of facts. (See D.1.8 at 4 (identifying "a generic computer
processor" and "a generic transceiver" when such terms are not present in the
specification)) Defendant argues further in its statement of facts that the specification
lacks a number of elements. (D.I. 8 at 5-6) Plaintiff contends that this is "blatant
attorney argument" and notes that the specification, with reference to figure 3, identifies
a preferred embodiment including the ADE7756 integrated circuit and VS6801
semiconductor chip, which it argues is "clearly more than 'generic' computer
equipment." (D.I. 9 at 3)
10. The specification explains that, in an embodiment, the invention may be
used to replace human meter readers and that the invention may be used to transmit
"[p]ower consumption information ... to a wireless monitoring station, one or more
computers within the household, or directly to a utility company via the Internet." ('524
patent, 1:64-67). As discussed above, the specification identifies other uses, such as
transmitting other types of data and operating as a firewall. However, the specification
makes no representations about the operation and business practices of electric power
utilities. As for the commercially-available components identified in a preferred
embodiment, without a more detailed record (including expert reports), the court is
unprepared to draw inferences. Moreover, the court notes that claim 17 is a method
claim, and "a new combination of steps in a process may be patentable even though all
the constituents of the combination were well known and in common use before the
combination was made. The 'novelty' of any element or steps in a process, or even of
the process itself, is of no relevance in determining whether the subject matter of a

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claim falls within the§ 101 categories of possibly patentable subject matter." Diehr, 450
U.S. at 188-89.
11. Analysis. In its brief, defendant makes four arguments that claim 17 is
"directed to" an abstract idea: (1) the steps of claim 17 "do not involve any scientific or
technical innovation, but merely recite a way of measuring and transmitting power
consumption information;" (2) "[p]ower utility companies have measured power
consumption information for decades using human meter readers;" (3) "the specification
expressly acknowledges that the claimed invention could be performed by a meterreading human" which is "an indication that the claimed invention is directed to an
abstract idea;" and (4) "[c]laim 17 is analogous to the claims that the Federal Circuit
recently found abstract in TL/ that were directed to the idea of classifying and storing
digital images in organized manner." (D.I. 8 at 8-12) The first three arguments
duplicate the arguments found in defendant's "statement of facts."
12. As discussed above, the specification identifies a number of embodiments
and a number of possible benefits of the invention. One of these benefits is the
possibility of replacing human meter readers. Defendant asserts that this embodiment
and possible benefit means that humans can perform "the invention." (D.I. 8 at 12)
Plaintiff responds that:
[T]he specification explicitly claims numerous uses for the claimed
invention, such as for the remote control of household appliances in
response to power consumption trends, and providing network
connectivity and firewall capabilities between an existing network within a
dwelling and a power line network, and allowing "power consumption data
to be remotely monitored."
(D.I. 9 at 2 (citing '524 patent, 2:45-56)) The specification does not admit that humans
could perform any of these functions, and defendant does not identify where the record
demonstrates that humans could perform these aspects of the invention. The method
of claim 17 most likely could encompass these embodiments, meaning that remote

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meter reading is only one possible infringing use of claim 17. By definition, a claim is
not "directed to" a specific embodiment when multiple embodiments are potentially
covered by the claim limitations. Assuming, arguendo, the meter-reading embodiment
is an abstract idea and reading claim 17 as a whole in light of the specification (which
discloses other embodiments), the court cannot conclude that claim 17 is directed to an
abstract idea.
13. Analogous claims. Defendant argues that claim 17 is analogous to the
claims held invalid by the Federal Circuit in In re TL/ Communications LLC Patent
Litigation, 823 F.3d 607 (Fed. Cir. 2016). In that case, the Federal Circuit held that "the

invention teaches manually or automatically assigning 'classification data,' such as a
date or timestamp, to digital images and sending those images to a server. The server
then extracts the classification data and stores the digital images, 'taking into
consideration the classification information."' TL/, 823 F.3d at 610. Claim 17 of the '524
patent does not relate to classification of data, digital images, or storing images on a
server. The specification in TL/ made numerous statements about the prior art that
enabled the Court to draw its conclusion. In the case at bar, defendant has not
adequately explained how applicant's statements about the prior art and the
specification of the '524 patent relate to the relevant claims discussed in TL/. Defendant
has also provided the court with subsequent authority in the form of Elec. Power Grp.,
LLC v. Alstom S.A., 830 F.3d 1350 (Fed. Cir. 2016), which defendant contends the

"subject matter and concepts ... are similar to those" in the case at bar. (D.I. 13 at 1)
That case arose out of summary judgment on a record and patent wholly unrelated to
the '524 patent. Elec. Power Grp. 830 F.3d 1352. The court declines to draw analogies
on this basis.
14. Moreover, the specification at bar identifies several technical challenges
related to conventional power meters in 2002, namely that: (1) "a single ... meter ...

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does not accurately reflect power consumption by individual families or occupants of the
dwelling" ('524 patent, 1:24-28); (2) "meters do not ... identify locations in the building
where power is most frequently consumed and/or wasted" (id., 1:32-34); (3) RF meterreading technologies "do not allow for the direct connection of the meter to the Internet"
(id., 1:40-41); and (4) metering systems do not "allow[] for the transmission of power

consumption data, in addition to standard network data, over one or more power lines
within a dwelling." (Id., 1:43-46) As part of the solution to these technical problems, the
specification describes a number of potential architectures:
In a preferred embodiment of the present invention, the power metering
system 10 measures power consumption information on power line 50,
before the circuit breaker 55. However, it is to be expressly understood
that the power metering system 10 could be placed at any desired location
along a power line within a single-family dwelling, multi-family dwelling,
commercial business, or elsewhere, to measure power consumption data.
For example, the power metering system 10 could be installed on one of
the cables 60 to analyze power consumption trends on a given electrical
branch stemming from circuit breaker 55. Further, measurement of power
consumption in multi-family dwellings can be achieved by positioning a
plurality of power metering systems 10 of the present invention at various
locations throughout the dwelling (e.g., by placing a single power metering
system on each electrical branch that provides electricity for each family
within the dwelling).
('524 patent, 2:66-3:16) These architectures contemplate metering devices that appear
in places other than the known location of a "conventional power utility meter" (i.e.,
between the power source and a user's circuit breaker). (Id., 1:20-34) Even if, as
defendant contends, human reading of a conventional power meter is a known business
process, the specification discusses an altogether different device and proposes
numerous other architectures that enable the metering device to do metering tasks that
traditional power meters cannot do (e.g., monitoring specific appliances, providing subunit level power metering, etc.) and to perform additional non-metering functions (e.g.,
networking functions such as bridging, combining data traffic with metering data, or
serving as a firewall). Plaintiff argues that "[o]nly through claim construction will the

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court be able to determine the scope of the inventive concepts." (D.I. 9 at 2 (emphasis
in original)) While this is likely true, at this stage in the proceedings, the specification
provides sufficient detail for the court to conclude that claim 17 addresses a technical
solution to the technical problem of connecting metering devices over power line
networks. Based upon the intrinsic record, the court concludes that claim 17 is not
directed to an abstract idea and, therefore, claim 17 is eligible subject matter under

§ 101.
THEREFORE, IT IS ORDERED that defendant's motion to dismiss (D.I. 7) is
denied.

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