Uniloc USA, Inc. et al v. Google Inc.

Filing 41

MEMORANDUM AND OPINION AND ORDER DISMISSING CASE WITH PREJUDICE. Signed by Judge Robert W. Schroeder, III on 3/20/2017. (slo, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
MARSHALL DIVISION
UNILOC USA, INC. and
UNILOC LUXEMBOURG S.A.,

Plaintiffs,
v.
AMAZON.COM, INC. and
AMAZON DIGITAL SERVICES, INC.,

Defendants.
GOOGLE INC.,
Defendant.
HOME BOX OFFICE, INC.,
Defendant.
HULU LLC,
Defendant.
NETFLIX, INC.,
Defendant.

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CIVIL ACTION NO. 2:16-CV-00570-RWS
(LEAD)

CIVIL ACTION NO. 2:16-CV-00571-RWS

CIVIL ACTION NO. 2:16-CV-00572-RWS

CIVIL ACTION NO. 2:16-CV-00573-RWS

CIVIL ACTION NO. 2:16-CV-00574-RWS

MEMORANDUM OPINION AND ORDER
Before the Court are Defendant Netflix Inc.’s Motion to Dismiss (Case No. 2:16-cv-574,
Docket No. 15) and Defendants Amazon.com, Inc. and Amazon Digital Services, Inc.’s
(collectively, “Amazon”) Motion to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(6) for Lack of
Patentable Subject Matter Under 35 U.S.C. § 101 (Docket No. 20)1, which is joined by the other

1

All references to “Docket No.” are to the docket in lead Case No. 2:16-cv-570 unless specifically stated otherwise.

Defendants in this consolidated action.2

Amazon’s motion argues that the case should be

dismissed because the asserted patent claims ineligible subject matter under 35 U.S.C. § 101 and
Alice Corp. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014). Netflix’s motion joins Amazon’s and
further argues that the case should be dismissed because the Complaint pleads insufficient facts
to state a claim under Federal Rule of Civil Procedure 8. The Court GRANTS Amazon’s
motion (Docket No. 20). Netflix’s motion is GRANTED-IN-PART to the extent it seeks relief
under 35 U.S.C. § 101 and is otherwise DENIED as moot.
BACKGROUND
This is a consolidation of five patent-infringement actions in which Plaintiffs Uniloc
USA, Inc. and Uniloc Luxembourg S.A. (collectively, “Uniloc”) assert infringement of U.S.
Patent No. 8,566,960 (“the ’960 Patent”), entitled “System and Method for Adjustable Licensing
of Digital Products.” The Defendants are providers of digital media content, and Plaintiffs
generally allege that the Defendants’ digital media content distribution systems infringe the ’960
Patent.
The ’960 Patent relates to “systems and methods to enable the monitoring and adjusting
software usage under a software license.” ’960 Patent, col. 1:18–20. The ’960 Patent explains
that a license can be adjustable over time in terms of the number of devices that may access the
licensed product. Id. at col. 3:41–42 (“The techniques described herein allow for a changing
number of device installations on a per license basis over time.”). It further explains that the
adjustment may be desirable to accommodate the natural usage patterns of users, for promotional
reasons or to control abusive copying. Id. at col 1:61–2:2, 6:13–20, 6:36–40.

2

All other Defendants have joined Amazon’s motion. See Case No. 2:16-cv-571, Docket No. 14 (joining Amazon’s
motion); Case No. 2:16-cv-572, Docket No. 16 (same); Case No. 2:16-cv-573, Docket No. 14 (same); Case. No.
2:16-cv-574, Docket No. 15 (joining Amazon’s motion and providing alterative grounds for dismissal).

Page 2 of 21

The three independent claims of the ’960 Patent recite a system (claim 1), a method
(claim 22) and a computer program product (claim 25) “for adjusting a license for a digital
product over time.” Id. at col. 11:57–58, 13:32–33. Claim 22 and its dependent claims 23 and
24 provide:
22. A method for adjusting a license for a digital product over time, the license
comprising at least one allowed copy count corresponding to a maximum number
of devices authorized for use with the digital product, comprising:
receiving a request for authorization to use the digital product on a given
device;
verifying that a license data associated with the digital product is valid based
at least in part on a device identity generated by sampling physical
parameters of the given device;
in response to the device identity already being on a record, allowing the
digital product to be used on the given device;
in response to the device identity not being on the record, setting the allowed
copy count to a first upper limit for a first time period, the allowed copy
count corresponding to a maximum number of devices authorized to use
the digital product;
calculating a device count corresponding to total number of devices already
authorized for use with the digital product; and
when the calculated device count is less that the first upper limit, allowing the
digital product to be used on the given device.
23. The method of claim 22, further comprising:
in response to the device identity not being on the record, after the first time
period has expired, setting the allowed copy count to a second upper limit
for a second time period;
recalculating the device count; and
when the recalculated device count is less than the second upper limit,
allowing the digital product to be used on the given device.
24. The method of claim 23, further comprising:
in response to the device identity not being on the record, after the second
time period has expired, setting the allowed copy count to a third upper
limit;
recalculating the device count; and
when the recalculated device count is less than the third upper limit, allowing
the digital product to be used on the given device.
Id. at 13:32–14:23.
Figure 1 of the ’960 Patent provides the core features or “rules” of an “example license”
to be implemented by the claimed method:
Page 3 of 21

Id. at Figure 1. The example shows a licensing scheme by which the number of devices that may
access the digital content grows over time. The licensing scheme starts on the day of initial
authorization of the license and prescribes a first five-day period in which a maximum of five
devices are permitted to access the content, a second 25-day period with a new upper limit of
seven devices, and a third, indefinite period with another new upper limit of 11 devices. The
specification of the ’960 Patent explains that the upper limit of devices may rise or fall over time
and may be keyed to the date of initial authorization or some other fixed date.

See id. at col.

6:13:20. The kind of license shown in Figure 1 can be referred to as a “time-adjustable license.”
As claims 22–24 show, the claimed invention of the ’960 Patent is a system or method
for managing and implementing the time-adjustable license using a computer as exemplified in
Figure 2. Id. at col. 4:42–45 (“FIG. 2 shows an example embodiment of a software system that
is designed to manage and implement the rules under a license, such as, for example, the
licensing terms 60 described in FIG. 1.”).

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LEGAL STANDARD
Federal Rule of Civil Procedure 12(b)(6)
Under Federal Rule of Civil Procedure 12(b)(6), the Court must dismiss a complaint that
does not state a claim for relief that is “plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). To state a plausible
claim, Plaintiffs must plead facts sufficient to allow the Court to draw a reasonable inference that
Defendants are liable for the alleged patent infringement. See id. (citing Twombly, 550 U.S. at
556). At this stage, the Court accepts all well-pleaded facts as true and views those facts in the
light most favorable to the Plaintiffs. Bustos v. Martini Club, Inc., 599 F.3d 458, 461 (5th Cir.
2010).
Eligibility Under 35 U.S.C. § 101
In determining whether a claim is patent-ineligible under Alice, the Court must “first
determine whether the claims at issue are directed to a patent-ineligible concept.” Alice, 134 S.
Ct. at 2355. Claims directed to software inventions do not automatically satisfy this first step of
the inquiry. Enfish, LLC v. Microsoft Corp., 822 F.3d 1327, 1335 (Fed. Cir. 2016). Rather, “the
first step in the Alice inquiry . . . asks whether the focus of the claims is on [a] specific asserted
improvement in computer capabilities . . . or, instead, on . . . an ‘abstract idea’ for which
computers are invoked merely as a tool.” Id. at 1335–36.
If the Court determines that the claims are directed to an abstract idea, it then determines
whether the claims contain an inventive concept sufficient to transform the claimed abstract idea
into a patent-eligible application. Alice, 134 S. Ct. at 2357. An inventive concept is “some
element or combination of elements sufficient to ensure that the claim in practice amounts to
‘significantly more’ than a patent on an ineligible concept.” DDR Holdings, LLC v. Hotels.com,

Page 5 of 21

L.P., 773 F.3d 1245, 1255 (Fed. Cir. 2014). The Court “consider[s] the elements of each claim
both individually and as an ordered combination to determine whether the additional elements
transform the nature of the claim into a patent-eligible application.” Alice, 134 S. Ct. at 2355
(internal quotation omitted). Even if each claim element, by itself, was known in the art, “an
inventive concept can be found in the non-conventional and non-generic arrangement of known,
conventional pieces.” Bascom Global Internet Servs., Inc. v. AT&T Mobility LLC, 827 F.3d
1341, 1350.
ANALYSIS
Alice Step One
The parties dispute whether the claims are directed to an abstract concept. Defendants
assert that the claims are directed to the general business concept of allowing customers to use
multiple copies of a licensed product. Docket No. 20 at 1. Defendants further state that the
claims do not provide any improvement in computer functionality but instead address a
customer-service problem for businesses that license software. Id. at 10. Defendants further
argue that the invention as claimed does not require the use of a computer and that the method
claims can be performed by humans. Id. at 7–10.
Plaintiffs deny that the claims are directed to an abstract concept. Docket No. 26 at 4.
They argue that the claims recite a non-abstract, improved technique for effectively mitigating
unauthorized or “pirated” use of software, while also accommodating the typical multiple-device
and dynamically-changing use patterns of license customers over time. Id. at 5. Plaintiffs
further argue that the abstract concept proposed by Defendants overlooks the fundamental
“adjusting” concept of the patent and therefore should be rejected as untethered from the
language and character of the claims as a whole. Id. at 5–6.

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“The Supreme Court has not established a definitive rule to determine what constitutes an
‘abstract idea’ sufficient to satisfy the first step of the Mayo/Alice inquiry.” Enfish, 822 F.3d at
1334. “Rather, both [the Federal Circuit] and the Supreme Court have found it sufficient to
compare claims at issue to those claims already found to be directed to an abstract idea in
previous cases.” Id. In the context of software inventions, the Federal Circuit has instructed that
claims directed to improvements in the functioning of a computer are not directed to an abstract
idea. Id. at 1335. Conversely, claims may be directed to abstract ideas if they are directed to
fundamental economic and conventional business practices. OIP Techs., Inc. v. Amazon.com,
Inc., 788 F.3d 1359, 1362–63 (Fed. Cir. 2015). Claims may also be directed to abstract ideas if
“[t]hey do not claim a particular way of programming or designing the software to [accomplish
the claimed functionality], but instead merely claim the resulting systems” or if the claims “are
not directed to a specific improvement in the way computers operate.” Apple, Inc. v. Ameranth,
Inc., 842 F.3d 1229, 1241 (Fed. Cir. 2016).
The time-adjustable license is an abstract idea because licensing is a fundamental
economic practice and because licenses are abstract exchanges of intangible contractual
obligations. See in re Chorna, 656 Fed. App’x 1016, 1019 (Fed. Cir. 2016); buySAFE, Inc. v.
Google, Inc., 765 F.3d 1350, 1353 (Fed. Cir. 2014) (internal citations omitted)). Plaintiffs
contend that the concept of “adjusting” is present in claim 22 and renders the claim non-abstract.
Even accepting Plaintiffs’ contention that “adjusting” is present in claim 22, “adjusting” is a
feature of the time-adjustable license, not a limitation on that concept. Time-adjustable licenses,
although they are a small subset of licenses as a whole, are still abstract. Thus, the claims of the
’960 Patent are directed to abstract concepts regardless of whether “adjusting” is present in claim
22.

Page 7 of 21

Further, the claims of the ’960 Patent are not directed to specific improvements in the
functioning of a computer. Plaintiffs argue that “claims that recite particular implementations for
‘providing protection for proprietary digital content’ are patent eligible because they ‘solve
problems faced by digital content providers in the Internet Era and ‘improve the functioning of
the computer itself.’ ” Docket No. 26 at 8–9 (citing Smartflash LLC v. Apple Inc., 2015 WL
661174, at *9 (E.D. Tex. Feb. 13, 2015)). Defendants respond that “the concept of license
modifications remains an abstract business concept.” Docket No. 29 at 2 (citing In re TLI
Commc’ns LLC Patent Litig., 823 F.3d 607, 611 (Fed. Cir. 2016)).
Plaintiffs’ reliance on Smartflash is misplaced because the Smartflash court found the
claims in that case were directed the abstract concept of “conditioning and controlling access to
data based on payment.” Smartflash, 2015 WL 661174, at *8. It was only at step two of the
Alice inquiry that the court found the claims eligible, relying on the specific limitations
addressing “specific ways of managing access to digital content data based on payment
validation through storage and retrieval of use status data and user rules in distinct memory types
and evaluating the use data according to the use rules.” Id. at *9. Although the court wrote the
phrase “improve the functioning of the computer itself,” it did so in the context of the second
step of the Alice test and without the benefit of the Federal Circuit’s guidance in Enfish.
Moreover, the Federal Circuit has reversed Smartflash and invalidated the claims in that case on
§ 101 grounds. Smartflash LLC v. Apple Inc., No. 2016-1059, Slip Op. at *2, *14 (Fed. Cir. Mar.
1, 2017). In sum, Plaintiffs’ comparison of the instant claims to the claims in Smartflash
confirms rather than refutes the foregoing analysis.
Because step one of the Alice inquiry is satisfied, the Court proceeds to step two.

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Alice Step Two
At the second step of the Alice eligibility inquiry, the Court evaluates “whether the claims
here do more than simply instruct the practitioner to implement the abstract idea . . . on a generic
computer.” Alice, 124 S. Ct. at 2359. The Court first analyzes the claim elements separately and
then as an ordered combination. Id. at 2359–60.
Defendants argue that none of the claims of the ’960 patent transforms the abstract idea
into patent-eligible subject matter. Docket No. 20 at 11 (citing OIP Techs., 788 F.3d at 1363).
Defendants characterize the steps of claim 22 as “well-understood, routine, and conventional
activities commonly used in the industry.” Id. (citation omitted). Defendants state, “Claims 1
and 25 recite the same elements as claim 22 that are carried out by generic and conventional
computer components, such as a ‘communication module,’ a ‘processor module,’ and a ‘memory
module,’ (claim 1) or simply require a ‘computer” (claim 25).’ Id. Defendants assert that the
instant claims lack a technical explanation for performing the claimed functions and are therefore
patent-ineligible. Id. at 11–12 (citing Internet Patents Corp. v. Active Networks, Inc., 790 F.3d
1343, 1348 (Fed. Cir. 2015)).
Defendants further argue that “the purported innovation of the ’960 patent[,] to impose a
maximum limit on the number of authorized devices by setting ‘a first upper limit for a first time
period’ in response to a new device[,]” is “nothing but a generic function of setting values in
response to an event.” Id. at 12 (citing Accenture Global Servs., GmbH v. Guidewire Software,
Inc., 728 F.3d 1336 (Fed Cir. 2013), cert. denied 134 S. Ct. 2871 (2014)). Defendants contend
that the individual limitations, such as “digital product” or “sampling physical parameters of the
given device,” do not provide an inventive concept because they represent field of use
restrictions and well-known, routine or conventional activity, respectively. Id. at 13–14.

Page 9 of 21

Defendants also argue that the ordered combination does not provide an inventive
concept because the combination of the steps adds nothing to what is already present when the
steps are considered separately. Defendants further argue that it would be improper to give
weight to the ordering of the claimed functions because the specification states that “[t]he
accompanying method claims present elements of the various steps in sample order, and are not
meant to be limited to the specific order or hierarchy presented.” Id. at 13 (citing ’960 Patent,
col 11:36–39).
Plaintiffs respond that “each independent claim recites inventive concepts amounting to
significantly more than the alleged abstraction, ‘allowing customers to use multiple copies of a
licensed product.’ ” Docket No. 26 at 10. In support of their argument, Plaintiffs again compare
the claims to those in Smartflash and argue that “[t]he same application of DDR Holdings [as in
Smartflash] applies here because the present claims recite improved solutions to specific
computer-related ‘problems faced by digital content providers in the Internet Era.’ ” Id. at 12.3
Plaintiffs also assert that claim 22 recites an ordered combination of process steps that
specifically implements a solution designed to prevent unauthorized access to a digital product,
while allowing the access to be nearly instantaneous under certain authorized conditions. Id. at
13. Plaintiffs also argue that the claims do not preempt the alleged abstract idea, id., and that
Defendants “improperly conflate the eligibility requirements of § 101 with the novelty
requirement of §§ 102 and 103” by limiting its analysis to whether individual claim elements
were known in the art. Id. at 14. Finally, Plaintiffs state that inventive concepts can be found in
inventive combinations of elements in any given process step as well as in the ordered

3

As stated above, the Federal Circuit has found that the patent claims asserted in Smartflash recite patent-ineligible
subject matter under § 101. Smartflash, No. 2016-1059, Slip Op. at *2, *14.

Page 10 of 21

combination of steps making up the overall method. Id. at 14–15 (citing BASCOM Glob.
Internet Servs. v. AT&T Mobility LLC, 827 F.3d 1341, 1350 (Fed. Cir. 2016)).
Claim 22 is representative of claims 1 and 25 for purposes of this analysis because the
three independent claims recite almost identical limitations modified only to fit the claimed
“system” (claim 1), “method” (claim 22) or “computer program product” (claim 25). For
example, the first step of claim 22 is “receiving a request for authorization to use the digital
product on a given device,” and claims 1 and 25 have the limitations “a communication module
for receiving a request for authorization to use the digital product from a given device” and
“code for causing a computer to receive a request for authorization to use the digital product,”
respectively. Moreover, the computer-related elements of claims 1 and 25 are generic (e.g. “a
processor module” in claim 1 or “a non-transitory computer-readable medium” in claim 25) and
do not contribute to any inventive concept in the claims.
Although Defendants are correct that claim 22 is representative, the Court is not
persuaded that claim 22’s alleged failure to recite a mechanism for each of the claimed functions
is fatal under 35 U.S.C. § 101. See Docket No. 20 at 12 (citing Internet Patents Corp., 790 F.3d
at 1348). The instant claims do not fail to recite a mechanism like the claims in Internet Patents
Corp. The steps recited in claim 22 of the ’960 Patent explain how to implement the concept of
a time-adjustable license; the Internet Patents claim listed its object—maintaining a certain
state—as one of many claim limitations and did not explain how the “maintaining” was
accomplished. See 790 F.3d at 1348. Accordingly, to satisfy step two of the Alice inquiry, the
Court must analyze the limitations of claim 22 of the ’960 Patent to determine whether they
sufficiently limit the abstract concept of time-adjustable licenses.

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The preamble of claim 22 does not provide an inventive concept. The phrase “for
adjusting a license for a digital product over time” is a statement of purpose indicating that the
steps following the phrase would accomplish the “adjusting.”4 The next clause, providing that
“the license compris[es] at least one allowed copy count corresponding to a maximum number of
devices authorized for use with the digital product,” assumes that a time-adjustable license is in
place. The preamble does not require entering into the license as a step of the method. Because
the time-adjustable license is the abstract concept to be limited by the remaining limitations, the
preamble does not limit, but rather announces, the abstract concept.
The first step of claim 22, “receiving a request for authorization to use the digital product
on a given device,” does not meaningfully limit the abstract idea of the time-adjustable license.
In the context of computer software, “receiving a request” is routine and generic method of
accessing a desired digital product. Moreover, the combination of sub-elements—a “digital
product” and a “given device”—is also not meaningfully limiting because the combination
merely limits the field of use of the invention to digital products.
The second step is “verifying that a license data associated with the digital product is
valid based at least in part on a device identity generated by sampling physical parameters of the
given device.”

Verifying the validity of the license does not meaningfully limit the

implementation of a time-adjustable license; rather, it asks only whether there is a valid license
before the method determines how many devices may access the content under that license. Nor
does the “device identity” sub-element provide an inventive concept because using a device
identity generated in part by sampling the physical characteristics of a device was well-known at
the time the ’960 Patent was filed. See Docket No. 20 at 14 (citations omitted). Plaintiffs’
4

As explained above, the “adjusting” is part of the abstract concept. Accordingly, it would not be more favorable to
Plaintiff to construe “adjusting” as a limitation for the purposes of this motion.

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response does not dispute that such device identities were well-known; instead, Plaintiffs assert
that asking whether particular claim elements are within the prior art conflates the eligibility
inquiry with the novelty inquiry of §§ 102 and 103. The Court will address this argument below.
The third step of the method depends on whether the device identity is already “on a
record.” If it is, the third step is “allowing the digital product to be used on the given device.”
This first option is routine. If the device is recognized as one which is approved for access (this
step) pursuant to a valid license (previous step), then access is granted. Moreover, the subelements are all generic; “digital product” and “given device” have already been addressed, and
“a record” is a generic record. Nor does the combination of a “digital product,” a “device” and a
“record” contain an inventive concept.
Allowing the digital product to be used “in response to the device identity already being
on a record” is the last step of the method in embodiments in which the device is recognized. In
other embodiments of the method, the device identity is not “on the record,” and claim 22
prescribes three additional steps that culminate in allowing the digital product to be used on the
given device. These steps also fail to provide an inventive concept.
The first additional step, “setting the allowed copy count to a first upper limit for a first
time period, the allowed copy count corresponding to a maximum number of devices authorized
to use the digital product,” contains no inventive concept. “Setting the allowed copy count to a
first upper limit for a first time period” does not provide a meaningful limitation on the concept
of time-adjustable licenses because a time-adjustable license, which by definition has more than
one copy count in more than one time period, necessarily has a “first upper limit for a first time
period.” The remainder of the limitation defines “allowed copy count” as “a maximum number
of devices authorized to use the digital product.” The allowed copy count is a feature of the

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time-adjustable license and its definition describes, but does not limit, the abstract concept. See
’960 Patent, col. 13:33–35 (explaining that “the license compris[es] at least one allowed copy
count . . . .”).
The second additional step, “calculating a device count corresponding to total number of
devices already authorized for use with the digital product,” does not contain an inventive
concept. Like the first additional step, most of its language is definitional, providing that “device
count” means the “total number of devices already authorized for use with the digital product.”
The remainder, “calculating a device count,” is an information-gathering step, which does not
provide an inventive concept. See Elec. Power Group LLC v. Alstom S.A., 830 F.3d 1350, 1353–
54 (Fed. Cir. 2016).
The third additional step, “when the calculated device count is less than the first upper
limit, allowing the digital product to be used on the given device,” also lacks an inventive
concept for the same reasons as allowing the digital product to be used “in response to the device
identity already being on a record.” Allowing the marginal authorization when fewer than the
maximum allowable number of devices are authorized is not inventive.
The entirety of the method as a combination of steps5 does not contain an inventive
concept. The method can be summarized as: receiving an access request for a licensed digital
product, verifying the license, checking to see if the device is authorized and then either granting
access if the device is already authorized or, if not, granting access after ensuring that the number
of presently authorized devices is less than the number that is permitted to be authorized. This
amounts to no more than instructions to implement the time-adjustable license on a computer and

5

The specification of the ’960 Patent states, “The accompanying method claims present elements of the various
steps in sample order, and are not meant to be limited to the specific order or hierarchy presented.” ’960 Patent, col.
11:36–39. Any inventive concept must therefore be found in the combination of steps, but not in their order.

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cannot rescue the patent eligibility of claims 1, 22 or 25. In sum, the independent claims of the
’960 Patent are drawn to patent-ineligible subject matter.
Dependent Claims
Having concluded that the independent claims of the ’960 Patent are drawn to ineligible
subject matter, the Court now analyzes the dependent claims. There are twenty-two dependent
claims in the ’960 Patent, of which twenty (claims 2–21) depend from claim 1 and recite
systems, and two (claims 23–24) depend from claim 22 and recite methods.
Defendants argue that “[n]one of the dependent claims add anything of ‘practical
significance to the underlying abstract idea’ that would otherwise salvage the patentability of
those claims.” Docket No. 20 at 15 (citing Ultramercial, 772 F.3d at 716). Specifically,
Defendants argue that dependent claim 2 is not inventive because limiting the digital product to
software only specifies the nature of the licensed product. Id. (citation omitted). Defendants
assert that claim 3 adds nothing inventive to the “verify” step of claim 1 because it merely
defines license data as “information that may be used to verify whether the license for the digital
product is valid.” Id. (citation omitted). With respect to claim 4, Defendants state that a
database is a well-known generic structure for storing information.

Id. (citation omitted).

Defendants state that “claims 5, 6, 10, 11 and 15 define a time period as a number of days and
recite specific number of days for the time periods. Dependent claims 9, 14, 23 and 24 recite
repeating the functions of setting a limit and calculating a device count in independent claim 1
after expiration of a time period.” Id. at 15–16. Defendants argue that “claims 7, 12, and 16
recite the function of sending a warning when a limit has been reached (a well-known generic
business practice) by sending messages (a generic function of computers).” Id. at 16 (citation
omitted). Defendants further argue that “[d]ependent claims 8, 13, and 17 recite denying access

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when a limit has been exceeded, another well-known generic business practice . . . .” Id.
Finally, Defendants state that “claims 18–21 also limit the device identity to a unique identity
based on user-configurable and non-user configurable parameters of the device, and a
cryptographic hash of those parameters.” Id. Defendants argue those claims do not contain an
inventive concept because the claimed identification techniques were known long before the
filing of the ’960 Patent. Id.
Plaintiffs respond that the dependent claims recite additional claim-specific inventive
concepts. Docket No. 26 at 15. Plaintiffs assert that Defendants’ approach to the dependent
claims is insufficient. Id. at 15–16. Plaintiffs specifically characterize Defendants’ approach to
claims 9, 14, 23 and 24 as “internally consistent.” Id. at 16. Plaintiffs argue that “while Claim 1
requires executable code to ‘verify that a license data’ itself is valid, Claim 3 further defines and
meaningfully limits the ‘license data’ as further comprising ‘information’ that may be used to
separately ‘verify whether the license’ is valid.” Id. (emphasis in original). Plaintiffs argue that
Defendants’ allegations that claim 7–8, 12–13 and 16–17 recite nothing more than “well-known
generic business practice” are unsupported by evidence and improperly conflate the § 101 and §
103 inquiries. Id. Plaintiffs also argue that Defendants’ arguments with respect to Claims 18–
21 improperly conflate the § 101 and § 103 inquiries. Id. at 17. Finally, Plaintiffs state, “The
only expressed challenge to dependent Claims 5, 6, 10, 11, and 15 is that they allegedly ‘define a
time period as a number of days and recite specific numbers of days for the time periods.’
Clearly, more is required to overcome the presumption of eligibility by clear and convincing
evidence.” Id.
As a preliminary matter, Plaintiffs are incorrect that Defendants’ Motion conflates the §
101 eligibility inquiry with the § 103 obviousness inquiry. Plaintiffs are correct that merely

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finding a claim element within the prior art does not, by itself, dispose of the § 101 inquiry, and a
determination that a claim is drawn to ineligible subject matter should not turn only on the
finding that one or more claim elements are within the prior art. However, the “pragmatic
analysis of § 101 is facilitated by considerations analogous to those of §§ 102 and 103 as applied
to the particular case.” Internet Patents, 790 F.3d at 1347. “Courts have found guidance in
deciding whether the allegedly abstract idea (or other excluded category) is indeed known,
conventional, and routine, or contains an inventive concept, by drawing on the rules of
patentability.” Id. A § 101 inquiry properly relies on intrinsic evidence concerning the prior art
in the context of determining whether a claim element is known (i.e., so well-known as to be
conventional), conventional, routine, or contains an inventive concept.6 Although the § 101 and
§ 103 inquiries may rely on similar tools (i.e., references showing claim elements within the
prior art), they are distinct and are treated as such herein.
The § 101 inquiry here demonstrates that the dependent claims of the ’960 Patent do not
contain inventive concepts.
With respect to claims 2 and 4,7 Defendants are correct that neither limiting the digital
product to “software” nor limiting the record to “an authorization database” adds an inventive
concept to the claims because they are generic digital products and records, respectively.
Accordingly, claims 2 and 4 are drawn to ineligible subject matter.
Claim 3 adds to claim 1 the requirement that “the license data comprises information that
may be used to verify whether the license for the digital product is valid.” For purposes of this
motion, the Court adopts Plaintiffs’ construction of claim 3 under which “verify[ing] that a
6

The court may consider, on motions to dismiss, matters of public record appropriate for judicial notice. See
Integrated Technological Sys., Inc. v. First Internet Bank of Indiana, 2017 WL 631195, at *2 (E.D. Tex. Jan 30,
2017).
7

Plaintiffs make no particularized arguments with respect to claims 2 or 4.

Page 17 of 21

license data” is valid is a separate step from “verify[ing] whether the license” is valid. In any
event, the license data is not an element of the system of claim 1; rather, claim 1 assumes the
license data is present, and the claimed system must only verify its validity. In Plaintiffs’ view,
the claimed system need not verify that the license itself is valid because this is a separate step
from verifying that a license data is valid.

Claim 3 limits the “license data” to data that

comprises enough or the kind of data that might be used to verify the validity of the license. This
is not inventive because it merely states what kind of data is used in the validation process
whether or not that process includes an extra step. Accordingly, claim 3 is drawn to ineligible
subject matter.
Claims 5, 6, 10, 11 and 15 are directed to defining a number of days for the first, second
and third time periods. These claims limit the abstract concept of a time-adjustable license to a
subset of abstract concepts (i.e., only licenses having particular features or characteristics) rather
than limiting the methods or systems for implementing those licenses. Accordingly, claims 5, 6,
10, 11 and 15 do not add inventive concepts, and they are all drawn to ineligible subject matter.
Claims 7, 12 and 16 are directed to warning a user when the calculated device count is
equal to the upper limit. Specifically, the claims require that the warning be sent to the device
being used to access the digital product. In cases in which the involvement of a computer is
otherwise too limited to rescue the eligibility of the claims, the claims are not rescued by the
addition of a limitation that the computer sends information over a network. buySAFE, 765 F.3d
at 1355 (discussing Alice and also citing CyberSource Corp. v. Retail Decisions, Inc., 654 F.3d
1366, 1370 (Fed. Cir. 2011)). Relaying information a computer generates to another device or
user is a generic function of computers. See id. Accordingly, claims 7, 12 and 16 are also drawn
to ineligible subject matter.

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Claims 8, 13 and 17 are all directed to denying authorization when the calculated device
count exceeds the upper limit of the copy count. Denying authorization when the calculated
device count exceeds the upper limit of the copy count is the logical alternative to granting
authorization when the device count is less than the upper limit. This does not meaningfully
limit the concept of the time-adjustable license because denying access to devices that exceed the
currently-enforced limit is a generic way of implementing such a limit, which is itself a feature
of the abstract time-adjustable license. In other words, the additional limitations recited in
claims 8, 13 and 17 still do no more than instruct the reader to implement the time-adjustable
license on a computer. These claims are also drawn to patent-ineligible subject matter.
Claims 9, 14, 23 and 24 are drawn to establishing second and third upper limits on the
copy count for second and third periods, respectively. As discussed above, these limitations
describe the license to be implemented rather than a system to implement a license. Because the
additional limitations do not add more than instructions to implement the time-adjustable license
on a computer, claims 9, 14, 23 and 24 are also drawn to ineligible subject matter.
Finally, claims 18–21 modify the “device identity” limitation of claim 1. Claim 18
requires that “the device identity comprises unique device identifying information.”

The

specification of the ’960 Patent states that “unique device identifying information may comprise
at least one user-configurable parameter and/or at least one non-user-configurable parameters of
the given device.” ’960 Patent, col. 9:22–24. Claims 19–21 depend from claim 18. Claim 19
further requires that the “unique device identifying information comprises at least one userconfigurable parameter and at least one non-user-configurable parameter of the device.” Claim
20 requires that the “device identity is generated by utilizing at least one irreversible
transformation of the at least one user-configurable and the at least one non-user-configurable

Page 19 of 21

parameters of the given device.” Finally, claim 21 requires that “the device identity is generated
by utilizing a cryptographic hash function on the at least one user-configurable and the at least
one non-user-configurable parameters of the given device.” Defendants provide evidence in the
form of United States patents, one of which is incorporated by reference in its entirety into the
specification of the ’960 Patent, that the claimed techniques for generating a unique device
identity were well-known in the art by the priority date of the ’960 Patent.8 The Court finds that
the claimed techniques for generating a device identity were routine and conventional in the
industry at the time of patenting. Thus, the use of the claimed techniques to generate device
identities is not inventive, nor is the combination of these techniques with the remaining
limitations of claim 1. Accordingly, claims 18–21 are also drawn to ineligible subject matter.
In sum, the claims of the ’960 Patent instruct the person of ordinary skill to implement
the time-adjustable license using a computer. “Stating an abstract idea while adding the words
‘apply it with a computer’ ” is “not enough for patent eligibility.” Alice, 134 S. Ct. at 2358
(internal quotation omitted). Accordingly, the claims of the ’960 Patent are directed to patentineligible subject matter.
CONCLUSION
For the reasons listed above, the Court finds that all claims of the ’960 Patent are drawn
to ineligible subject matter under 35 U.S.C. § 101. Accordingly, it is
ORDERED that Defendants’ Motions to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(6) for
Lack of Patentable Subject Matter Under 35 U.S.C. § 101 are hereby GRANTED;9 and

8

Because the patents Defendants provide are incorporated by reference into the specification of the ’960 Patent, the
Court finds them sufficiently part of the intrinsic record to be considered on this Motion to Dismiss. See supra, n.6.
9

Case No. 2:16-cv-570, Docket No. 20; Case No. 2:16-cv-571, Docket No. 14; Case No. 2:16-cv-572, Docket No.
16; Case No. 2:16-cv-573, Docket No. 14; Case. No. 2:16-cv-574, Docket No. 15 (GRANTED-IN-PART and
DENIED-IN-PART as described above).

Page 20 of 21

ORDERED that all claims asserted by Plaintiffs in Case Nos. 2:16-cv-570, 2:16-cv-571,
2:16-cv-572, 2:16-cv-573 and 2:16-cv-574 are hereby DISMISSED WITH PREJUDICE.
SIGNED this 20th day of March, 2017.

____________________________________
ROBERT W. SCHROEDER III
UNITED STATES DISTRICT JUDGE

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