EMG Technology, LLC v. Etsy, Inc.

Filing 60

ORDER ADOPTING REPORT AND RECOMMENDATIONS for 56 Report and Recommendations, overruling all objections, and granting 11 Motion to Dismiss filed by Etsy, Inc. Signed by Judge Robert W. Schroeder, III on 3/1/17. (mjc, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
TYLER DIVISION
EMG TECHNOLOGY, LLC,
Plaintiff,
v.
ETSY, INC.,
Defendant.

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CIVIL ACTION NO. 6:16-CV-00484RWS-JDL

ORDER ADOPTING REPORT AND RECOMMENDATION
OF UNITED STATES MAGISTRATE JUDGE
The above entitled and numbered civil action was referred to United States Magistrate
Judge John D. Love pursuant to 28 U.S.C. § 636. The Report and Recommendation of the
Magistrate Judge (Docket No. 56 (hereinafter, “R&R”)), which contains his recommendation for
the disposition of such action, has been presented for consideration. The Magistrate Judge
recommended granting Defendant Etsy Inc.’s Motion to Dismiss for Failure to State a Claim under
Fed. R. Civ. P. 12(b)(6) (Doc. No. 11), reasoning that the patents, U.S. Patent Nos. 6,600,497 (“the
’497 Patent”) and 7,194,698 (“the ’698 Patent”) (collectively, “the Asserted Patents”), are directed
toward ineligible subject matter under 35 U.S.C. § 101. R&R at 25. Plaintiff EMG Technology,
LLC (“Plaintiff”) filed objections to the Magistrate Judge’s Order (Docket No. 57 (hereinafter,
“Obj.”)). The Court reviews de novo the portions of the Magistrate Judge’s findings to which
Plaintiff has raised objections. 28 U.S.C. § 636 (b)(1).

Plaintiff objects to several “findings and legal conclusions” of the Magistrate Judge but
does not articulate specific reasons for those objections. 1 Obj. at 1–2. Plaintiff provides specific
arguments primarily on two grounds: (1) that the Magistrate Judge wrongly concluded that the
claims are abstract ideas; and (2) that the Magistrate Judge erred by concluding that the claims
lack inventive concepts. Id. at 2, 5. For the reasons that follow, Plaintiff’s objections are
OVERRULED.
Ground 1: Abstract Idea Analysis Under Alice Step-One
Plaintiff objects to the Magistrate Judge’s conclusion that the “claimed invention is
directed to an abstract idea of displaying information in a hierarchical tree format on a computer
screen.” Obj. at 2. Specifically, Plaintiff first argues that “[w]hile navigating the Internet involves
decision making, the ‘gist’ of the claims is not a decision tree, but a webpage interface to navigate
the Internet on an unconventional device, i.e., something other than a standard PC display.” Id. at
3. Second, Plaintiff argues that the Magistrate Judge mistakenly relied upon Apple, Inc. v.
Ameranth, Inc., 842 F.3d 1229 (Fed. Cir. 2016) because the claimed features in the Asserted
Patents (e.g., unique input, navigation matrix, client node) are not recited in the Amernath claims.
Obj. at 3–4. Third, Plaintiff argues that the Magistrate Judge erred in concluding that the claims
of the Asserted Patents broadly “preempt any specific solutions” to display and navigate
information on the Internet. Obj. at 4.

1

Plaintiff provides a bullet-list of sentences from the R&R to which it takes exception without providing further
information, such as:
•

“The related ’698 Patent also claims a similar invention, the only difference is that the information, which is
being displayed and navigated, pertains to advertisements.”
Obj. at 1 (quoting R&R at 13).
Presumably, Plaintiff objects to these sentences in that they contribute to the Magistrate Judge’s conclusion
that the Asserted Patents are invalid under Alice. Because Plaintiff’s objections cover, and the Court therefore analyzes
de novo, both steps of the Alice inquiry, Plaintiff’s unstated objections to the bullet-list of sentences are addressed in
response to Plaintiff’s stated objections, discussed below.

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Plaintiff’s first argues that the claims are directed to “a webpage interface to navigate the
Internet on an unconventional device” rather than “displaying information in a hierarchical tree
format on a computer screen.” In support of its argument, Plaintiff states that “the specification
discloses that non-standard devices [. . .] can navigate content on the Internet using a custom
browser.” Obj. at 3.
First, Plaintiff conflates what may be permitted by some embodiments of the claimed
invention with the invention as claimed. The claims of the ’497 Patent posit a multidimensional
navigation matrix (i.e. at least two “two-dimensional layer[s]” arranged along a third “depth”
dimension), which may be properly called a “hierarchical tree format.” ’497 Patent, claims 1, 9,
20. The claims of the ’698 Patent are directed to displaying Internet-derived content related to a
selected advertisement and “formatted for navigation with unique inputs” in response to receiving
a user selection of a displayed advertisement (i.e. using at least one layer of a multidimensional
hierarchical tree format). ’698 Patent, claims 1, 23, 45. This multidimensional navigation matrix
or hierarchical tree format is the focus of the Asserted Patents’ specification and claims.
Second, the Asserted Patents do not limit the display of the navigation matrix to
“unconventional device[s].” Rather, the Asserted Patents teach that the “client node” on which
the navigation occurs may be a generic personal computer in addition to a custom terminal device.
See ’497 Patent, col. 2:55–58 (“Content partners provide content to the information and services
hub in a specified format that facilitates its use by the client nodes 20, 22.”); Fig. 1 (“showing
custom browser node 22 as a generic personal computer”). Because the “custom browser node
22” and the “custom terminal device 20” may include generic personal computers in addition to
“unconventional device[s],” they are aptly categorized as “computers” without further specificity.
Accordingly, the Court concurs with the Magistrate Judge that the claims of the Asserted Patents

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are directed to the abstract concept of “displaying information in a hierarchical tree format on a
computer screen.”
Plaintiff’s second argument alleges that the Magistrate Judge mistakenly relied upon Apple,
Inc. v. Ameranth, Inc., 842 F.3d 1229 (Fed. Cir. 2016). Obj. at 3. Admitting that both sets of
claims involve a “graphical user interface,” Plaintiff distinguishes the instant claims from the
Ameranth claims by arguing that certain claimed features in the Asserted Patents (e.g., unique
input, navigation matrix, client node) are not recited in the Amernath claims. Ameranth is
instructive here because it involved a similar, albeit not identical, claimed invention, and it was
therefore not error for the Magistrate Judge to rely on Ameranth in analyzing the instant claims.
See Amdocs (Israel) Ltd. v. Openet Telecom, Inc., 841 F.3d 1288, 1294 (Fed. Cir. 2016)); Enfish,
LLC v. Microsoft Corp., 822 F.3d 1327, 1334 (Fed. Cir. 2016) (“[B]oth this court 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.”).
Moreover, the Magistrate Judge was correct to find that the instant claims are directed to
an abstract idea similar to the one to identified in Ameranth because the instant claims resemble
the claims in Ameranth. Plaintiff admits that the claims both here and in Amernath recite a
“graphical user interface” that displays information in a “generic hierarchical tree format.” Obj.
at 3. Because the Court has determined that the claims are directed to the hierarchical tree format,
the additional features cited by Plaintiff are more properly considered under step 2 of the Alice
inquiry. In sum, the Court agrees with the Magistrate Judge’s conclusion and finds no error in the
Magistrate Judge’s analysis under Alice step one.
Plaintiff third argues that the Magistrate Judge erred in concluding that the claims of the
Asserted Patents broadly “preempt any specific solutions” to display and navigate information on

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the Internet. Obj. at 4 (citing R&R at 9). The scope of preemption relates to Alice step two, and
the Court will consider Plaintiff’s argument in that context. Plaintiff’s argument regarding
preemption therefore does not disturb the Court’s finding under Alice step one that the claims are
directed to the abstract concept of “displaying information in a hierarchical tree format on a
computer screen.”
Ground 2: Inventive Concept Analysis Under Alice Step-Two
Before addressing the arguments Plaintiff advances under Ground 2, the Court addresses
Plaintiff’s preemption argument raised under Ground 1. While preemption may “signal patent
ineligible subject matter, the absence of complete preemption does not demonstrate patent
eligibility.” FairWarning IP, LLC v. Iatric Sys., Inc., 839 F.3d 1089, 1098 (Fed. Cir. 2016) (citing
Ariosa Diagnostics, Inc. v. Sequenom, Inc., 788 F.3d 1371, 1379 (Fed. Cir. 2015); see also OIP
Techs., Inc. v. Amazon.com, Inc., 788 F.3d 1359, 1362–63 (Fed. Cir. 2015) (holding claims do not
become “any less abstract” due to lack of complete preemption). Where “a patent’s claims are
deemed only to disclose patent ineligible subject matter under the Mayo framework, . . .
preemption concerns are fully addressed and made moot.” Id. Thus, even if the Court assumes
that the Asserted Patents do not preempt “all forms of navigating a computer network,” Obj. at 5,
the claims may yet be invalid under Alice. As explained below, that is the case here.
Plaintiff objects on the grounds that the Magistrate Judge erroneously concluded under
Alice step two that the claims lack inventive concepts. Obj. at 5. Plaintiff first argues that the
claims of the Asserted Patents are more similar to the claims in DDR Holdings, which the Federal
Circuit determined to be patent eligible, than the claims in Amernath. Id. at 6. Second, Plaintiff
argues that “[t]he Report also erred by concluding that ‘the specification does not place meaningful
limitation on the computer equipment to implement the claimed invention’ and ‘the claims . . .

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simply recite generic computer components to implement the abstract idea.’ ” Id. at 7 (citing R&R
at 19, 21). Finally, Plaintiff argues that it was error for the R&R to conclude that “[t]he dependent
claims of the Asserted Patents similarly add nothing of substance that would affect the patentability
of the claims under § 101.” Id. (citing R&R at 23–24).
Plaintiff’s first argument—that this case is more like DDR Holdings than Ameranth—is
without merit. In its Objections, Plaintiff compares parts of claim 35 of the ’698 Patent with parts
of claim 19 of U.S. Patent No. 7,818,399, which was analyzed in DDR Holdings. However, the
parts of the claim from DDR Holdings on which Plaintiff relies exclude limitations providing for
a “composite web page by an ‘outsource provider’ that incorporates elements from multiple
sources” including information from a second, linked web page and visual elements from a first,
host web page. See DDR Holdings, 773 F.3d at 1258–59. Because Plaintiff’s comparison does
not include the very features the Federal Circuit relied on in upholding the validity of the DDR
Holdings claims, see id. at 1259, Plaintiff’s comparison confirms rather than refutes that the instant
claims lack an inventive concept.
Plaintiff’s second argument seeks to refute that “the specification does not place
meaningful limitations on the computer equipment to implement the claimed invention” and “the
claims . . . simply recite generic computer components to implement the abstract idea.” Obj. at 7
(internal quotations omitted).

Plaintiff argues that the R&R improperly “focuses on the

conventional features to the exclusion of the unconventional features (e.g., displaying content on
a custom device in using a simplified interface).” Id. As explained above, displaying the
“simplified interface”—the hierarchical tree format—taught in the specification of the asserted
patents is the abstract idea, and the claims are not limited to “custom device[s].” Rather, as
described by the Magistrate Judge, the claims may be satisfied using only generic computer

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components.

Accordingly, the Magistrate Judge correctly found that the claims do not

meaningfully limit the abstract concept.
Finally, Plaintiff argues that the Magistrate Judge erred in concluding that the dependent
claims of the Asserted Patents add nothing to affect the patentability analysis under § 101. Obj. at
7. Plaintiff states that claims 14 and 36 of the ’698 Patent contain an inventive concept because
of the additional limitation of “displaying a background advertisement at least partially visible
behind the first navigation layer.” Id. at 7–8. Plaintiff also asserts that claim 6 of the ’497 Patent
contains an inventive concept because it provides that the client node comprises a television and
“using a television to display and navigate the Internet was unconventional in 1999.” Obj. at 8.
Plaintiff’s arguments are again without merit. Displaying a background advertisement
either partially or entirely (i.e. at least partially) visible behind some useful information is a timeworn advertising technique, and the requirement that such an advertisement appear behind the
claimed graphical interface is not a meaningful limitation on the abstract idea.

Similarly,

displaying information transmitted over a network is the conventional use of televisions, and using
the television as a display device for the other generic computer components (e.g., processor) does
not meaningfully limit the equipment that may be used to actualize the abstract hierarchical tree
of the claims. In sum, the Magistrate Judge adequately analyzed whether the additional limitations
of the dependent claims provide an inventive concept, and the Court agrees with his conclusion
that they do not.
CONCLUSION
Having conducted a de novo review of the Magistrate Judge’s recommended disposition,
the Court ADOPTS the Report and Recommendation of the United States Magistrate Judge as the
Order of this Court. All objections are OVERRULED. Defendant’s Motion to Dismiss for
Failure to State a Claim (Doc. No. 11) is GRANTED.
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SIGNED this 1st day of March, 2017.

____________________________________
ROBERT W. SCHROEDER III
UNITED STATES DISTRICT JUDGE

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