Mankes v. Fandango, LLC

Filing 110

ORDER granting 92 Motion to Dismiss and 101 Motion to Dismiss - Signed by District Judge Louise Wood Flanagan on 2/28/2017. (Baker, C.)

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION
No. 5:13-CV-00716-FL

ROBERT MANKES,
Plaintiff,
v.
FANDANGO, LLC and REGAL
ENTERTAINMENT GROUP,
Defendants.

)
)
)
)
)
)
)
)
)
)
)

ORDER

This matter is before the court on defendants’ motion to dismiss, pursuant to Federal Rule
of Civil Procedure 12(b)(6). (DE 92, 101). The issues presented are ripe for ruling. For the
following reasons, defendants’ motion is granted.
BACKGROUND
On October 14, 2013, plaintiff, inventor and owner of United States Patent Number
6,477,503 (“ ‘503 patent”), initiated this suit asserting claims against defendant Fandango, LLC,
(“Fandango”), an online retailer of movie tickets, for patent infringement in violation of 35 U.S.C.
§ 271(a) and induced infringement in violation of 35 U.S.C. § 271(b).1 Defendant responded with
a motion to dismiss, later mooted by the court’s allowance of plaintiff’s motion to amend, resulting

1

The same date, a corresponding lawsuit was filed by plaintiff against another operator of a reservation system aimed
at selling tickets, alleging similar violations of or relating to the ‘503 patent. See Mankes v. Vivid Seats, Ltd., No. 5:13CV-717-FL. That case voluntarily was dismissed on June 21, 2016.

in an amended complaint filed March 7, 2014. In answer filed March 24, 2014, defendant denied
liability and asserted two counterclaims against plaintiff. (DE 37).
At the time plaintiff initiated this action, relevant law relating to plaintiff’s claims was in a
state of flux. The court allowed the parties joint motion to stay proceedings pending outcome of
Limelight Networks, Inc. v. Akamai Technologies, Inc., 134 S. Ct. 2111 (2014). On June 2, 2014,
in unanimous ruling, the Supreme Court held that liability for induced infringement only can be
found when there is direct patent infringement. Id. at 2117. The Supreme Court remanded the case
back to the United States Court of Appeals for the Federal Circuit for further proceedings.
Ultimately stay was lifted in this case, where the court declined to continue it pending the Federal
Circuit’s address on remand.
Thereafter, plaintiff moved to dismiss defendant Fandango’s counterclaims, (DE 50), and
defendant filed a motion for judgment on the pleadings. (DE 55). On February 26, 2015, this court,
applying relevant law as it then stood, granted judgment on the pleadings in favor of defendant. (DE
60). The February 26, 2015, order also held in abeyance plaintiff’s motion to dismiss, pending
further briefing. (Id.). However, before the court could address the merits of plaintiff’s motion,
defendant Fandango’s counterclaims voluntarily were dismissed on March 5, 2015. (DE 61).
Following the court’s February 26, 2015, order, plaintiff appealed to the Federal Circuit.
During briefing on the merits of plaintiff’s appeal, the Federal Circuit issued an en banc decision
in Akamai Technologies, Inc. v. Limelight Networks, Inc., 797 F.3d 1020 (Fed. Cir. 2015) (en banc)
(Akamai IV), which revised the legal standards this court had applied in granting judgment on the
pleadings in favor of defendant. In Akamai IV, the Federal Circuit held that when more than one
actor is involved in practicing the steps of a claimed method, a single entity will be liable for others’

2

performance of method steps, and ultimately direct infringement, “where that entity directs or
controls the others’ performance” or “where the actors form a joint enterprise.” Id. at 1022.
On April 22, 2016, the Federal Circuit vacated this court’s judgment on the pleadings
against plaintiff and remanded the case for further proceedings in light of Akamai IV. Mankes
v.Vivid Seats Ltd., 822 F.3d 1302, 1309 (Fed. Cir. 2016). Specifically, the Federal Circuit held that
because this court’s decision was “squarely based on [an] earlier, narrower [legal] standard,”
reinstatement and remand were appropriate for determining whether or not plaintiff’s claims
survived the new legal standard. Id. at 1305. Following the Federal Circuit’s opinion, this court
directed plaintiff to file an amended complaint.
On June 30, 2016, plaintiff filed the instant second amended complaint against defendants
Fandango and Regal Entertainment Group (“Regal”), asserting claims for patent infringement in
violation of 35 U.S.C. § § 271 et seq. (DE 81). Plaintiff alleges that defendant Fandango’s
operation of an Internet-based reservation system, in conjunction with defendant Regal’s operation
of a local reservation system, infringes the ‘503 patent. Plaintiff seeks declaratory and injunctive
relief, monetary damages, and trial by jury.
On August 24, 2016, defendant Fandango moved to dismiss the instant complaint (DE 92).
Defendant Regal joined in that motion. (DE 101). Defendants argue that plaintiff’s patent claims
are directed to an abstract idea and therefore fail to cover patentable subject matter under 35 U.S.C.
§ 101.
STATEMENT OF FACTS
The facts alleged in plaintiff’s second amended complaint are summarized as follows.
Plaintiff is owner and inventor of the ‘503 patent, which issued on November 5, 2002. (DE 81 ¶

3

12–13). The ‘503 patent, entitled “Active Reservation System,” claims methods for a system to
control inventory when goods and services are sold both through the Internet and at a physical site.
(Id. ¶ 13). Ordinarily, when vendors sell inventory online and at a physical site, inventory is
divided and allocated between the two locations. U.S. Patent No. 6,477,503, col. 1.ll. 30–58.
However, when inventory is divided, “neither [site] ha[s] contemporaneous information on the
overall state of the local inventory.” Id. at col. 1.ll. 43–67. As a result, inventory is often undersold.
Id. at col. 1.ll. 57–58.
The ‘503 patent specification describes a method reservation system which allows vendors
to control entire inventory at a single, local site. Id. at col. 2.ll. 58–60. The local site uses a local
server to allocate, control and reserve inventory.

Id. at col. 2.ll. 61–63. The local server

communicates over the Internet to an online reservation server certain information regarding
available inventory. Id. at col. 3.ll. 6–9. The reservation system then makes the available
inventory accessible for purchase by consumers online. Id. at col. 3.ll. 10–12. When inventory is
sold online, the Internet site communicates the sale to the local site, which then confirms the sale
and updates total available inventory. Id. at col. 3.ll. 16–19. Confirmation of the sale, along with
updated inventory, is then transmitted to the reservation server and forwarded to the consumer. Id.
at col. 3.ll. 37–41. Any time a sale is made, the local site is able to control available inventory and
communicate information regarding the same, regardless of whether the sale was made online or at
the local site. Id. at col. 3.ll. 42–46.
These features of plaintiff’s invention generally are found in the four claims of the ‘503
patent. Of the four claims, Claims 1 through 3 are at issue. Claim 1 is representative of the asserted
claims, stating:

4

1. A method for operating an Internet based active reservation system for the
purchase of goods and services, comprising:
(a) providing an owner event server located at and operated by a local event
owner having an available inventory of goods and services at a local site;
(b) providing an active reservation server located at and operated by user remote
from said local site, said active reservation server accepting only data from said
owner event server and formatting said data for viewing by an Internet-based
consumer;
(c) allocating said available inventory by only said owner event server at all
times between local inventory and Internet inventory;
(d) adjusting said available inventory by only said event owner at said owner
event server at all times based on purchases of goods and services at said local
event site;
(e) communicating said allocated Internet inventory only to said active
reservation server;
(f) receiving purchase requests for goods and services in said Internet inventory
at said active reservation server from said Internet-based consumer;
(g) communicating said purchase requests from said active reservation server to
said owner event server;
(h) accepting said purchase requests solely at said local event server and
adjusting said Internet inventory only by said owner event server at all times to
establish an adjusted Internet inventory;
(i) communicating said accepting and said adjusted Internet inventory from said
owner event server to said active reservation server; and
(j) communicating said accepting and confirmation indicia relative thereto from
said active reservation system to said Internet consumer.
Id. at col. 3.ll. 33– 67. Claims 2 and 3 differ slightly from Claim 1. Unlike Claim 1, Claim 2
specifies that information regarding available inventory be communicated through two separate
Internet connections and that the local event server designate a rate structure for the goods and
services being sold. Id. at col. 9.ll. 5–19. Additionally, Claim 3 specifies that the reservation server
5

display available Internet inventory “in a reservation server selected format on a website for viewing
by prospective customers.” Id. at col. 10.ll. 7–8.
Defendant Fandango operates an online reservation system, which sells tickets to movie
screenings that are shown at defendant Regal’s movie theaters. (DE 81 ¶ 16). Defendant Regal
operates a local reservation system for movie screenings at its theaters. (Id. ¶ 19). Furthermore,
each of defendant Regal’s theaters has a box office, which sells movie tickets to local customers
onsite and accesses defendant Regal’s reservation system to effectuate sales. (Id. ¶ 15). The
reservation system used by defendant Fandango, in conjunction with Regal’s operation of a local
reservation system, largely mimics that disclosed in the ‘503 patent.
DISCUSSION
A.

Standard of Review
A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of the complaint, “it does

not resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses.”
Republican Party of N.C. v. Martin, 980 F.2d 943, 952 (4th Cir. 1992). To meet this standard, 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, 663 (2009) (quoting Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007)).
In evaluating whether a claim is stated, “[the] court accepts all well-pled facts as true and
construes these facts in the light most favorable to the plaintiff,” but does not consider “legal
conclusions, elements of a cause of action, . . . bare assertions devoid of further factual
enhancement[,] . . . unwarranted inferences, unreasonable conclusions, or arguments.” Nemet
Chevrolet, Ltd. v. Consumeraffairs.com, Inc., 591 F.3d 250, 255 (4th Cir. 2009) (citations omitted).

6

When ruling on a motion to dismiss, the court may consider the facts as alleged in the complaint,
“documents attached to the complaint, . . .[and documents] attached to the motion to dismiss, so long
as they are integral to the complaint and authentic.” Sec’y of State for Defence v. Trimble
Navigation Ltd., 484 F.3d 700, 705 (4th Cir. 2007) (internal citations omitted).2
B.

Analysis
Defendants move for dismissal of the instant complaint on the basis that the ‘503 patent is

invalid under 35 U.S.C. § 101. Patent eligibility under 35 U.S.C. § 101 is a question of law, which
properly may be decided on a Rule 12(b)(6) motion. See OIP Techs., Inc., v. Amazon.com, Inc.,
788 F.3d 1359, 1362 (Fed. Cir. 2015). Courts may resolve questions of patent eligibility under §
101 before engaging in formal claim construction. See Genetic Techs. Ltd. v. Merial L.L.C., 818
F.3d 1369, 1373 (Fed. Cir. 2016); Bancorp Servs., L.L.C. v. Sun Life Assurance Co. of Canada
(U.S.), 687 F.3d 1266, 1273 (Fed. Cir. 2012).3
Under 35 U.S.C. § 101, a patent may be obtained for “ any new and useful process, machine,
manufacture, or composition of matter, or any new and useful improvement thereof.” 35 U.S.C. §
101. The Supreme Court has long held that “[l]aws of nature, natural phenomena, and abstract
ideas” are excepted from § 101 and thus, are not patent-eligible. Alice Corp. Pty. Ltd., v. CLS Bank
Int’l, 134 S. Ct. 2347, 2354 (2014) (internal quotations omitted). However, since “all inventions .
. . embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas” at

2

Where the ‘503 patent is attached to and referenced in plaintiff’s second amended complaint (DE 81-1), the court may
properly consider its contents in ruling on the instant motion. Trimble, 484 F.3d at 705.
3

The parties do not identify any claim terms that require construction prior to deciding this motion. (See DE 92 at 8, n.3;
see also DE 108 at 2). Accordingly, this court may resolve the instant motion without engaging in claim construction.
See e.g., Content Extraction & Transmission L.L.C., v. Wells Fargo Bank, N.A., 776 F.3d 1343, 1349 (Fed. Cir. 2014).

7

some level, “an invention is not rendered ineligible from patent simply because it involves an
abstract concept.” Id. (internal citations omitted).
The Supreme Court has delineated a two-step process for “distinguishing patents that claim
of nature, natural phenomena, and abstract ideas from those that claim patent-eligible applications
of those concepts.” Id. at 2355. The first step requires the court to determine whether the patent
claims at issue are directed toward an abstract idea. Id. If the court concludes the claims are
directed to an abstract idea, it proceeds to the second step. Id. At the second step, the court
determines whether the patent contains an “inventive concept”– that is, whether there exists “an
element or combination of elements that is sufficient to ensure that the patent in practice amounts
to significantly more than a patent upon the ineligible concept itself.” Id. (internal quotations
omitted).
Although the Supreme Court has not defined the precise contours of what constitutes an
abstract idea, its prior cases on the issue are informative here. For example, most recently, in Alice,
the Court found claims concerning “intermediated settlement” to be directed to an abstract idea. The
Court reasoned that the “concept of intermediated settlement is “a fundamental economic practice
long prevalent in our system of commerce,” and thus qualifies as “an abstract idea beyond § 101’s
scope.” 134 S. Ct. at 2356. Similarly, in Bilski v. Kappos, 561 U.S. 593 (2010), the Court
invalidated a claimed method for hedging risk as directed to an abstract idea. Id. at 611.
In light of these guideposts, the patent claims at issue here are directed to an abstract idea.
More specifically, the asserted claims are directed to the abstract idea of allocating, tracking, and
controlling inventory. The claims recite methods for a reservation system in which an “event vendor
uses a local event server to allocate, control, and reserve their inventory at their place of business,”

8

while making available inventory accessible for purchase by consumers on the Internet. ‘503 Patent,
col. 3.ll. 6–8.
Like the concept of intermediated settlement in Alice and risk hedging in Bilski, the concept
of allocating, tracking, and controlling inventory is a fundamental business and economic practice
“long prevalent in our system of commerce.” Alice, 134 S. Ct. at 2356; see also Bilski, 561 U.S.
at 611; Life Techs. Corp., v. Unisone Strategic IP, Inc., No. CBM2015-00037, 2016 WL 5593329
(P.T.A.B. June 28, 2016) (finding the concept of inventory management to be an abstract,
“fundamental economic practice” under the Supreme Court’s guidance in Alice and Bilski). Thus,
on their face, the instant claims are drawn to the abstract idea of allocating, tracking, and controlling
inventory between two sites.
Plaintiff rejects the idea that his claims recite an abstract idea. Plaintiff contends that his
invention is “not a well-known business concept applied to a general computer,” but rather, “an
integrated reservation method that combines aspects of a local reservation system and an online
reservation system.” (DE 104). Plaintiff argues that defendants “oversimplify” his claims and fail
to account for specific limitations contained within them. To support his position, plaintiff relies
on McRO, Inc. v. Bandai Namco Games Am., 837 F.3d 1299 (Fed. Cir. 2016), and Enfish, L.L.C.
v. Microsoft Corp., 822 F.3d 1327 (Fed. Cir. 2016). These cases, however, are distinguishable from
the present case.
In McRO, the Federal Circuit found a claimed process for “automating part of a pre-existing
3-D animation method[]” for “depict[ing] various facical expressions during speech” patent-eligible.
837 F.3d at 1303. The court reasoned that because the claimed process used an order of “rules with
specific characteristics” to improve computer animation, such claims were not abstract and thus

9

patent-eligible. Id. at 1313. In so finding, the court held that when deciding whether a claim is
directed to an abstract idea, a court must determine “whether the claims . . . focus on a specific
means or method that improves the relevant technology, or . . . instead . . . merely invoke generic
processes and machinery.” Id. at 1314 (emphasis added). Similarly, in Enfish, the Federal Circuit
found that claims directed to a logical model for a data storage and retrieval system, understood in
light of their specific limitations, were not directed to an abstract idea, where such claims were
unambiguously directed to improving computer functionality. 822 F.3d at 1335–36.
Plaintiff contends that his claims, like the claims in McRO and Enfish, are patent-eligible
because they contain specific rules, which function to improve existing technology. For example,
plaintiff claims that steps (g), (h) and (i) of Claim 1 “recite specific steps that enable the local event
server to maintain control over local and Internet inventory, while enabling sales by the online
reservation system.” (DE 104 at 10). However, the specific rules provided in these steps, and in
similar steps of the remaining claims, are insufficient to transform an otherwise abstract idea into
a patent-eligible concept. Unlike the claims in McRO and Enfish, here, the method claims “merely
invoke generic processes and machinery.” McRO, 837 F.3d at 1314. Namely, the claimed methods
control inventory by using standardized computers to store, allocate, communicate, and receive data
over the Internet. Furthermore, plaintiff fails to allege that his method claims are directed to “an
improvement in the functioning of a computer.” Enfish, 822 F.3d at 1338 (emphasis added).
Consequently, the method claims, viewed as an ordered combination, do not impose specific
limitations sufficient to render plaintiff’s claims patent-eligible.
Beyond the abstract idea of allocating, tracking, and controlling inventory, the asserted
claims also fail to contain an inventive concept. As noted above, a claim directed to an abstract idea

10

contains an inventive concept if it contains “an element or combination of elements . . . sufficient
to ensure that the patent in practice amounts to significantly more than a patent upon the ineligible
concept itself.” Alice, 134 S. Ct. at 2354 (internal citations omitted). “[W]holly generic computer
implementation is not generally the sort of ‘additional featur[e]’ ” required to render a claim patenteligible. Alice, 134 S. Ct. at 2358 (quoting Mayo Collaborative Servs. v. Prometheus Labs.,
Inc.,,132 S. Ct. 1289, 1297 (2012)); see also buySAFE, Inc. v. Google, Inc., 765 F.3d 1350, 1355
(Fed Cir. 2014) ( “That a computer receives and sends . . . information over a network— with no
further specification— is not even arguably inventive.”).
Here, the asserted claims do not contain “an element or combination of elements . . .
sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the
ineligible concept itself. ” Alice, 134 S. Ct. at 2354 (internal citations omitted). Like the claims in
Alice, the claimed methods simply provide a method of implementing the well-known business
practice of inventory management on conventional computer hardware. 134 S. Ct. at 2358–60; Life
Techs., 2016 WL 5593329 (finding the concept of inventory management to be an abstract,
“fundamental economic practice” under the Supreme Court’s guidance in Alice and Bilski); see also
Mortgage Grader, Inc. v. First Choice Loan Servs. Inc., 811 F.3d 1314, 1324–25 (Fed. Cir. 2016)
(finding claims directed to anonymous loan shopping to be patent-ineligible even though they
required computer-based communication of particular data between borrowers and lenders);
Intellectual Ventures I L.L.C. v. Capital One Bank (USA), 792 F.3d 1363, 1367 (Fed. Cir. 2015)
(finding that limitations involving the use of the Internet and telephone networks were insufficient
to render a claimed method directed to tracking financial transactions patent-eligible); OIP Techs.,
Inc., v. Amazon.com, Inc., 788 F.3d 1359, 1364 (Fed. Cir. 2015) (finding claims directed to price-

11

optimization and implemented through generic computer processes and hardware to be patentineligible).
Relying on Bascom Global Internet Servs., Inc., v. AT&T Mobility, L.L.C., 827 F.3d 1341
(Fed. Cir. 2016), plaintiff argues that, even if his invention is abstract, his claims are still patenteligible because they improve computer-based inventory management. Specifically, plaintiff argues
that the “claims recite the specific manner in which the local event server and active reservation
server interact to enable local control of all inventory.” (DE 104 at 13). In Bascom, the Federal
Circuit found an inventive concept “in the non-conventional and non-generic arrangement of known,
conventional pieces,” even though the asserted claims, taken individually, merely “recite[d] generic
computer, network and Internet components, none of which [was] inventive by itself.” Id. at
1349–1350. However, unlike the claimed method in Bascom, plaintiff’s claimed method is not a
“software-based invention that improves the performance of the computer system itself.” 827 F.3d
at 1351 (internal quotations omitted). Furthermore, the instant method claims do not require
modification of the conventional use of the computer or Internet, or otherwise use computer servers
or the Internet in a non-conventional combination or arrangement. Rather, the method claims
merely disclose a method for allocating, tracking and communicating inventory information
between two servers. See buySAFE, 765 F.3d at 1355 (“That a computer receives and sends . . .
information over a network— with no further specification— is not even arguably inventive.”).
Thus, viewed individually, or as an ordered combination, the claims do not contain an inventive
concept.
In sum, the claims at issue in the ‘503 patent are directed to an abstract idea and lack an
inventive concept. Consequently, the asserted claims are patent-ineligible under 35 U.S.C. § 101.

12

Finding a sufficient basis for granting defendants’ motion on these grounds, the court need not
address the parties’ additional arguments.
CONCLUSION
Based on the foregoing, the court GRANTS defendants’ motion to dismiss. (DE 92, 101).
Plaintiff’s second amended complaint is DISMISSED with prejudice. The clerk is DIRECTED to
close this case.
SO ORDERED, this the 28th day of February, 2017.

_________________________
LOUISE W. FLANAGAN
United States District Judge

13