Berkeley*IEOR v. W.W. Grainger Inc. et al
Filing
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ORDER: The Court denies Teradata's motion. It is so ordered. Signed by the Honorable Charles P. Kocoras on 3/25/2020. Status hearing is set for 5/14/2020 at 9:30 a.m. Mailed notice(vcf, )
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
BERKELEY*IEOR d/b/a B*IEOR,
Plaintiff,
v.
TERADATA OPERATIONS, INC.,
Defendant.
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17 C 7472
MEMORANDUM OPINION
CHARLES P. KOCORAS, District Judge:
Before the Court is Defendant Teradata Operations, Inc.’s (“Teradata”) motion
to dismiss Plaintiff Berkeley*IEOR’s (“Berkeley”) Second Amended Complaint
(“SAC”) pursuant to Federal Rule of Civil Procedure 12(b)(6). For the following
reasons, the Court denies the motion to dismiss.
BACKGROUND
For purposes of this motion, the Court accepts as true the following facts from
the complaint. Alam v. Miller Brewing Co., 709 F.3d 662, 665–66 (7th Cir. 2013). All
reasonable inferences are drawn in Berkley’s favor. League of Women Voters of
Chicago v. City of Chicago, 757 F.3d 722, 724 (7th Cir. 2014).
A.
The Relevant Parties
Plaintiff Berkeley is a Nevada corporation that provides consulting services,
specializing in the design and development of large-scale decision support solutions.
Richard Lepman (“Lepman”) is Berkeley’s president and the named inventor for U.S.
Patent Number 7,596,521 (the “‘521 Patent”), U.S. Patent Number 7,882,137 (the “‘137
Patent”), and U.S. Patent Number 8,612,316 (the “‘316 Patent”) (the “Asserted
Patents”).
Defendant Teradata is headquartered in Ohio and is a developer and retailer of
enterprise-wide data-analytics software, services, and related data-warehousing
platform technology. Teradata offers its data-analytical products and services to
customers throughout various industries, which include financial services, retail, travel,
transportation, communications, media, and entertainment.
Teradata was originally formed as a collaboration between researchers at the
California Institute of Technology and Citibank’s Advanced Technology Group. After
fifteen years as a division within both NCR Corporation (“NCR”) and AT&T, Teradata
re-emerged as an independent company in 2007.
Berkeley makes claims against other parties, including Grainger, DHL Express,
Danzas, and Air Express (collectively, the “non-Teradata Defendants”), but those
actions have been severed and stayed.
B.
The Asserted Patents
Lepman was the inventor of the patents-in-suit owned by Berkeley.
He
developed a method that calculated profitability associated with the smallest common
component of profit measurement desired, namely the profit “object.” The inventions
of the Asserted Patents provide management with a single version of the truth when
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evaluating multiple dimensions of profitability, such as product, account, customer, or
item, which was not previously possible. Lepman assigned all rights, title, and interest
in the Asserted Patents to Berkeley’s predecessor, and thus, Berkeley is presently the
owner and assignee of the Asserted Patents.
For purposes of this motion, Berkeley is willing to treat—but does not concede
—claim 1 of the ‘521 Patent as a representative claim for simplicity’s sake. As to the
‘521 Patent, claim 1 is the only independent claim. Claim 1 in the ‘137 Patent and the
‘316 Patent are nearly identical to claim 1 of the ‘521 Patent and are also the only
independent claims in their respective patents. The ‘521 Patent states as follows:
The ‘521 Patent, entitled “Process for Determining Object Level
Profitability,” is “a process for determining object level profitability,” and
claims in relevant part:
1. A process for determining object level profitability in a computer,
comprising the steps of:
providing a relational database management system operable in
association with a computer;
preparing information to be accessed electronically through the
relational database management system;
establishing, in the relational database, rules for processing the
prepared information;
using the relational database management system to independently
calculate at least one marginal value of profit for each object being
measured using the established rules as applied to a selected set of
prepared information;
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using the relational database management system to calculate a
fully absorbed profit adjustment value for each object being
measured; and
combining the at least one marginal value of profit and the fully
absorbed profit adjustment value to create a measure for object
level profitability.
2. The process of claim 1, wherein the relational database comprises a
structured query language (SQL).
3. The process of claim 1, wherein the preparing step further includes
the step of calculating opportunity values of funds used or supplied by
each object being measured.
4. The process of claim 1, wherein the establishing step includes the
steps of providing the information necessary to select objects, and
performing the correct profit calculus.
1:17-cv-7472, Dkt. #105 at 7.
Before the filing date of the Asserted Patents, prior attempts to calculate certain
profitability-related measures for individual customer accounts on a limited scale, either
manually or sometimes through traditional procedural-based computer software, faced
limited success. Due to the technical limitations associated with relying primarily on
traditional procedural-based software (if-then-else statements), such prior attempts did
not have the flexibility or capability needed to perform the number of calculation
permutations simultaneously and in a timely manner, which is required to achieve the
functionality made possible by the Asserted Patents.
The Asserted Patents allow for the independent and simultaneous processing of
multiple profitability factors using a relational database management system
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(“RDBMS”). When compared to methods that rely on traditional procedural-based
software, this method for processing profitability factors resulted in improved
performance. The Asserted Patents disclose and claim not only the idea of determining
object level profitability, but also recite limitations directed at employing allegedly
unconventional technological solutions to these technological problems encountered by
the prior art.
The claim is that the Asserted Patents employ relational database management
techniques, independent simultaneous calculation techniques, and combinations of
rules and data in a mathematical set theoretic framework, in an unconventional manner
that improves upon the capabilities, performance, and scalability of traditional
procedural-based computer software. Berkeley alleges that these features enable it to
achieve a technologically scalable solution that can measure profit at a speed,
resolution, and precision previously not possible in prior computerized financial
performance measurement processes.
Against this backdrop, the specification describes, generally, the goals of the
invention:
To gain this new level of profit resolution this invention is designed to use
micro profit measurement rules applied at a granular level consistent with
standard accounting practice using a combination of actuarial science and
mathematical set theory. The invention is designed to utilize massively
parallel computing operations using relational database management
techniques enabling profit measurement at a level not available today in a
large individual customer scale business. This invention does this through
a consistent application of measures to a class of business entities which
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represent the smallest common component of profit measurement
desired—the Profit Object.
C.
The Underlying Action
In the 1990s, Berkeley provided consulting services to Defendant Teradata’s
predecessor, NCR. Around this time, Lepman was strategizing and designing an
improved profitability measurement solution that both NCR and Berkeley could bring
to market, and he envisioned the functional and technical ideas behind the inventions
claimed in the Asserted Patents. Subsequently, in April 1999, the Royal Bank of
Canada implemented the first commercial embodiment of Lepman’s invention. This
commercial embodiment received much industry acclaim and was ultimately named the
Teradata Value Analyzer (“TVA”).
The TVA calculates the profit contribution for all of a company’s accounts,
customers, relationships, or other entities.
It gives management the valuable
information needed to understand and affect the profit dynamics of business. The
software allows multiple profitability factors to be independently and simultaneously
processed by a relational database management system.
On June 1, 1999, Berkeley and NCR executed a licensing agreement that allowed
NCR limited use of the TVA. NCR subsequently spun off into a separate legal entity,
creating Defendant Teradata in 2007.
On September 29, 2009, Berkeley sent a letter to Teradata announcing the
issuance of the ‘521 Patent and asking for a meeting with Teradata to discuss its ongoing
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sales of the TVA, particularly those falling outside of the licensing agreement. In July
2010, the two parties met and discussed the ‘521 Patent and then-existing
implementations of the TVA.
Berkeley alleges that Teradata and its customers
continued using the TVA, even though at that meeting, Teradata allegedly took the
position that it and some of its customers were discontinuing use of the TVA and that
they were not infringing the ‘521 Patent.
Berkeley further alleges that sometime in 2010, Teradata partnered with
Grainger and implemented the TVA software, which allocates to “the lowest profit
object.” To this effect, Teradata’s website discussed the benefits promoted by Teradata
and enjoyed by Grainger through their implementation of the TVA and use of the
inventions in the Asserted Patents.
Similarly, Berkeley alleges that in 2013 Teradata partnered with DHL Express
and implemented the TVA “as a costing and profitability engine.” Teradata and DHL
Express refer to DHL’s TVA implementation, together with a corresponding data
warehouse, as INSIGHT. As a result, Berkeley claims that Danzas and Air Express,
both part of DHL Express’s parent company, Deutsche Post AG, would have access to
the INSIGHT application.
On March 26, 2018, Berkeley filed its five-count SAC, alleging claims for direct
infringement of the Asserted Patents against the non-Teradata Defendants in Counts IIV, and a claim for indirect infringement of the Asserted Patents by Teradata in Count
V. This court previously severed and stayed Counts I-IV against the non-Teradata
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Defendants. On August 29, 2019, Defendant Teradata moved to dismiss Count V under
Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim.
LEGAL STANDARD
A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) “tests
the sufficiency of the complaint, not the merits of the case.” McReynolds v. Merrill
Lynch & Co., 694 F.3d 873, 878 (7th Cir. 2012). The allegations in the complaint must
set forth a “short and plain statement of the claim showing that the pleader is entitled to
relief.” Fed. R. Civ. P. 8(a)(2). Plaintiffs need not provide detailed factual allegations,
but they must provide enough factual support to raise their right to relief above a
speculative level. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). A claim
must be facially plausible, meaning that the pleadings must “allow . . . the court to draw
the reasonable inference that the defendant is liable for the misconduct alleged.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The claim must be described “in sufficient
detail to give the defendant ‘fair notice of what the…claim is and the grounds upon
which it rests.’” E.E.O.C. v. Concentra Health Servs., Inc., 496 F.3d 773, 776 (7th Cir.
2007) (quoting Twombly, 550 U.S. at 555). “Threadbare recitals of the elements of a
cause of action, supported by mere conclusory statements,” are insufficient to withstand
a 12(b)(6) motion to dismiss. Iqbal, 556 U.S. at 678.
DISCUSSION
Section 101 of the Patent Act broadly defines the scope of patentable subject
matter as “any new and useful process, machine, manufacture, or composition of matter,
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or any improvement thereof.” 35 U.S.C. § 101. However, claims directed toward laws
of nature, natural phenomena, and abstract ideas are not patent eligible (“the
exclusionary principle”). Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 573 U.S. 208, 216
(2014). That said, “an invention is not rendered ineligible for patent simply because it
involves an abstract concept.” Alice, 573 U.S. at 217. And the exclusionary principle
does not bar patents that claim “applications of those concepts.” Id.
To determine whether a patent is barred by the exclusionary principle, courts
follow a two-step analysis. Id. The first step is to “determine whether the claims at
issue are directed to . . . patent-ineligible concepts.” Id. If the claims are directed to a
patent-ineligible concept, the second step is to determine whether the claim limitations,
analyzed individually and as ordered combinations, contain an inventive concept that
transforms the claims into patent-eligible subject matter. Id.
Patent eligibility can sometimes be determined at the Rule 12(b)(6) stage. Aatrix
Software, Inc. v. Green Shades Software, Inc., 882 F.3d 1121, 1125 (Fed. Cir. 2018).
This determination can only be made when there are no factual allegations that, taken
as true, prevent resolving the eligibility question as a matter of law. Id. While the
ultimate determination of eligibility under Section 101 is a question of law, that
determination turns on whether the claim elements or the claimed combinations are
well-understood, routine, and conventional, which is a question of fact. Id. at 1128.
The Federal Circuit has held that patentees who adequately allege their claims contain
inventive concepts sufficient to “transform” the claimed abstract idea into a patent-
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eligible application survive a Section 101 eligibility analysis under Rule 12(b)(6). Id.
at 1126–27.
Teradata urges the Court to dismiss the case because the Asserted Patents claim
patent ineligible subject matter, violating 35 U.S.C. § 101. Teradata asserts that these
claims cannot pass the two-part patent eligibility test set forth in Alice because: (1) the
claims are directed towards calculating profitability, which is mathematics and an
abstract idea, and (2) the claims do not recite an inventive concept and are therefore
invalid under 35 U.S.C. § 101 as a matter of law. The Court addresses each argument
in turn.
I.
Alice Step One: Whether Calculating Profitability is Mathematics
and Therefore an Abstract Idea
To uncover whether a claim covers an abstract idea, one must “identify the
purposes of the claim – in other words, determine what the claimed invention is trying
to achieve – and ask whether that purpose is abstract.” Enfish, LLC v. Microsoft Corp.,
56 F. Supp. 3d 1167, 1173 (C.D. Cal. 2014). The idea of collecting, analyzing, and
displaying information, even when particularly limited, is an abstract idea. Elec. Power
Grp., LLC v. Alstom S.A., 830 F.3d 1350, 1353–54 (Fed. Cir. 2016) (holding method
claims directed to “collecting information, analyzing it, and displaying certain results
of the collection and analysis” is unpatentable because they merely recited an abstract
idea). Even if techniques claim to be “[g]roundbreaking, innovative, or even brilliant,”
that is not enough for eligibility. Ass’n for Molecular Pathology v. Myriad Genetics,
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Inc., 569 U.S. 576, 591 (2013). Nor is it enough for subject-matter eligibility that
claimed techniques be novel and nonobvious in light of prior art.
See Mayo
Collaborative Servs. v. Prometheus Labs., Inc., 566 U.S. 66, 89–90 (2012).
The Court finds that the claims here are ineligible because their innovation is in
an ineligible subject matter. The claims do no more than prepare, organize, and apply
mathematical calculations to existing information. No matter how much of an advance
in the business field the claims recite, the advance lies entirely in the realm of abstract
ideas.
Berkeley argues that limitation 1[d] within the Asserted Patents improved on the
prior technological process for determining object level profitability and, therefore,
makes the Asserted Patents non-abstract. The Court disagrees.
At the first Alice step, the “claims are considered in their entirety to ascertain
whether their character as a whole is directed to excluded subject matter.” Two-Way
Media Ltd. V. Comcast Cable Comms., 874 F.3d 1329, 1337 (Fed. Cir. 2017) (emphasis
added).
Here, the “character of the whole” involves the overarching method of
performing profitability calculations with a computer system.
Accordingly, the
character as a whole, not just an isolated limitation, is directed to excluded subject
matter because calculating profitability is an abstract idea.
This case is similar to Digitech Image Techs., LLC v. Electronics for Imaging,
Inc., 758 F.3d 1344 (Fed. Cir. 2014) (hereinafter “Digitech”). In Digitech, the court
found the claims of the challenged patent were directed to the abstract idea of organizing
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information through mathematical correlations. Id. at 1350–51. It explained that the
claim at issue “recites a process of taking two data sets and combining them into a single
data set” simply by organizing existing data into a new form. Id. at 1351. The Court
held that a process that started with data, added an algorithm, and ended with a new
form of data was directed to an abstract idea. Id.
In this case, the ‘521 Patent claims a method whereby a business starts with data
in the form of financial statements, that data is processed via a RDBMS where multiple
profitability factors are handled independently and simultaneously, and the output is the
same data in the new form of object level profitability. We discern no material
difference between the Alice step one analysis in Digitech and the analysis here.
The Court, therefore, finds that the claims of the Asserted Patents are directed to
an abstract idea. We now proceed to the second step of Alice.
II.
Alice Step Two: Whether the SAC and Asserted Patents Recite an
Inventive Concept
Although the Asserted Patents cover a mathematical construct, they may survive
if they contain an inventive concept that transforms the claims into patent-eligible
subject matter. Alice, 573 U.S. at 221 (“A claim that recites an abstract idea must
include ‘additional features’ to ensure ‘that the [claim] is more than a drafting effort
designed to monopolize the [abstract idea].’”). The “inventive concept” may arise in
one or more of the individual claim limitations or in the ordered combination of the
limitations. Id. at 217. This second step of the test is satisfied when the claim
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limitations “involve more than performance of well-understood, routine, [and]
conventional activities previously known to the industry.” Berkheimer v. HP Inc., 881
F.3d 1360, 1367 (Fed. Cir. 2018) (internal quotation marks omitted). The question of
whether a claim element or combination of elements is well-understood, routine and
conventional to a skilled artisan in the relevant field is a question of fact. Id. at 1368.
Whether a particular technology is well-understood, routine, and conventional goes
beyond what was simply known and disclosed in the prior art. Id. at 1369.
In Berkheimer, the court found that the claims were directed to the abstract idea
of parsing, comparing, storing, and editing data. Id. at 1366. The plaintiff argued that
the claimed combination improved computer functionality, and the specification
discussed the state of the art at the time the patent was filed and the invention’s
purported improvements. Id. at 1369. The specification explained that the claimed
improvement increased computer efficiency and functionality over the prior art systems
and described an inventive feature that stored parsed data in a purportedly
unconventional manner. Id. To the extent such improvements were captured in the
claims, they were sufficient to create a factual dispute regarding whether the invention
described well-understood, routine, and conventional activities. Id. Because certain
claims recited a specific method of archiving that, according to the specification,
provided benefits that improved computer functionality, the Berkheimer Court found a
fact issue as to whether they contained an inventive concept. Id. at 1369–70.
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Berkeley alleges in the SAC that the inventive concept of the Asserted Patents is
found in the non-conventional and non-generic arrangement of the claim limitations.
Teradata argues that the Asserted Patents merely recite the use of conventional devices.
This is a fact issue similar to the one in Berkheimer.
Berkeley sufficiently alleges the shortcomings of the prior art and how the
invention overcomes these shortcomings by improving computer functionality.
Specifically, Berkley alleges that the Asserted Patents make it possible to achieve a
technologically scalable solution that can measure profit at a level of precision,
resolution, and speed not possible in prior art. Prior art had little success in its attempts
to calculate certain profitability-related measures for individual customer accounts on
a limited scale, either manually or through traditional procedural-based computer
software.
In contrast, Berkley alleges, the Asserted Patents’ limitations contain an
inventive concept that arranges known conventional pieces in an unconventional order.
This arrangement combines at least three concepts to achieve the desired result: (1) the
RDBMS itself performs profitability calculations, which provides speed and efficiency;
(2) the calculations execute “independently” of each other, allowing the method to take
advantage of parallel processing capabilities that further improve on speed and
efficiency; and (3) the method uses established rules as applied to a selected set of
prepared information to perform the calculations.
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Accordingly, the limitations within the Asserted Patents and the SAC sufficiently
claim a particularized and unconventional use of RDBMS capabilities, not the mere
presence of an RDBMS. Each claim limitation operates together to achieve a specific
profitability calculator that takes advantage of RDBMS capabilities, parallel
processing, and the rules and data to achieve a solution capable of processing more
object-level profitability calculations than its predecessors in the same amount of time.1
Drawing reasonable inferences in favor of Berkeley, as this Court must at the
Rule 12(b)(6) stage, the SAC sufficiently alleges that the claimed unconventional
combination improves the functioning and operation of the computer itself by
performing parallel computations in a faster amount of time. See Cellspin Soft, Inc. v.
Fitbit, Inc., 927 F. 3d 1306, 1315 (Fed. Cir. 2019) (“we have explained that claims
directed to ‘an improvement to a computer functionality itself, not on economic or other
tasks for which a computer is used in its ordinary capacity,’ are patent eligible.”).
Accordingly, Berkley sufficiently alleges an inventive concept, and Teradata’s motion
to dismiss is therefore denied.
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This Court recognizes that conflicting case law exists on whether an innovative concept exists in this
context. Defendant Teradata cites various cases to suggest that the patents in this case lack an inventive
concept, but those cases are distinct in that they found a lack of innovative concept after the 12(b)(6) stage.
This case is similar to Aatrix Software, Inc. v. Green Shades Software, Inc., 882 F.3d 1121, 1127 (Fed. Cir.
2018), where the court found the complaint sufficiently alleged that the claimed improvements to computer
technology were not simply directed to generic components performing conventional activities.
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CONCLUSION
For the aforementioned reasons, the Court denies Teradata’s motion. It is so
ordered.
Dated: 3/25/20
________________________________
Charles P. Kocoras
United States District Judge
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