Tech Pharmacy Services, LLC v. Alixa Rx LLC et al

Filing 280

MEMORANDUM OPINION AND ORDER re 197 Amended SEALED MOTION for Partial Summary Judgment that the Patents in Suit are Invalid Under 35 U.S.C. § 101 filed by Golden Gate National Senior Care, Fillmore Strategic Investors, LLC, Fil lmore Strategic Management, LLC, Fillmore Capital Partners, LLC, Alixa Rx LLC. Defendants Amended Motion for Partial Summary Judgment That the Patents in Suit are Invalid Under 35 U.S.C. § 101 (Dkt. #197) is DENIED. Signed by Judge Amos L. Mazzant, III on 7/24/17. (cm, )

United States District Court
EASTERN DISTRICT OF TEXAS
SHERMAN DIVISION

TECH PHARMACY SERVICES, LLC
v.
ALIXA RX LLC, GOLDEN GATE
NATIONAL SENIOR CARE LLC d/b/a
GOLDEN LIVINGCENTERS, FILLMORE
CAPITAL PARTNERS LLC, FILLMORE
STRATEGIC MANAGEMENT LLC, and
FILLMORE STRATEGIC INVESTORS
LLC

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Civil Action No. 4:15-CV-00766
Judge Mazzant

MEMORANDUM OPINION AND ORDER
Pending before the Court is Defendants’ Amended Motion for Partial Summary
Judgment That the Patents in Suit are Invalid Under 35 U.S.C. § 101 (Dkt. #197).

After

reviewing the relevant pleadings, the Court denies Defendants’ motion.
BACKGROUND
Tech Pharmacy Services, LLC (“Tech Pharmacy”) asserts Defendants infringed twelve
claims from five patents that share a common specification. Specifically, Tech Pharmacy asserts
Claims 7, 9, and 10 from U.S. Patent No. 7,698,019 (the “’019 Patent”); Claims 5, 7, and 8 from
U.S. Patent No. 8,209,193; Claims 1, 2, and 6 from U.S. Reissue Patent No. RE44,127; Claims 1
and 4 from U.S. Patent No. 8,612,256; and Claim 1 from U.S. Patent No. 8,954,338 (collectively,
the “patents-in-suit”).

The patents-in-suit articulate a system and method for enhanced

distribution of pharmaceuticals in long-term care facilities.
On March 20, 2017, Defendants filed the present motion for summary judgment (Dkt.
#197). On April 3, 2017, Tech Pharmacy filed a response (Dkt. #225). On April 7, 2017,

Defendants filed a reply (Dkt. #235). On April 12, 2017, Tech Pharmacy filed a sur-reply (Dkt.
#240).
LEGAL STANDARD
The purpose of summary judgment is to isolate and dispose of factually unsupported
claims or defenses. Celotex Corp. v. Catrett, 477 U.S. 317, 323–24 (1986). Summary judgment
is proper under Rule 56(a) of the Federal Rules of Civil Procedure “if the movant shows that
there is no genuine dispute as to any material fact and the movant is entitled to judgment as a
matter of law.” Fed. R. Civ. P. 56(a). A dispute about a material fact is genuine when “the
evidence is such that a reasonable jury could return a verdict for the nonmoving party.”
Anderson v. Liberty Lobby Inc., 477 U.S. 242, 248 (1986). Substantive law identifies which
facts are material. Id. The trial court “must resolve all reasonable doubts in favor of the party
opposing the motion for summary judgment.” Casey Enters., Inc. v. Am. Hardware Mut. Ins.
Co., 655 F.2d 598, 602 (5th Cir. 1981).
The party seeking summary judgment bears the initial burden of informing the court of its
motion and identifying “depositions, documents, electronically stored information, affidavits or
declarations, stipulations (including those made for purposes of the motion only), admissions,
interrogatory answers, or other materials” that demonstrate the absence of a genuine issue of
material fact. Fed. R. Civ. P. 56(c)(1)(A); Celotex, 477 U.S. at 323. If the movant bears the
burden of proof on a claim or defense for which it is moving for summary judgment, it must
come forward with evidence that establishes “beyond peradventure all of the essential elements
of the claim or defense.” Fontenot v. Upjohn Co., 780 F.2d 1190, 1194 (5th Cir. 1986). Where
the nonmovant bears the burden of proof, the movant may discharge the burden by showing that
there is an absence of evidence to support the nonmovant’s case. Celotex, 477 U.S. at 325; Byers

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v. Dall. Morning News, Inc., 209 F.3d 419, 424 (5th Cir. 2000). Once the movant has carried its
burden, the nonmovant must “respond to the motion for summary judgment by setting forth
particular facts indicating there is a genuine issue for trial.” Byers, 209 F.3d at 424 (citing
Anderson, 477 U.S. at 248–49). A nonmovant must present affirmative evidence to defeat a
properly supported motion for summary judgment. Anderson, 477 U.S. at 257. Mere denials of
material facts, unsworn allegations, or arguments and assertions in briefs or legal memoranda
will not suffice to carry this burden.

Rather, the Court requires ‘“significant probative

evidence’” from the nonmovant to dismiss a request for summary judgment. In re Mun. Bond
Reporting Antitrust Litig., 672 F.2d 436, 440 (5th Cir. 1982) (quoting Ferguson v. Nat’l Broad.
Co., 584 F.2d 111, 114 (5th Cir. 1978)). The Court must consider all of the evidence but “refrain
from making any credibility determinations or weighing the evidence.”

Turner v. Baylor

Richardson Med. Ctr., 476 F.3d 337, 343 (5th Cir. 2007).
ANALYSIS
Defendants move for summary judgment, arguing the patents-in-suit are invalid because
they are directed to an abstract idea and lack an inventive concept.
Whoever invents or discovers any new and useful process, machine, manufacture, or
composition of matter, or any new and useful improvement thereof, may obtain a patent therefor,
subject to the conditions and requirements of this title.” 35 U.S.C. § 101. The Supreme Court
has “long held that this provision contains an important implicit exception: Laws of nature,
natural phenomena, and abstract ideas are not patentable.” Alice Corp. Pty. v. CLS Bank Int’l,
134 S. Ct. 2347, 2354 (2014) (quoting Ass’n for Molecular Pathology v. Myriad Genetics, Inc.,
133 S. Ct. 2107, 2116 (2013)).

Monopolization of these “basic tools of scientific and

technological work” through the grant of a patent “might tend to impede innovation more than it

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would tend to promote it, thereby thwarting the primary object of the patent laws.” Id. (first
quoting Myriad, 133 S. Ct. at 2116; and then quoting Mayo Collaborative Servs. v. Prometheus
Labs., Inc., 132 S. Ct. 1298, 1923 (2012)).
The Supreme Court has set forth a framework for determining patent eligibility. Id. at
2355. First, the court determines whether the claims at issue are directed towards one of the
three patent-ineligible concepts. Id. If so, then the court then asks “[w]hat else is there in the
claims before us?” Id. (alteration in original) (quoting Mayo, 132 S. Ct. at 1296–97). In
answering the second question, the court considers “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.” Id. The second step can be characterized as a
search for an “inventive concept”—“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. (alteration in original) (quoting Mayo, 132 S. Ct. at 1294).
Defendants argue the asserted claims are directed to the abstract idea of automating wellestablished manual pharmacy activities using already known technologies.

According to

Defendants, the asserted claims are factually analogous to Becton, Dickson v. Baxter
International, Inc., 127 F. Supp. 3d 687 (W.D. Tex. 2015), aff’d, 639 F. App’x 652 (Fed. Cir.
2016).

In Becton, the Federal Circuit analyzed a claim directed to a “method for remote

supervision and verification of pharmacy functions that are performed by a non-pharmacist
person.”

The Federal Circuit noted that “[a]fter stripping away the technicalisms and

superfluous verbiage from the claims’ language, it is evident that the gist of the claims, and
indeed the entire aim of the patent, involves a pharmacist supervising and verifying the work of a
nonpharmacist to ensure the work’s accuracy.” Id. at 692. To this end, Defendants contend that

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when the “technicalisms and superfluous verbiage” is stripped away from the asserted claims,
there is nothing more than the abstract idea of ordering, storing, and distributing
pharmaceuticals—tasks that were previously performed by humans.
Tech Pharmacy responds that Defendants’ proposed alleged abstract idea ignores the role
of remote pharmaceutical storage and electronic dispensing machines and the specific operations
recited in the asserted claims, such as individually retrieving, loading, packaging, and dispensing
pharmaceuticals into a separate and removable container. Tech Pharmacy further responds that
Defendants’ ignore the software components developed to control remotely multiple packaging
and dispensing machines from a central hub pharmacy. Taking these elements together, Tech
Pharmacy recognizes the asserted claims are not an abstract idea. Instead, the asserted claims are
directed to a system of remote pharmaceutical storage, packaging, and electronic dispensing
machines positioned in a plurality of remote long-term care facilities to individually retrieve,
load, package, and dispense specified pharmaceuticals based on patient-specific instructions.
The Court agrees with Defendants and finds the asserted claims are directed to the
abstract idea of ordering, storing, and distributing pharmaceuticals. Much like the claimed idea
in Becton, the asserted claims here represent a system and method that could be performed by a
human, without the assistance of a communication network, software, or a server. Claim 7 of
’019 Patent serves an example:
A system of enhanced pharmaceutical operation services for a long-term
facility, the system comprising:
a pharmacy group management computer including memory to store data
therein, the pharmacy group management computer being positioned to manage
and control a plurality of pharmaceutical storage and electronic dispensing carts
each positioned remote therefrom to thereby define a long-term care facility
pharmacy group management server;
long-term care facility pharmacy management software associated with
the long-term care facility pharmacy group management server to manage
pharmaceutical operations in a plurality of long-term care facilities, to process
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distribution of pharmaceuticals stored in the dispensing carts during preselected
dispending time periods, and to perform a pharmaceutical utilization review for
individual patients at a long-term care facility responsive to added prescriptions
so that each respective dispensing cart includes new approved prescriptions prior
to the next preselected time periods;
a plurality of pharmaceutical storage and electronic dispensing carts each
positioned in a separate long-term care facility remote from the long-term care
facility pharmacy group management server and in communication with the longterm care facility pharmacy group management server to store a plurality of
pharmaceuticals therein and to individually retrieve at least one pharmaceutical of
the plurality of pharmaceuticals stored in the pharmaceutical storage and
dispensing cart, load the at least one pharmaceutical of the plurality of
pharmaceuticals into one of a plurality of disposable individual patient dosing
packages, package the at least one pharmaceutical, and dispense the loaded and
packaged one of the plurality of individual patient dosing packages into a separate
and removable container associated with the cart for use by authorized health care
personnel located at the long-term care facility; and
a plurality of pharmaceutical prescription document processors each
positioned in a separate long-term care facility remote from and in
communication with the long-term pharmacy group management server to
process a pharmaceutical prescription order from the long-term care facility to be
delivered to the long-term care facility.
’019 Patent at 22:50–23:26 (emphasis added). In other words, Claim 7 recites components, such
as a computer, software, dispensing carts, and document processors, to order, store, and
distribute pharmaceuticals. A human can perform these actions without the recited components.
The Federal Circuit and the Supreme Court have found certain methods of organizing human
activity to be abstract. See Bilski v. Kappos, 561 U.S. 593, 612 (2010) (determining a method for
hedging against the financial risk of price fluctuations was abstract); Alice, 134 S. Ct. at 2356
(determining claims directed to settlement risk mitigation were abstract); Planet Bingo LLC v.
VKGS LLC, 576 F. App’x 1005, 1008 (Fed. Cir. 2014) (determining a system for managing a
game of Bingo was abstract); see also DietGoal Innovations v. Bravo Media LLC, 599 F. App’x
956, 956 (Fed. Cir. 2015) (affirming the district court’s determination that meal planning was an
abstract idea).

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Although Plaintiff argues that Defendants overgeneralize the asserted claims and fail to
take into account specific components and operations, the Federal Circuit has stated that “the
addition of merely novel or non-routine components to the claimed idea [does not] necessarily
turn[] an abstraction into something concrete” as opposed to an abstract idea. Ultramerical, Inc.
v. Hulu, LLC, 772 F.3d 709, 715 (Fed. Cir. 2014).

“In any event, any novelty in the

implementation of the idea is a factor to be considered only at the second step of the Alice
analysis,” to which the Court now turns. Id.
The second step of the Alice analysis requires the Court to consider whether the asserted
claims, both individually and as an ordered combination, include an inventive concept “that
amounts to more than a patent upon the [ineligible concept] itself.” Alice, 134 S. Ct. at 2355
(internal quotation marks and citation omitted). “[A]n invention is not rendered ineligible for
patent simply because it involves an abstract concept.” Id. at 2354. Rather, application of such
concepts “to a new and useful end . . . remain eligible for patent protection.” Id. (citation
omitted). The Court concludes the asserted claims set forth elements that transform the claimed
subject matter into an inventive concept, particularly when viewed in light of what was
considered conventional at the time of the invention. The common specification of the patentsin-suit indicates little has been done to improve storage and distribution of medication in longterm care facilities. ’019 Patent at 2:1–5. It is increasingly important to reduce the risk of error
in dispensing medication in such facilities. Id. at 2:16-19. Thus, the asserted claims aim to
“streamline the medication distributing procedures for medical personnel working with the longterm care facilities to help make the procedures more efficient and easier.” Id. at 2:28–30. To
accomplish this, the specification describes system, software, and methods to “reduce[]
medication shortages, reduce[] medication preparation time, reduce[] medication waste,

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enhance[] documentation, and enhance[] regulatory acceptance.” Id. at 2:26–33. As an ordered
combination, the asserted claims disclose a system and method that are improvements for
pharmaceutical operations in long-term care facilities, “which are significantly different in
operation, personnel structure, and physical structure than hospitals, physician offices, and home
care.” Id. at 1:56–57.
There is a presumption that a patent is valid. Ruiz v. A.B. Chance Co., 234 F.3d 654, 662
(Fed. Cir. 2000). Defendants bear the burden of proving invalidity by clear and convincing
evidence, and the burden never shifts to Tech Pharmacy to prove validity.

The Court is

unconvinced Defendants have met their burden of showing the patents-in-suit are invalid by
clear and convincing evidence.
CONCLUSION

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Accordingly, it is therefore ORDERED that Defendants’ Amended Motion for Partial
Summary Judgment That the Patents in Suit are Invalid Under 35 U.S.C. § 101 (Dkt. #197) is
DENIED.
SIGNED this 24th day of July, 2017.

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AMOS L. MAZZANT
UNITED STATES DISTRICT JUDGE

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