Berkeley*IEOR v. W.W. Grainger Inc. et al
Filing
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MEMORANDUM Opinion: The Defendants' motion to sever and stay is granted. The 12(b)(6) motion is granted in part and denied in part. The claims arising under 35 U.S.C. § 271(g) in Counts II-IV are dismissed. The Counts remain to the extent they state claims under U.S.C. § 271(c). Signed by the Honorable Charles P. Kocoras on 3/7/2019. Status hearing set for 3/28/2019 at 09:30 AM. 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.,
W.W. GRAINGER, INC., DHL
EXPRESS (USA), INC., DANZAS
CORPORATION, d/b/a DHL GLOBAL
FORWARDING, AND AIR EXPRESS
INTERNATIONAL USA, INC.,
d/b/a DHL GLOBAL FORWARING
Defendants.
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17 C 7472
MEMORANDUM OPINION
CHARLES P. KOCORAS, District Judge:
Before the Court are three motions to dismiss portions of Plaintiff
Berkeley*IEOR’s (“Berkeley”) Second Amended Complaint (“SAC”), brought by (1)
Defendant W.W. Grainger, Inc. (“Grainger”); (2) DHL Express (USA) (“DHL
Express”); (3) Air Express International USA, Inc., (“Air Express”), and DHL Global
Forwarding (“DHL Global”) (collectively, “the non-Teradata Defendants”), and
Defendant Teradata Operations, Inc., (“Teradata”) (collectively, the “Defendants”)
pursuant to Federal Rule of Civil Procedure 12(b)(6). For the following reasons, the
Court grants in part and denies in part all three motions.
Also before the Court are three motions to sever and stay portions of Berkeley’s
Second Amended Complaint. For the following reasons, the Court grants all three
motions.
BACKGROUND
The Court accepts as true the following facts from Berkeley’s SAC. All
reasonable inferences are drawn in Berkeley’s favor. Tamayo v. Blagojevich, 526 F.3d
1074, 1081 (7th Cir. 2008).
A.
The Relevant Parties
Plaintiff Berkeley is a Nevada corporation that designs and develops large scale
decision support systems. Richard “Tad” Lepman (“Lepman”) is Berkeley’s president
and 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 provides databasemanagement systems for data analytics. Teradata is a software and solutions company
that offers a broad portfolio of data-analytical products and services to customers
throughout various industries. These industries include financial services, retail, travel
and transportation, communications, media, and entertainment.
Defendant Grainger is headquartered in Chicago and is a leading supplier of
industrial products. These products include motors, lighting, fasteners, plumbing, tools,
2
and safety supplies. Grainger serves over three million customers through a network of
branches, online channels, and distribution channels.
Defendant DHL Express is a leading air express and logistics company that
provides an international service portfolio consisting of letter, parcel dispatch, and
express delivery. DHL Express has been one of Teradata’s customers since 2016. DHL
Express’ parent company is Deutsche Post AG and provides its services through this
division.
Defendants Danzas and Air Express, while distinct entities, are both affiliated
with DHL Express and are significant customers for Teradata. Danzas and Air Express
both provide freight forwarding and packaging insurance.
They also organize
shipments worldwide. Danzas and Air Express’ parent company is Deutsche Post AG
and provides its services through this division.
B.
The Asserted Patents
Lepman was the inventor of the patents-in-suit owned by Berkeley.
He
developed the method to provide a “granular,” “object level” calculation of a business’
profit. The patents-in-suit and alleged infringed claims are 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;
3
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;
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
comprise a structured query language (SOL)
3. The process of claim 1, wherein the preparing step further
includes the step of calculating opportunity values of funds used or
suppled 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.
The ‘137 Patent, entitled “Process for Determining Object Level
Profitability,” claims in relevant part:
1.
A method for transforming a computerized profit database,
comprising the steps of:
providing a computerized profit database having profit
information;
providing a relational database management system operable in
association with the computerized profit database;
preparing the profit information to be accessed electronically
through the relational database management system, including the step
of calculating opportunity values for funds used or supplied by each
object being measured;
establishing, in the relational database, rules for processing the
prepared information, including the steps of providing information
necessary to select objects and performing a profit calculus;
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, where the relational database comprises
a structured query language (SQL)
The ‘316 Patent, entitled “Process for Determining Object Level
Profitability,” claims in relevant part:
1.
A process for determining object level profitability in a
relational database management system, comprising the computer
implemented steps of:
providing a computerized profit database having profit
information;
providing a relational management system operable in association
with the computerized profit database;
preparing the profit information to be accessed electronically
through the relational database management system, including the step
of calculating opportunity values for funds used or supplied by each
object being measured;
establishing, in the relational database, rules for processing the
prepared information, including the steps of providing information
necessary to select objects and performing a profit calculus;
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;
and
combining the at least one marginal value of profit to create a
measure of object level profitability.
2.
The process of Claim 1, wherein the relational database
comprises a structured query language (SQL)
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C.
The Underlying Action
In the 1990s, Berkeley was providing consulting services to Defendant
Teradata’s predecessor, NCR Corporation (“NCR”).
Around this time, Lepman
conceived the functional and technical ideas behind the inventions claimed in the
Asserted Patents.
Berkeley and NCR subsequently built the first commercial
embodiment of Lepman’s inventions, which Royal Bank of Canada implemented in
April 1999. The commercial embodiment received much acclaim and was subsequently
named the “Value Analyzer,” or “Teradata Value Analyzer” (the “TVA”).
TVA is a software application that allows a user to calculate the profit
contribution for all of a company’s accounts, customers, relationships, and other
entities. The software allows multiple profitability factors to be independently and
simultaneously processed by a relational database management system.
On or about June 1, 1999, Berkley and NCR executed a licensing agreement,
allowing NCR to sell certain implementations of TVA while restricting others. In 2007,
NCR spun off into a separate legal entity, giving birth to Defendant Teradata.1
On April 9, 1999, Lepman filed a provisional application to which the Asserted
Patents claim priority.
On September 29, 2009, Berkeley sent Teradata a letter
announcing the issuance of the ‘521 Patent. In July 2010, Berkeley and Teradata met
to discuss the ‘521 patent and the then-existing TVA implementations. Berkeley alleges
1
While not relevant to the underlying motions, Berkeley denies that Teradata and/or its parent company acquired
NCR’s rights under the License Agreement. Berkeley does not seek remedies for acts of patent infringement falling
within the licensing agreement’s scope, nor are there any allegations that any party breached the licensing agreement.
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that at this meeting, Teradata claimed that it and some of its customers were
discontinuing its use of the TVA technology and were not infringing on the ‘521 patent.
Despite such representation, Berkeley alleges Teradata and its customers continue using
the TVA technology.
Sometime in 2010, Teradata partnered with Grainger “to implement new
analytics capabilities utilizing Teradata’s Active Enterprise Data Warehouse (EDW)
platform and [TVA] software.” Berkeley claims that the TVA object-level accounting
method was custom-built and designed for use with Grainger’s specific database.2 In
2013, Grainger appeared in a write up on Teradata’s website, making public its use of
Teradata’s technology and how it has benefited them.
Sometime in 2013, Teradata partnered with DHL Express.
DHL Express
embraced the TVA technology as a “costing and profitability engine.” In a published
article, DHL Express announced that “it chose to expand the existing Teradata solution,
adding Teradata Value Analyzer as a costing and profitability engine, and the data
warehouse as a repository and reporting platform for the output data.” This program
became known as “INSIGHT.”
Danzas and Air Express are separate entities but are both divisions of Deutsche
Post AG. Berkeley claims that, as divisions of Deutsche Post AG, both Danzas and Air
Express would have access to the INSIGHT application.
2
The pleadings clearly state that Grainger uses and services the patented object-level accounting method itself,
and not Teradata. However, the pleadings fail to clearly indicate if Berkeley or Teradata custom-built and designed
the specific database.
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On March 26, 2018, Berkeley filed its five-count SAC, alleging direct
infringement of the Asserted Patents against: (i) Grainger; (ii) DHL Express; (iii)
Danzas; and (iv) DHL Global. Specifically, Berkeley alleges that the non-Teradata
Defendants directly infringed on claims 1-4 of the ‘521 patent, claims 1 and 2 of the
‘137 patent, and claims 1 and 2 of the ‘316 patent. Berkeley alleges violations of 35
U.S.C. §§ 271(a) and (g).
Berkeley also alleges indirect infringement against Teradata in Count IV,
arguing that Teradata knowingly induced infringement of the Asserted Patents by
marketing, distributing, and/or selling the TVA and related technology to Grainger,
DHL Express, Danzas, and Air Express.
Teradata and the non-Teradata Defendants have filed a multitude of defenses in
response. First, in three distinct motions, Teradata asks the Court to: (1) sever and stay
Counts I, II, III, and IV against the non-Teradata Defendants, arguing that Teradata
itself is the real party in interest; and (2) dismiss Berkeley’s assertions of infringement
under 35 U.S.C. § 271(g) in Counts II, III, and IV.
We first evaluate the non-Teradata Defendant’s motion to sever and stay Counts
I, II, III, and IV. While the Defendants bring three distinct motion, at its core, each
argument is postured the same. Therefore, the Court will analyze the motions to sever
and stay in a single discussion.
After a discussion on the non-Teradata Defendants’ motion to sever and stay, we
will then evaluate the various motions to dismiss.
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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 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.
A district court's power to stay proceedings is well-established and “incidental
to the power inherent in every court to control the disposition of the causes on its docket
with economy of time and effort for itself, for counsel, and for litigants.” Landis v. N.
Am. Co., 299 U.S. 248, 254 (1936); see also In re Groupon Derivative Litig., 882 F.
Supp. 2d 1043, 1045 (N.D. Ill. 2012). The Court has “broad discretion” to decide
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whether a stay is warranted. Clinton v. Jones, 520 U.S. 681, 706 (1997).
When
deciding whether to grant a stay, a court should “balance the competing interests of the
parties and the interest of the judicial system” by considering the following three
factors: (1) whether a stay will simplify the issues in question and streamline the trial;
(2) whether a stay will reduce the burden of litigation on the parties and on the court;
and (3) whether a stay will unduly prejudice or tactically disadvantage the non-moving
party. In re Groupon Derivative Litig., 882 F. Supp. 2d at 1045.
Courts in this district have “routinely applied this doctrine to stay patent
infringement claims against customers in favor of resolving the patentee’s claims
against the upstream manufacturer first.” Mantissa Corp. v. Old Second Bancorp, Inc.,
2018 WL 3059604, at *3 (N.D. Ill. 2018); see also Select Retrieval, LLC v. ABT Elecs.,
2013 WL 6576861, at *1 (N.D. Ill. 2013) (relying on customer-suit exception to grant
stay of infringement claims against customers who were “end users” of allegedly
infringing software, pending outcome of later-filed declaratory judgment action by
developer of software). The Federal Circuit has also granted writs of mandamus
directing district courts to stay proceedings on issues predicated on the customer-suit
exception. See In re Nintendo of Am., Inc., 756 F.3d 1363, 1364 (Fed. Cir. 2014)
(relying on customer-suit exception in infringement suit against manufacturer and
retailers of allegedly infringing product to grant a writ of mandamus directing district
court to sever and stay patentee’s claims against retailers).
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DISCUSSION
I.
Motion to Sever
Defendants first contend that Counts I–IV should be severed and stayed.
Berkeley advances three counter arguments: (1) a stay is inappropriate because the nonTeradata Defendants have “substantive knowledge and expertise in the use and
implementation of the patented-object level accounting method;” (2) the customer-suit
exception does not apply because it has alleged direct infringement against the nonTeradata Defendants and indirect infringement by Teradata; and (3) the traditional stay
factors weigh against a stay. We evaluate each argument in turn.
A.
Non-Teradata Defendants’ Substantive Knowledge
Berkeley contends that a stay is inappropriate because the non-Teradata
Defendants have “substantive knowledge and expertise in the use and implementation
of the patented object-level accounting method.” Specifically, Berkeley argues that the
“patented object-level accounting method was custom built and designed for use with
Grainger’s, DHL Express’, Air Express’, and Danzas’ specific database.”
The non-Teradata Defendants argue that despite having the ability to modify and
customize the TVA technology, Berkeley’s infringement claims hinge on the
implementation of the TVA technology itself. Therefore, because any implementations
are derived exclusively from the TVA technology, Berkeley’s argument must fail.
We agree with the non-Teradata Defendants that Berkeley’s infringement claims
appear to take issue with the implementation of the TVA technology itself, and not with
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the ability to modify or customize it for a particular purpose. Berkeley has alleged that
the non-Teradata Defendants have infringed on its TVA software by “perform[ing] a
process for determining object level profitability as recited in the Asserted Claims of
the ‘316 and ‘521 Patents and a process for transforming a computerized profit database
as recited in the Asserted Claims of the ‘137 Patent.” See Compl. ¶¶¶¶ 14, 21, 32, 42.
In Berkeley’s infringement action, it uniformly accuses the non-Teradata Defendants
of utilizing the TVA technology and infringing on its use by carrying out asserted
claims 1-4 of the ‘521 patent, 1 and 2 of the ‘437 patent, and claims 1 and 2 of the ‘316
patent.
In Count I, Berkeley contends that “Grainger performs the steps recited in the
Asserted Claims in connection with their usage of the TVA.” In Counts II-IV, Berkeley
contends that DHL Express, Air Express, and Danzas “perform[] the steps recited in the
Asserted Claims in connection with its usage of TVA / INSIGHT” technology.
Therefore, Berkeley does suggest that other software, the INSIGHT, may be involved
in DHL Express, Air Express, and Danzas’ infringement contentions. However,
Berkeley fails to explain how the INSIGHT technology is anything more than a specific
implementation of the TVA technology. Thus, the non-Teradata Defendants correctly
point out that Berkeley’s infringement claims arise not out of some “custom-built”
functionality of its TVA technology, but implementation of the TVA technology itself.
Berkeley’s SAC suggests that INSIGHT is derived from the TVA technology
itself. In fact, Berkeley states that DHL Express, Air Express, and Danzas added the
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“Teradata Value Analyzer as a costing and profitability engine.”
This specific
implementation became subsequently known as INSIGHT. Also, Berkeley has made
uniform allegations that the non-Teradata Defendants have infringed on the Asserted
Patents by carrying out asserted claims 1-4 of the ‘521 patent, 1 and 2 of the ‘437 patent,
and claims 1 and 2 of the ‘316 patent. It is also telling that, while accusing the nonTeradata Defendants of infringement, Berkeley has not suggested that the infringement
occurred because of the “custom built” technology. Indeed, based on the posture of its
SAC, it would not be credible for Berkeley to claim otherwise.
It is apparent that the implementation of INSIGHT relies almost exclusively on
the TVA technology. In In re Google Inc., the Federal Circuit directed the district court
to stay infringement proceedings against customer, stating that by denying the stay, the
district court “relied heavily on each mobile phone manufacturer’s ability to modify
and customize the Android platform to its own particular purpose.” 558 Fed. Appx 988,
990 (Fed. Cir. 2014). However, the Federal Circuit noted that the claims should
nonetheless be stayed because the infringement’s contentions against all defendants
relied “almost exclusively on the underlying functionalities provided in the base
Android source provided by Google.” Id. Here, Berkeley fails to demonstrate in its
responsive pleadings how the implementation of INSIGHT does not exclusively rely
on the TVA technology.
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Accordingly, this Court is not persuaded that a stay is inappropriate because nonTeradata Defendants alleged “substantive knowledge and expertise in the use and
implementation of the patented object-level accounting method.”
B.
Customer-Suit Exception
Defendants argue that this case should be stayed under the customer-suit
exception because Teradata is the manufacturer, seller, and distributor of the allegedly
infringing process technology. Defendants assert that at issue is solely Teradata’s TVA
software product. Therefore, Defendants claim that if Teradata’s accused TVA product
is found to not infringe on the limitations of the asserted claims,3 the matter against the
non-Teradata Defendants inherently solves itself. Conversely, if Teradata is found to
infringe, Defendants concede that the sole remaining issue for this Court to resolve is
what liability attaches to each defendant.
Berkeley contends that the customer-suit exception is inapplicable because it has
alleged direct infringement against the non-Teradata Defendants and indirect
infringement by Teradata. Therefore, it is Berkeley’s position that the non-Teradata
Defendants are all necessary parties to this action. Berkeley argues that adjudication of
the claims against Teradata will not necessarily resolve the claims against Grainger,
DHL Express, Danzas, and Air Express because the specific issues of infringement are
not entirely common.
3
Or, if by later motion the claims are deemed invalid.
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The purpose of staying the customer suit is “to avoid, if possible, imposing the
burdens of trial on the customer, for it is the manufacturer who is generally the ‘true
defendant’ in the dispute, while the customer is simply a downstream retailer or end
user of the allegedly infringing product.” Mantissa Corp. v. Old Second Bancorp, Inc.,
2018 WL 3059604, at *3 (N.D. Ill. 2018) (quoting In re Nintendo of Am., Inc., 756 F.3d
at 1365); see also Codex Corp. v. Milgo Elec. Corp., 553 F.2d 735, 737–38 (1st Cir.
1977) (“At the root of the preference for a manufacturer’s declaratory judgment action
is the recognition that, in reality, the manufacturer is the true defendant in the customer
suit.”). The “guiding principles” underlying the customer-suit exception are efficiency
and judicial economy. Spread Spectrum Screening LLC, 657 F.3d at 1357.
We are persuaded that the customer-suit exception applies. As an initial matter,
we find that although Berkeley is suing Teradata and the non-Teradata Defendants in
the single complaint, the customer-suit rationale applies because Teradata is the true
defendant. See In re Nintendo of Am., Inc., 756 F.3d at 1365 (finding that the customersuit exception applies despite the manufacturer and customers being sued in the same
single complaint).
The customer-suit exception is most apt “where the customer is accused of
directly infringing apparatus claims, because the manufacturer’s liability will
necessarily turn on whether the accused product satisfied every limitation of those
claims, and a resolution of that issue in the manufacturer’s suit will also resolve whether
the customer infringes.” Mantissa Corp., 2018 WL 3059604, at *5. Therefore, the
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Court recognizes that the underlying motion is of a somewhat different paradigmatic
case than the typical customer-suit exception case. However, the Court is still satisfied
that the exception applies. See In re Nintendo of Am., Inc., 756 F.3d at 1365 (applying
the customer-suit exception notwithstanding that “the circumstances of this case differ
from those of the customer-suit exception,” concluding that “we agree with the district
court that the same general principles govern in that Nintendo is the true defendant”).
While Berkeley correctly points out that in Erfindergemeinschaft Uropep GbR
v. Eli Lilly and Company, and Brookshire Brothers, Inc., the court refused to apply the
customer-suit exception to a situation where the customer was accused of direct
infringement and the manufacturer accused of indirect infringement, this is not a strict
rule. 2016 WL 1659924, at *1 (E.D. Tex. 2016); see also Card Activation Techs., 2009
WL 2956926, at *3 (finding “without merit” the argument that the customer-suit
exception “does not apply to method patents”).
As discussed in great lengths above, the baseline analysis is the application of
the asserted claims construed against the TVA technology. Berkeley has failed to
demonstrate that its infringement claim is predicated upon the specific implementations
of its TVA technology. Instead, Berkeley’s infringement claims appear to be based
solely on the functionalities of the TVA technology itself and the TVA’s ordinary use
of “determining object level profitability.” Accordingly, because Teradata is the
manufacturer and seller of the TVA technology, we find that the customer-suit
exception applies.
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C.
Traditional Stay Factors
The traditional stay factors also align with our conclusion that a stay is warranted.
First, we agree with the non-Teradata Defendants that staying Counts I-IV will simplify
the issues in question. By deciding first whether the TVA technology infringed on the
Asserted Patents, there is the potential that all substantive issues regarding Grainger,
DHL Express, Danzas, and Air Express will be resolved. While Berkeley correctly
states that some issues may remain if this Court orders a stay, resolution of the
infringement claim against Teradata may potentially resolve the “major issues” against
the downstream retailers. See Katz v. Lear Siegler, Inc., F.2d 1459, 1464 (Fed. Cir.
1990). As mentioned, it appears from Berkeley’s SAC that INSIGHT is predicated
upon the implementation of the TVA technology itself, and not the customization of it.
Therefore, if the TVA technology does infringe on the Asserted Patents, the sole issue
this Court must decide is damages for the underlying infringement
Second, staying Counts I-IV will reduce litigation burden. The case is still in its
early stages, as it was initially filed on October 16, 2017. Berkeley filed its SAC March
26, 2018. A preliminary assessment of whether the TVA technology has infringed on
the Asserted Patents may subsequently eliminate the need for additional responsive
pleadings, and fact and expert discovery.
Third, this Court is not persuaded that Berkeley would be unduly prejudiced or
tactically disadvantaged if Counts I-IV are stayed.
The baseline analysis is the
application of the asserted claims as construed against the TVA technology. There is
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significant overlap between what the non-Teradata Defendants can offer compared to
what Teradata itself can produce. Therefore, this Court finds that there is no need to
involve the non-Teradata Defendants at this time when each utilize the baseline TVA
technology.
D.
Motion to Sever
The Court also finds that a severance is appropriate. In analyzing whether a
claim should be severed, courts consider whether: “(1) the claim to be severed is
peripheral to the remaining claims; (2) the adjudication of the remaining claims is
potentially dispositive of the severed claims; and (3) the transfer of the remaining claims
otherwise is warranted under § 1404(a).”4 MGT Gaming, Inc. v. WMS Gaming, Inc.,
978 F. Supp. 2d 647, 664 (S.D. Miss. 2013).
First, we find that Teradata is the real party of interest, making the non-Teradata
Defendants peripheral under the customer-suit exception. Second, as discussed in great
detail above, adjudication of the alleged TVA infringement may potentially be
dispositive for all of the non-Teradata Defendants.
For these reasons, we grant Defendants’ motion to sever and stay.
II.
Motion to Dismiss
The Defendants bring a variety of arguments seeking to partially dismiss
Berkeley’s SAC. First, Air Express and Danzas seek to dismiss Counts III and IV,
4
The non-Teradata Defendants are not seeking to transfer this case. Therefore, the third prong is not analyzed.
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claiming that the SAC improperly conflates DHL Express, Danzas, and Air Express.
Second, the Defendants argue that Counts II-IV should be dismissed because Berkeley
has failed to properly allege a claim under 35 U.S.C. § 271(a). Third, the Defendants
argue that, in the alternative, Counts II-IV should be dismissed because the SAC fails
to sufficiently allege a claim under 35 U.S.C. §271 (g).
A.
Group Pleading
Air Express and Danzas seek dismissal of Counts III and IV claiming that the
SAC improperly conflate DHL Express, Danzas, and Air Express. Specifically, Air
Express and Danzas claim that Berkeley fails to state a proper patent infringement claim
because Berkeley creates a fictional proxy, “DHL,” when stating its cause of action.
We disagree.
“Group pleading” does not violate Federal Rule of Civil Procedure 8 so long as
the complaint provides sufficient detail to put the defendants on notice of the claims.
See Sanders v. JGWPT Holdings, Inc., 2016 WL 4009941, at *10 (N.D. Ill. 2016)
(“‘Group pleading’ that refers to ‘Defendants’ collectively is sufficient under Rule 8
when a plaintiff provides enough detail about the allegations to put each defendant on
fair notice of the claims.”).
The SAC clearly articulates that “on information and belief, Danzas performs the
steps recited in the Asserted Claims in connection with its usage of TVA / INSIGHT
and related activity,” and that “on information and belief, Air Express performs the
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steps recited in the Asserted Claims in connection with its usage of TVA / INSIGHT
and related claims.”
Danzas and Air Express are divisions of Deutsche Post AG, DHL Express’ parent
company. As a division of Deutsche Post AG, it is plausible that Danzas and Air
Express each would have access to the INSIGHT application. It is also plausible that
Danzas and Air Express, both shipping and logistic companies, would seek the
profitability and margin data generated by INSIGHT. This is especially plausible
because DHL Express has made public its use of the INSIGHT technology.
Also, Berkeley has showed evidence of Danzas and Air Express each posting job
openings for “Air Freight Specialist[s],” a vacancy requiring “implementation [of]
appropriate pricing for DHL Air Freight products and services.”
Accordingly, Danzas and Air Express have sufficient notice, and Berkeley’s
SAC is sufficiently tailored to Danzas and Air Express.
B.
35 U.S.C. § 271 (a)
In its reply brief, the Defendants argue that Counts II-IV should be dismissed
because Berkeley has failed to properly allege a claim under 35 U.S.C. § 271 (a).
However, the Defendants have waived this argument as they did not attempt to argue it
in their opening briefs. See United States v. Miles, 244 F. App’x 31, 33–34 (7th Cir.
2007) (stating that arguments not developed in the opening brief are waived).
Therefore, the Court will not address this issue.
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C.
35 U.S.C. § 271 (g)
Defendants contend that Counts II, III, and IV under § 271(g) should be
dismissed because its alleged infringing process does not make a “product” that is
imported into the United States. Instead, the Defendants contend that the asserted
claims are limited to “object level profitability,” failing to claim a physical product or
even a “report.”
Therefore, because Defendants argue that the “object level
profitability” is data and not tangible information, Berkeley’s claim must dismissed
because § 271(g) is inapplicable.
Berkeley argues that § 271(g) is applicable because its patented methodgenerated Profitability Records and Profitability Reports qualify as “product[s]” under
§ 271(g). Berkeley contends that the Defendants have performed “the patented steps
of the asserted patents to make calculated object level profitability values.”
Specifically, Claim 1 of each of the Asserted Patents each contemplate that the
“calculated values of the Profitability Records will be written to, or otherwise present
in, a relational database, given that the claims require they be calculated in a ‘relational
database management system.’”
In Bayer AG v. Housey Pharmaceuticals, Inc., the Federal Circuit found that the
statutory prohibition on the importation or sale of a product “made” by a patented
process applies only to “physical products” that are “manufactured,” and does not
extend to “information” produced by a patented process. 340 F.3d 1367, 1371–72 (Fed.
Cir. 2003). The Defendant owned a patent claiming “a method of screening for
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substances which specifically inhibit or activate a particular protein affecting the
cultural or morphological characteristics of the cell expressing the protein.” Id. at 1369.
The patent-holder alleged infringement under § 271(g), asserting that the method
patents used a process to identify which drug to produce. Id. The issue was whether
the research data from the performance of a method to identify substance, was a product
which is made by a process. Id. at 1370. The Federal Circuit said no, explaining that
the process did fall within the scope of the processes of “manufacture” discussed in the
statute. Id. at 1372.
Notwithstanding Bayer, Berkeley relies on CNET Networks, Inc. v. Etilize, Inc.,
528 F. Supp. 2d 985 (N.D. Cal. 2007) and Ormco Corp. v. Align Technology, Inc., 609
F. Supp. 2d 1057 (C.D. Cal. 2009) for the proposition that digital creations can
constitute products within the meaning of § 271(g).
In CNET Networks, the patent concerned claimed methods and systems for
automatically creating an electronic catalog of product information gathered from
various internet websites. Etilize, Inc., 528 F. Supp.2d 985 (N.D. Cal. 2007). The court
found that the digital catalogue was a product within the meaning of § 271(g) because
the infringing method was used to create a product – the catalogue – which was
subsequently imported into the United States. Id. The court explained that this was
unlike Bayer because Bayer dealt with an infringing process that performed a service
of transmitting information to recipients in the United States. Id.
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Likewise, in Ormco Corp. v. Align Technology, Inc., the court concluded that a
three-dimensional digital representation of teeth transmitted to recipients was a
“‘creation’ produced by ‘practicing each step’ of patented process.” 609 F. Supp. 3d
1057 (C.D. Cal. 2009)
The Court finds that the “profitability records” asserted by Berkeley do not
qualify as “products” under § 271(g). Claim 1 of the ‘521 patent covers a “process for
determining object level profitability in a computer … ,” resulting in a “process for
determining object level profitability.” Claim 1 of the ‘137 patent addresses a “method
for transforming a computerized profit database … ,” resulting in “a measure for object
level profitability.” Claim 1 of the ‘361 patent discusses a “process for determining
object level profitability” with the same result.
We find that the method claim of “determining object level profitability” is more
aligned with Bayer in that the claims provide a more efficient means of measuring
profitability, which we find is not a tangible component. Profitability is defined as “the
excess of returns over expenditure in a transaction or series of transactions; especially
the excess of selling price of goods over their cost.” Profit, Merriam-Webster’s
Dictionary
(2018),
https://www.merriam-webster/com/dictionary/profit.
The
Defendants correctly point out that calculated profitability exists irrespective of whether
the method is applied, and that the method claims do not necessarily “create” anything
new.
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The Court is not persuaded by Berkeley’s argument that the “profitability
records” are tangible goods within the meaning of § 271(g). Instead, the Court agrees
with the Defendants that the “profitability records” are not the result, or manufactured
as a result, of the claims. Indeed, the “profitability records” are an element of the
process and a pre-existing element of the claims that subsequently leads to the “process
for determining object level profitability.” Therefore, we find that the “profitability
records” are not “physical products” that are “manufactured” for purposes of § 271(g).
CONCLUSION
For the reasons above, the Defendants’ motion to sever and stay is granted. The
12(b)(6) motion is granted in part and denied in part. The claims arising under 35
U.S.C. § 271(g) in Counts II-IV are dismissed. The Counts remain to the extent they
state claims under U.S.C. § 271(c).
Dated: 3/7/2019
________________________
Charles P. Kocoras
United States District Judge
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