Stoneeagle Services, Inc. v. Pay-Plus Solutions, Inc. et al
Filing
91
ORDER denying 69 Motion for Judgment on the Pleadings. Signed by Judge Virginia M. Hernandez Covington on 2/9/2015. (KM)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
STONEEAGLE SERVICES, INC.,
Plaintiff,
v.
Case No. 8:13-cv-2240-T-33MAP
PAY-PLUS SOLUTIONS, INC.,
ET AL.,
Defendants.
________________________________/
AMENDED ORDER1
This cause is before the Court pursuant to Defendants
Pay-Plus Solutions, Inc. and Premier Healthcare Exchange,
Inc.’s Motion for Judgment on the Pleadings, filed on December
9, 2014 (Doc. # 69), and Notices of Supplemental Authority
(Docs. ## 71, 73), filed on December 22, 2014 and December 30,
2014.
On January 16, 2015, Plaintiff StoneEagle Services,
Inc., filed a response in opposition to the Motion.
# 78).
(Doc.
On February 2, 2015, Defendants filed a reply brief
(Doc. # 88), as permitted by the Amended Case Management and
Scheduling Order.
For the reasons that follow, the Motion is
denied without prejudice, as premature.
I.
Background
In this patent infringement action, Plaintiff alleges
1
This Order amends the Court’s February 2, 2015, Order
(Doc. # 87), which was vacated to allow consideration of
Defendants’ reply brief. (See Doc. # 90). Pursuant to the
Amended Case Management and Scheduling Order (Doc. # 47) and
Rule 6(d) of the Federal Rules of Civil Procedure, the reply
brief will be considered timely filed.
that Defendants willfully infringed Plaintiff’s rights under
two patents: Reissue Patent No. US RE43,904 E (“the ‘904
Patent”) and Reissue Patent No. US RE44,748 E (“the ‘748
Patent”).
(Doc. # 66 at ¶¶ 1, 8-10 & Exhs. A, B).
Both
patents cover a healthcare provider reimbursement system, by
which a payor, such as an insurance company, makes “a virtual
payment to a medical provider by transmitting a stored-value
card
account
payment
of
the
authorized
together with an explanation of benefits.”
& Exhs. A, B).
benefits
benefit
amount,
(Id. at ¶¶ 14-16
Plaintiff alleges that Defendants’ healthcare
payment
processing
system,
“Pay-Plus™
directly competes with Plaintiff’s patented system.
Select,”
(Id. at
¶¶ 17-18).
On November 20, 2014, Plaintiff filed a Second Amended
Complaint, asserting claims for infringement of the ‘904
Patent (Count I) and infringement of the ‘748 Patent (Count
II).
(Id. at ¶¶ 21-38).
On December 2, 2014, Defendants
filed Answers to the Second Amended Complaint, including, as
an affirmative defense, a challenge to the validity of the
patents pursuant to 35 U.S.C. § 101.
# 68 at 7).
(Doc. # 67 at 7; Doc.
In the instant Motion for Judgment on the
Pleadings, Defendants argue that the claims at issue are
directed to patent-ineligible subject matter under 35 U.S.C.
§ 101, warranting judgment in Defendants’ favor.
is now ripe for the Court’s review.
2
The Motion
II.
Legal Standard
A motion for judgment on the pleadings may be granted
“when material facts are not in dispute and judgment can be
rendered by looking at the substance of the pleadings and any
judicially
noticed
facts.”
Bankers
Ins.
Co.
v.
Fla.
Residential Prop. & Cas. Joint Underwriting Ass'n, 137 F.3d
1293, 1295 (11th Cir. 1998) (citations omitted).
A motion for judgment on the pleadings is governed by the
same standard as a Rule 12(b)(6) motion to dismiss.
Szabo v.
Fed. Ins. Co., No. 8:10-cv-02167-T-33, 2011 WL 3875421 (M.D.
Fla. Aug. 31, 2011)(citing Hawthorne v. Mac Adjustment, Inc.,
140 F.3d 1367, 1370 (11th Cir. 1998)).
As with a motion to
dismiss, the “[f]actual allegations must be enough to raise a
right to relief above the speculative level.” Bell Atl. Corp.
v. Twombly, 550 U.S. 544, 555 (2007). “To survive a motion to
dismiss, a complaint must contain sufficient factual matter,
accepted as true, to state a claim to relief that is plausible
on its face.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(citations omitted).
Rule 12(d) instructs that when matters outside of the
pleadings are presented to the court on a motion for judgment
on the pleadings, the motion must be treated as one for
summary judgment. See Fed. R. Civ. P. 12(d).
However, the
motion “should only be treated as one for summary judgment if
the record is fully developed and the non-moving party was
3
given adequate notice of the court's decision.” Jozwiak v.
Stryker Corp., No. 6:09–cv–1985–Orl–19GJK, 2010 WL 743834, at
*4 (M.D. Fla. Feb. 26, 2010)(citations omitted).
“The court has a broad discretion when deciding whether
to treat a motion [for judgment on the pleadings] as a motion
for summary judgment even though supplementary materials are
filed by the parties and the court is not required to take
cognizance of them.”
In re Jet 1 Ctr., Inc., 319 B.R. 11, 16
(Bankr. M.D. Fla. 2004) (citations omitted); Hagerman v. Cobb
County, No. 1:06–CV–02246–JEC, 2008 WL 839803, at *3 (N.D. Ga.
Mar. 28, 2008); see also 5C Charles Alan Wright & Arthur R.
Miller, Federal Practice & Procedure § 1371, at 273 (3d ed.
2004) (“It is within the district court's discretion whether
to accept extra-pleading matter on a motion for judgment on
the pleadings and treat it as one for summary judgment or to
reject it and maintain the character of the motion as one
under Rule 12(c).”).
III. Analysis
The issue of patent-eligibility under 35 U.S.C. § 101
presents a question of law.
Accenture Global Servs., GmbH v.
Guidewire Software, Inc., 728 F.3d 1336, 1340-41 (Fed. Cir.
2013). Because each claim of a patent is presumed valid,
Defendants bear the burden of establishing invalidity by
“clear
and
convincing
evidence.”
35
U.S.C.
§
282(a);
Microsoft Corp. v. i4i Ltd. P’ship, 131 S. Ct. 2238, 2242
4
(2011); CLS Bank Int’l v. Alice Corp. Pty. Ltd., 717 F.3d
1269, 1284 (Fed. Cir. 2013) (holding that the presumption of
validity applies to challenges pursuant to Section 101); cf.
Ultramercial, Inc. v. Hulu, LLC, 772 F.3d 709, 720 (Fed. Cir.
2014) (Mayer, J., concurring) (arguing that the presumption of
validity should not apply to Section 101 challenges).
Pursuant
to
35
U.S.C.
§
101,
four
categories
of
inventions or discoveries are eligible for patent protection:
“processes,
machines,
manufactures,
and
compositions
of
matter.” Bilski v. Kappos, 561 U.S. 593, 601 (2010). Supreme
Court precedent provides three exceptions to Section 101's
broad
coverage:
abstract
ideas”
“laws
are
of
not
nature,
natural
patent-eligible.
phenomena,
Id.
and
(internal
quotation marks omitted).
In order to determine whether subject matter is patenteligible under Section 101, the first question is whether the
claims at issue are directed to a law of nature, a natural
phenomenon, or an abstract idea. Alice Corp. Pty. Ltd. v. CLS
Bank Int’l, 134 S. Ct. 2347, 2355 (2014).
If so, the next
question is whether the elements of each claim, considered
both individually and in combination, contain an “inventive
concept,” sufficient to transform the claims into a patenteligible application. Id. (internal quotation marks omitted).
A claimed process contains the requisite “inventive
concept” if the process comprises more than “well-understood,
5
routine, conventional activity already engaged in by the
scientific
community.”
Mayo
Collaborative
Servs.
v.
Prometheus Labs. Inc., 132 S. Ct. 1289, 1298 (2012) (internal
quotation marks omitted).
Limiting the use of an abstract
idea to a “particular technological environment,” or using “a
generic computer to perform generic computer functions” is not
sufficient to transform an abstract idea into a patenteligible process. Id. at 1297, 1301 (internal quotation marks
omitted); Alice Corp. Pty. Ltd., 134 S. Ct. at 2359; DDR
Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245, 1256 (Fed.
Cir.
2014).
technological
On
the
process
inventive application.
2358.
other
may
hand,
improving
transform
a
an
process
existing
into
an
Alice Corp. Pty. Ltd., 134 S. Ct. at
For instance, an abstract idea may be integrated into
a new combination of steps, in a way that is unconventional in
the field.
Mayo, 132 S. Ct. at 1298-1300.
In the instant motion, Defendants argue that the claims
at issue are directed to a patent-ineligible abstract idea,
namely: “paying a service provider by transmitting a payment
combined with an explanation of the payment.”
19).
Defendants
maintain
that
this
type
(Doc. # 69 at
of
transaction
represents a “fundamental economic practice,” akin to other
financial concepts that the Supreme Court has recently held
constitute unpatentable abstract ideas.
E.g., Alice Corp.
Pty. Ltd., 134 S. Ct. at 2356 (holding that claims were
6
directed to the abstract idea of using a third party to
mitigate settlement risk); Bilski, 561 U.S. at 611 (holding
that claims were directed to “the basic concept of hedging, or
protecting against risk.”). (Doc. # 69 at 19-22; Doc. # 88 at
6-7).
Further, Defendants argue that the patents do not contain
the requisite “inventive concept.”
In particular, Defendants
assert that the claims merely involve the use of a generic
computer to complete the well-known concept of delivering
payment, with an explanation of the payment, to a medical
provider.
And even assuming that stored-value cards had not
previously been used in the area of healthcare insurance
claims, Defendants argue that the implementation of a process
in a new field is not enough, standing alone, to confer patent
eligibility.
(Doc. # 69 at 23-30; Doc. # 88 at 8-10).
In response, Plaintiff argues that its claims are narrow
and concrete, applying only to: (1) the use of stored-value
cards; (2) by third-party payors; (3) to pay healthcare
benefits; (4) via a computer-generated file, which couples the
payment with an explanation of benefits.
(Doc. # 78 at 13-
17, 20). Plaintiff maintains that its claims are sufficiently
inventive because, prior to the issuance of the ‘904 and ‘748
Patents, healthcare payors incurred greater time and expense
in generating and delivering a physical check accompanied by
an explanation of benefits.
(Id. at 17-20).
7
Upon careful consideration of the parties’ filings,
Defendants’ Motion for Judgment on the Pleadings is denied, as
premature.
As
an
initial
matter,
both
Defendants
and
Plaintiff cite to matters outside of the pleadings, in support
of their respective positions, including the prosecution
history of a “parent” patent, an expert report prepared by
Robert Allen (Plaintiff’s Chairman and CEO), and a declaration
submitted by Mr. Allen. (E.g., Doc. # 69 at 25, 27; Doc. # 78
at 18).2
However, discovery is still ongoing, and the record
is thus not “fully developed.”
*4.
Jozwiak, 2010 WL 743834, at
Due to the deficiency of the available record, the Court
declines to convert Defendants’ Rule 12(c) motion into a
motion for summary judgment.
In addition, Defendants filed the instant Motion prior to
claim construction.
is
not
an
As Defendants note, “claim construction
inviolable
prerequisite”
validity under Section 101.
to
an
assessment
of
Bancorp Servs., L.L.C. v. Sun
Life Assur. Co. of Canada (U.S.), 687 F.3d 1266, 1273 (Fed.
Cir. 2012); see, e.g., Bilski, 561 U.S. 593 (finding subject
matter
ineligible
construction).
for
patent
Nonetheless,
protection
without
“it
ordinarily
will
claim
be
desirable—and often necessary—to resolve claim construction
2
In the reply brief, Defendants acknowledge that they
rely on matters outside of the pleadings, and they provide no
authority that would allow the material to be considered on a
Rule 12(c) motion. (Doc. # 88 at 12).
8
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 Servs.,
L.L.C., 687 F.3d at 1273-74.
In this case, the parties dispute the basic character of
the claimed subject matter. For instance, Defendants maintain
that the patent specification defines a “stored-value card” to
include credit and debit cards. (Doc. # 69 at 8-9, 14, 20, 24;
see Doc. # 66-1 at 7).3
By contrast, Plaintiff argues that
the claim language applies only to virtual stored-value cards,
not credit or debit cards (Doc. # 78 at 20).
Neither party
addresses the construction of the disputed term with reference
to established claim construction principles. See, e.g.,
SkinMedica, Inc. v. Histogen Inc., 727 F.3d 1187, 1195-96
(Fed. Cir. 2013); Deere & Co. v. Bush Hog, LLC, 703 F.3d 1349,
1354 (Fed. Cir. 2012); Phillips v. AWH Corp., 415 F.3d 1303,
1315-16
(Fed.
Cir.
2005).
At
the
very
least,
proper
construction of the term “stored-value card” is necessary
prior to an assessment of whether the claims implicate a
fundamental economic practice, and whether the claims comprise
a sufficiently inventive process.
3
In the reply brief, Defendants contend that they do not
offer such a broad construction of this term. (Doc. # 88 at
13-14). At the same time, however, Defendants continue to
argue that Plaintiff’s patent encompasses the electronic
transmission of credit card information. (Id. at 5, 7-8, 14).
9
Finally,
Defendants’
Motion
unilaterally
designates
certain claims as “representative.” Specifically, Defendants
designate claim 2 of the ‘904 Patent and claim 7 of the ‘748
Patent as representative of method claims (Doc. # 69 at 20),
and claim 12 of the ‘904 Patent and claim 13 of the ‘748
Patent as representative of system claims (Id. at 30).
In
response, Plaintiff disputes the designation of these claims
as
representative
individually.
and
requests
analysis
of
each
claim,
(Doc. # 78 at 4-5).
“[A] party challenging the validity of a claim, absent a
pretrial
agreement
or
stipulation,
must
submit
evidence
supporting a conclusion of invalidity of each claim the
challenger seeks to destroy.”
Shelcore, Inc. v. Durham
Indus., Inc., 745 F.2d 621, 625 (Fed. Cir. 1984) (underlined
emphasis added); see, e.g., Alice Corp. Pty. Ltd., 134 S. Ct.
at 2352 (noting that the parties agreed on representative
claims); cf. Content Extraction & Transmission LLC v. Wells
Fargo Bank, Nat’l Ass'n, Nos. 2013-1588, et al., ___ F.3d ___,
2014 WL 7272219, at *4 (Fed. Cir. Dec. 23, 2014)(affirming
district court’s designation of claims as representative where
patentee did not object).
Defendants’ Motion fails to meaningfully address the
claims not designated as “representative.” In order to narrow
the issues, and to conserve both the Court’s and the parties’
10
resources,
the
parties
representative claims.
are
encouraged
to
stipulate
to
Absent a stipulation, Defendants will
be required to address the challenged claims individually in
any subsequent motion.
Accordingly, it is now
ORDERED, ADJUDGED, and DECREED:
Defendants’ Motion for Judgment on the Pleadings (Doc.
# 69) is DENIED WITHOUT PREJUDICE as premature.
DONE and ORDERED in Chambers in Tampa, Florida, this 9th
day of February, 2015.
Copies: All Counsel of Record
11
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