Island Intellectual Property LLC v. TD Ameritrade, Inc. et al

Filing 193

ORDER ADOPTING REPORT AND RECOMMENDATIONS for 184 Report and Recommendations, Islands objections (Dkt. No. 189) are OVERRULED. Defendants motion for summary judgment (Dkt. No. 92) is GRANTED. Signed by District Judge Rodney Gilstrap on 11/17/2022. (ch, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
MARSHALL DIVISION
ISLAND INTELLECTUAL PROPERTY
LLC,
Plaintiff,
v.
TD AMERITRADE, INC., TD
AMERITRADE CLEARING, INC., TD
AMERITRADE TRUST COMPANY, TD
AMERITRADE HOLDING CORP., THE
CHARLES SCHWAB CORPORATION,
Defendants.

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CIVIL ACTION NO. 2:21-CV-00273-JRGRSP

ORDER
Before the Court is the Report and Recommendation (“R&R”) of the Magistrate Judge
regarding Defendants’ Motion for Summary Judgement of Invalidity under § 101. (Dkt. No. 184.)
Plaintiff Island Intellectual Property LLC (“Island”) objects to the R&R which recommends to this
Court that it grant Defendants’ motion for summary judgment that certain claims of the ’286, ’551,
and ’821 Patents are ineligible under § 101.1 Having reviewed Island’s objections, and having
fully considered the R&R de novo, the Court finds no reason to reject or modify the Magistrate
Judge’s recommended disposition. See Fed. R. Civ. P. 72(b)(3); 28 U.S.C. § 636(b)(1)(C).
Contrary to Island’s objections, the conclusion of the Magistrate Judge’s R&R that the
claims as issue are directed to an abstract idea under Alice step one and contain no inventive
concept under Alice step two is correct. Claim 18 of the ’551 Patent is directed to the abstract idea
of “aggregating and managing a plurality of funds to circumvent federal banking regulations and

Island has agreed to limit its asserted claims to claim 18 of the ’551 Patent, claims 19 and 25 of the ’821 Patent, and
claim 1 of the ’286 Patent. (Dkt. No. 182.)
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capitalizing on high interest rates associated with FDIC accounts through the use of generic
computer functionality,” which are “fundamental economic and accounting practices consistently
deemed abstract by the Supreme Court and the Federal Circuit.” (Dkt. No. 184 at 5–7.) Under
Alice step one, the Court examines the claims in their entirety to ascertain whether their character,
as a whole, is directed to an abstract idea. While this necessarily involves some distillation, the
Court must be careful not to express the claim’s focus at an unduly “high level of abstraction . . .
untethered from the language of the claims,” but rather at a level consonant with the level of
generality or abstraction expressed in the claims themselves. Enfish LLC v. Microsoft Corp., 822
F.3d 1327, 1347 (Fed. Cir. 2016). The Court finds no error in the R&R’s characterization of claim
18 of the ’551 Patent as directed to the fundamental economic activity of aggregate account
management, and finding that Island has not identified a specific means that improves computer
functionality or solves a problem specifically arising from computers.
In its objection, Island asserts that the R&R fails to conduct the requisite two-step analysis
under Alice for the ’286 Patent because it did not cite the “Field of Invention” in the ’286 Patent
and used broad overgeneralizations. (Dkt. No. 189 at 3–5.) However, the specification “cannot
be used to import details from the specification if those details are not claimed,” even in the § 101
analysis. Ericsson Inc. v. TCL Commc’ns Tech. Holdings Ltd., 955 F.3d 1317, 1328–29 (Fed. Cir.
2020).

Even considering the “Field of Invention” in the ’286 Patent, which discusses

“computerized account management techniques . . . by which financial entities may offer accounts
allowing unlimited withdrawals” (which is not claimed), and “the deposited funds earn interest at
rates that can be flexibly assigned and are covered by deposit insurance” (Dkt. No. 189 at 3), Island
does not explain how such consideration results in a finding that the claim is directed to eligible
subject matter.

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The R&R explains why the analysis with respect to claim 18 of the ’551 Patent applies
with equal force to the remaining claims in suit, including claim 1 of the ’286 Patent. (Dkt. No.
184 at 9–10.) It states that the additional limitations recited in claim 1 of the ’286 Patent “are all
fundamental economic and accounting activities deemed abstract . . . .” (Id. at 10.) Thus, the
focus of claim 1 of the ’286 Patent, considering its character as a whole, remains on fundamental
economic and accounting activities that are implemented by generic computer components.
Similarly, the focus of claim 19 of the ’821 Patent is also on fundamental economic practices, with
only inconsequential permutations that do not meaningfully add to the eligibility analysis. (Id. at
9–10.) Claim 25’s invocation of the Internet likewise does not save the claim from abstraction.
The R&R addresses the claims in suit under Alice step two by finding that claim 18 of the
’551 Patent lacks an inventive concept. (Id. at 8–9.) The R&R then explains why this analysis
also applies to the claims of the remaining patents, addressing the limitations of claim 1 of the ’286
Patent that differ from claim 18 of the ’551 Patent, and noting that Island does not present any
§ 101 eligibility argument specific to distinguishing the ’821 Patent from the ’551 Patent. (Id. at
9–10.)
At Alice step two, the Court searches for “an inventive concept—i.e., 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.” Alice Corp. v. CLS Bank Int’l,
573 U.S. 208, 217–18 (2014). “What is needed is an inventive concept in the non-abstract
application realm.” SAP Am., Inc. v. InvestPic, LLC, 898 F.3d 1161, 1168 (Fed. Cir. 2018); see
also Synopsys, Inc. v. Mentor Graphics Corp., 839 F.3d 1138, 1151 (Fed. Cir. 2016) (“[A] claim
for a new abstract idea is still an abstract idea.”). The inquiry into the inventive concept “may”
involve factual determinations about whether a claim element or combination of elements is well-

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understood, routine, and conventional. Berkheimer v. HP Inc., 881 F.3d 1360, 1368 (Fed. Cir.
2018). However, ultimately “whether a claim recites patent eligible subject matter is a question
of law which may contain underlying facts.” Id.
The R&R correctly applied these principles in finding that claim 18 of the ’551 Patent does
not contain an inventive concept, for example, citing SAP Am., Inc. v. InvestPic LLC, where the
Federal Circuit determined that “[n]o matter how much of an advance in the finance field the
claims recite, the advance lies entirely in the realm of abstract ideas, with no plausibly alleged
innovation in the non-abstract application realm.” 898 F.3d at 1163. Like the alleged innovation
in the InvestPic patent, which was found to be an innovation in ineligible subject matter, the
purported innovation in “cash management” of the ’551 Patent concerns the abstract idea of
fundamental economic and accounting activities itself, which is not sufficient to confer eligibility.
See id. at 1170. Island’s assertions that its claims “solve[] a difficult technical problem” do not
address the fact that it does not point to a specific improvement to computer functionality. (See
Dkt. No. 184 at 8–9.) The R&R distinguishes cases relied on by Island where improvements were
directed to non-abstract concepts. (Id. at 9.)
Put simply, “[t]he abstract idea itself cannot supply the inventive concept, ‘no matter how
groundbreaking the advance.’” Trading Techs. Int’l, Inc. v. IBG LLC, 921 F.3d 1378, 1385 (Fed.
Cir. 2019). The R&R correctly found that claim 18 of the ’551 Patent does not contain an inventive
concept outside the realm of abstract ideas (Dkt. No. 184 at 8–9), and no amount of “overwhelming
evidence of unconventionality and inventiveness” from Island can change that. (Dkt. No. 189 at
8.) The R&R applies the same reasoning as the above to claim 1 of the ’286 Patent and notes that
its additional limitations of “determining and applying an interest rate to individual funds held in
aggregate,” “calculating the respective interest of each individual fund over a period of time,”

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“calculating the interest earned by the aggregate FDIC account over the same period of time,” and
“posting the interest earned by individual funds” are all fundamental economic and accounting
activities deemed abstract and do not provide any additional inventive concept. (Dkt. No. 184 at
9–10.) The ’286 Patent’s description of flexible interest allocation and aggregated deposit
accounts make clear that these claim elements lie entirely in the abstract realm of fundamental
economic and accounting activities. See ’286 Patent at 11:6–14:3, 19:7–21:60. Beyond that,
invocations of an “electronic database” or other steps performed “electronically” fall squarely
within Federal Circuit precedent finding generic computer components insufficient to add an
inventive concept to an otherwise abstract idea. See In re TLI Commc’ns LLC Patent Litig., 823
F.3d 607, 614 (Fed. Cir. 2016). Furthermore, general concepts about how to “make a process more
efficient . . . do[] not necessarily render an abstract idea less abstract.” Secured Mail Sols. LLC v.
Universal Wilde, Inc., 873 F.3d 905, 910 (Fed. Cir. 2017).
Island’s arguments relying on industry praise to demonstrate that the patents in suit perform
steps that are not well-known, routine, or conventional (Dkt. No. 114 at 30) are unavailing. As are
statements from the prosecution history and Island’s inventor and technical expert. (Dkt. No. 189
at 4–5.) The December 19, 2008 Notice of Allowance predates Alice and subsequent case law.
(Dkt. No. 124-32). Further, the examiner’s statements in the Notice of Allowance concern novelty,
but as the R&R recognizes, novelty is not relevant to the § 101 analysis. (Dkt. No. 184 at 8.)
Similarly, Island’s arguments regarding a New York court’s eligibility determination of
the ’286 and ’551 Patents, decided prior to Alice (Dkt. No. 189 at 5–7), do not compel reaching
that court’s same conclusion. The New York court’s observation in Island Intellectual Prop. LLC
v. Deutsche Bank AG that “[r]eading the claims, it is not difficult to conclude that their methods
would be impracticable but for significant and complex computer programming” (2012 WL

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386282 at *7) reinforce the notion that the only technical aspect of the claims relates to generic
computer functionality, not any technical issue outside the realm of abstract ideas.
In summary, the Magistrate Judge’s Report and Recommendation implemented a proper

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analysis under Federal Circuit law, and the Court finds no error in it.
Accordingly,
It is ORDERED:
Island’s objections (Dkt. No. 189) are OVERRULED.
The Magistrate Judge’s Report and Recommendation (Dkt. No. 184) is ADOPTED.
Accordingly, Defendants’ motion for summary judgment (Dkt. No. 92) is GRANTED.
So ORDERED and SIGNED this 17th day of November, 2022.

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RODNEY GILSTRAP
UNITED STATES DISTRICT JUDGE

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