A PTY Ltd. v. eBay, Inc.

Filing 49

ORDER GRANTING 39 Motion for Judgment on the Pleadings. Signed by Judge Robert Pitman. (dm)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION
A PTY LTD.,
Plaintiff,
V.
EBAY, INC.,
Defendant

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1-15-CV-155 RP

ORDER
Before the Court are Defendants’ Motion for Judgment on the Pleadings, filed November
18, 2015 (Clerk’s Dkt. #39), and the responsive pleadings thereto. Having considered the motion,
responsive pleadings, the record in the case, and the applicable law, the Court issues the following
order.
I. BACKGROUND
Plaintiff A Pty Ltd. (“A Pty”) brings this action alleging defendant eBay, Inc. (“eBay”) has
infringed on a patent (the “‘572 Patent”) held by A Pty.1 According to A Pty, the ‘572 Patent
is generally directed towards a method for conveying email messages, where the
email message includes an address field that is different from the unique address
of the intended recipient of the email message. The email message can include an
address field that is a descriptor of the intended recipient of the email message,
rather than the account name of the recipient. The method further involves locating
in a database of descriptors and email addresses the email address associated with
the descriptor and forwarding the message to the email address yielded by the
database.
(Orig. Compl. ¶ 7). In its sole claim for relief, A Pty alleges eBay has infringed one or more claims
of the '572 Patent, at a minimum by "making, having made, providing, using, and/or distributing
their communications platform that enables users to contact and convey email messages to sellers

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Plaintiff simultaneously filed separate suits against Amazon, Inc., Facebook, Inc., HomeAway, Inc., Microsoft
Corporation and Google, Inc. asserting each of those entities also infringed on the ‘572 Patent. Plaintiff subsequently
dismissed its suit against Microsoft Corporation.

via a descriptor of the intended recipient." (Id. ¶ 11).
Defendant previously filed a motion to dismiss Plaintiff's complaint for failure to state a
claim. In that motion, Defendant argued that the '572 Patent claims are not patent-eligible under
35 U.S.C. § 101 ("Section 101"). The Court concluded Defendant "ha[d] not met its burden to show,
as a matter of law, that every possible plausible construction of each of the forty-nine claims
asserted in the '572 Patent render the patent ineligible." (Order, Clerk's Dkt. #34 at. 9). The Court
found that, prior to a claim construction, the Court would be unable to assess Defendant's Section
101 argument and therefore denied the motion to dismiss.
The parties subsequently conducted claim construction. They agreed on the proper
construction of the only term identified by either party as requiring interpretation. Specifically, the
parties agreed the term "email address" is to be construed as "a string of characters complying with
an addressing format for transmission of an email message by the SMTP protocol."
Defendant has now filed a motion for judgment on the pleadings. Defendant argues Plaintiff
is not entitled to relief because the '572 Patent claims are not patent eligible as they are nothing
more than the embodiment of an abstract idea and thus not patentable.2
II. STANDARD OF REVIEW
"After the pleadings are closed but within such time as not to delay the trial, any party may
move for judgment on the pleadings." FED. R. CIV. P. 12(C). "A motion brought pursuant to Rule
12(c) is designed to dispose of cases where the material facts are not in dispute and a judgment
on the merits can be rendered by looking to the substance of the pleadings and any judicially
noticed facts." Great Plains Trust Co. v. Morgan Stanley Dean Witter & Co., 313 F.3d 305, 312
(5th Cir. 2002). The Fifth Circuit applies the same standard to a motion under Rule 12(c) as it does
for a motion under Rule 12(b)(6). Id. at 313 n.8; Jones v. Greninger, 188 F.3d 322, 324 (5th Cir.

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Amazon, Inc., eBay, Facebook, Inc. HomeAway, Inc. and Google, Inc. have filed identical motions in each
case filed by A Pty asserting infringement of the ‘572 Patent.

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1999).
When evaluating a motion to dismiss for failure to state a claim under Rule 12(b)(6) the
complaint must be liberally construed in favor of the plaintiff and all facts pleaded therein must be
taken as true. Leatherman v. Tarrant Cnty. Narcotics Intelligence & Coordination Unit, 507 U.S.
163, 164 (1993); Baker v. Putnal, 75 F.3d 190, 196 (5th Cir. 1996). Although Federal Rule of Civil
Procedure 8 mandates only that a pleading contain a “short and plain statement of the claim
showing that the pleader is entitled to relief,” this standard demands more than unadorned
accusations, “labels and conclusions,” “a formulaic recitation of the elements of a cause of action,”
or “naked assertion[s]” devoid of “further factual enhancement.” Bell Atl. v. Twombly, 550 U.S. 544,
555 (2007). Rather, a complaint must contain sufficient factual matter, accepted as true, to “state
a claim to relief that is plausible on its face.” Id. at 570. The court must initially identify pleadings
that are no more than legal conclusions not entitled to the assumption of truth, then assume the
veracity of well-pleaded factual allegations and determine whether those allegations plausibly give
rise to an entitlement to relief. If not, “the complaint has alleged–but it has not ‘show[n]’–‘that the
pleader is entitled to relief.’” Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009) (quoting FED. R. CIV. P.
8(a)(2)).
III. RELEVANT LAW
The Supreme Court has made clear that “[l]aws of nature, natural phenomena, and abstract
ideas are not patentable.” Association for Molecular Pathology v. Myriad Genetics, Inc., 133 S. Ct.
2107, 2116 (2013). The Supreme Court has established a two-step analytical framework for
distinguishing patents that claim patent-ineligible laws of nature, natural phenomena, and abstract
ideas from those that claim patent-eligible applications of those concepts. Mayo Collaborative
Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289, 1294 (2012). First, the court must determine
whether the claims at issue are directed to a patent-ineligible abstract idea. Id. at 1296-97. If so,

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the court then 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 of that abstract idea. Id. at 1297-98.
The Supreme Court recently applied this framework to a patent involving computer software
in Alice Corp. v. CLS Bank Int'l, 134 S. Ct. 2347 (2014). In Alice, the asserted patent claimed a
software-implemented means of mitigating settlement risk by using a third-party intermediary.
Applying the two-step framework, the Court first found the concept of intermediated settlement was
an abstract idea long prevalent in financial practices. Id. at 2356 (describing the concept as “a
fundamental economic practice” and a “building block of the modern economy”). In turning to the
second step the Court explained that “[t]he introduction of a computer into the claims does not alter
the analysis.” Id. at 2357 (citing Mayo as holding “simply implementing a mathematical principle
on a physical machine, namely a computer, [i]s not a patentable application of that principle”). The
Court summarized its prior cases as demonstrating “that mere recitation of a generic computer
cannot transform a patent-ineligible abstract idea into a patent-eligible invention.” Id. at 2358.
Notably, the Court did not reject all software-based patents, stating “many computer-implemented
claims are formally addressed to patent-eligible subject matter,” and specifically suggested claims
which “improve the functioning of the computer itself” or “any other technology” are patent eligible.
Id. at 2359.
IV. DISCUSSION
eBay contends the ‘572 Patent is nothing more than a computerized version of the ages-old
concept of an address directory. Plaintiff contends dismissal is improper because it is premature,
and also because the claims of the ‘572 Patent are patent eligible.
Before applying the two-step analysis set forth in Alice, the Court turns to Plaintiff's
assertion that "[t]he law is well established that 'improvements to existing technologies' such as

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improvements 'to the functioning of the computer itself' are patentable." (Plf. Resp. at 10) (internal
quotes omitted).

This point is well taken, improvements to existing technologies including

improvements to the functioning of the computer itself are, as a class, not inherently barred from
patent-eligibility. But the point is not dispositive, such improvements are only patentable if they
pass the Alice test. Accordingly, the Court will turn to the two steps identified in Alice.
A. Abstract Idea
The first step in addressing patent eligibility is to determine whether the claims at issue are
directed to an abstract idea.

Alice, 134 S. Ct. at 2350.

Defendant is correct that simply

computerizing an abstract idea does not render the concept patent eligible. See Alice, 134 S. Ct.
at 2359 (concluding claims "simply instruct[ing] the practitioner to implement the abstract idea of
intermediated settlement on a generic computer" not patent eligible); Ultramercial, Inc. v. Hulu,
LLC, 772 F.3d 709, 715-16 (Fed. Cir. 2014) (claims merely reciting abstract idea of using
advertising as currency as applied to particular technological environment of the Internet not patent
eligible); buySAFE, Inc. v. Google, Inc., 765 F.3d 1350, 1355 (Fed. Cir. 2014) (claims reciting no
more than using computer to send and receive information over network in order to implement
abstract idea of creating a "transaction performance guaranty" not patent eligible); Accenture
Global Servs., GmbH v. Guidewire Software, Inc., 728 F.3d 1336, 1344-45 (Fed. Cir. 2013) (claims
reciting "generalized software components arranged to implement an abstract concept [of
generating insurance-policy-related tasks based on rules to be completed upon the occurrence of
an event] on a computer" not patent eligible). But the Supreme Court has also recognized that, "at
some level, all inventions embody, use, reflect, rest on, or apply abstract ideas." Alice, 134 S. Ct.
at 2345. And, as the Federal Circuit has noted, "[d]istinguishing between claims that recite a
patent-eligible invention and claims that add too little to a patent-ineligible abstract concept can be
difficult." DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245, 1255 (Fed. Cir. 2014).

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Plaintiff contends that the '572 Patent's claims pass the Section 101 threshold because
"they are directed to a process for improving computer communications using decidedly
nonconventional technology." (Plf. Resp. at 2). Plaintiff argues that the agreed construction for
"email address" as "a string of characters complying with an addressing format for transmission
of an email message by the SMTP protocol" firmly roots the claims of the '572 Patent as an
advancement to the SMTP protocol in the field of computer network communications. In support
of this contention Plaintiff relies on the decision in DDR Holdings, one of the few cases post-Alice
in which the Federal Circuit rejected a patent-eligibility challenge to a software patent. .
In DDR Holdings, the Federal Circuit applied the Alice analytical framework to a patent
which related to Internet webpage display technology. According to the patent, prior art systems
allowed third-party merchants to "lure the [host website's] visitor traffic away" from the host website
because visitors would be taken to the third-party merchant's website when they clicked on the
merchant's advertisement on the host site. DDR Holdings, 773 F.3d at 1248. The court described
the patent-in-suit as:
disclos[ing] a system that provides a solution to this problem (for the host) by
creating a new web page that permits a website visitor, in a sense, to be in two
places at the same time. . . . [T]he host website can display a third-party merchant's
products, but retain its visitor traffic by displaying this product information from
within a generated web page that "gives the viewer of the page the impression that
she is viewing pages served by the host" website.
Id. at 1248-49 (internal citations omitted).
The DDR Holdings court acknowledged that the patent invention could be characterized as
an abstract idea such as "making two e-commerce web pages look alike," but pointed out that the
claims "do not recite a mathematical algorithm . . . [n]or do they recite a fundamental economic or
longstanding commercial practice." Id. at 1257. The court found that the claims at issue stood
apart from those in Alice and other recent cases because they did not merely recite the
performance of some business practice known in the pre-Internet world along with the requirement
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to perform it on the Internet. Rather, the court concluded "the claimed solution was necessarily
rooted in computer technology in order to overcome a problem specifically arising in the realm of
computer networks" and was thus patent-eligible. Id. at 1258.
Plaintiff argues that the claims of the '572 Patent are analogous in all relevant aspects to
the patent in DDR Holdings. Plaintiff points out that, much like the patent in DDR Holdings, the
'572 Patent does not recite a mathematical algorithm, a fundamental economic practice or
longstanding commercial practice. Rather, the patent addresses a business challenge peculiar to
the Internet, the patent is rooted in computer technology, and any pre-Internet analogue of the
claims did not have to account for the near-instantaneous communication now standard on the
Internet.
Defendant, in turn, points out that Plaintiff's arguments ignore the fact that the asserted
claims of the '572 Patent are readily characterized as an abstract idea, namely "the abstract idea
of using information in a message's destination address to look up the recipient's correct address."
(Def. Reply at 1). Moreover, the Court agrees with Defendant that, unlike in DDR Holdings in which
the Federal Circuit held the website technology patent claims did not recite a longstanding business
practice, using information in a message's destination address to look up the recipient's correct
address is a longstanding commercial practice. Accordingly, Plaintiff's reliance on the decision in
DDR Holdings is unavailing.
Plaintiff also urges the Court to look to a decision by our sister court holding a
computer-based system for secure network communications to be patent-eligible because "[t]his
case . . . involves a way of making computer communication itself more effective . . ." TQP Dev.,
LLC v. Intuit Inc., 2014 WL 651935, at *7 (E.D. Tex. Feb. 19, 2014). According to Plaintiff, the '572
Patent is similar to the patent at issue in TQP because the technology "makes conventional email
communications more effective and enables communication in scenarios where conventional
methods would have failed." (Plf. Resp. at 3).
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The technology involved in TQP related specifically to an encrypted communication system.
The court in TQP distinguished most cases invalidating patents under Section 101 as involving the
use of a computer "to perform steps that are commonly performed without a computer such as
[risk] hedging, effecting routine insurance transactions, or selecting an appropriate treatment
regimen for a medical patient." TQP, 2014 WL 651935, at *7. The court found TQP's patent
instead "involves a way of making computer communication itself more effective by making
communication more secure" and the patent "does not involve a method of doing business that
happens to be implemented on a computer." Id.
The Court does not find Plaintiff's reliance on TQP well-placed for two reasons. First, to the
degree Plaintiff is correct that TQP suggests improved communication between computers is
patent eligible, Plaintiff's patent does not address such communication. Rather, Plaintiff's patent
is directed to improving communications between email users by obviating the need for precision
by the user in addressing an email.
Second, contrary to Plaintiff's characterization, the TQP decision does not stand for the
proposition that any improvement in computer communication is inherently patent eligible. Rather,
the court found patent eligibility because the patent "involves a method for changing data in a way
that will affect the communication system itself, by making it more secure." Id. Specifically, the
invention in TQP changed the data from interpretable on creation to un-interpretable during
transmission and back again upon receipt through its encryption. In contrast, the '572 Patent
involves a method of doing business (i.e. the idea of using information in a message's destination
address to look up the recipient's correct address), but does not involve any data modification in
a way that will affect the communication system itself. The limitation of "email address" as "a string
of characters complying with an addressing format for transmission of an email message by the
SMTP protocol" does not effect the first step of the Alice analysis because a field of use limitation
does not make an idea non-abstract. Intellectual Ventures LLC v. Capital One Bank (USA), 792
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F.3d 1363, 1366 (Fed. Cir. 2015) ("An abstract idea does not become non-abstract by limiting the
invention to a particular field of use or technological environment, such as the Internet").
The Court is well aware that in many cases it is difficult to distinguish between an abstract
idea and its application. However, in light of the agreed claim construction, the Court concludes
that the claims of the '572 Patent are more similar to the ideas that have been found to be abstract
in other cases before the Supreme Court and the Federal Circuit, such as Alice and Ultramercial,
involving methods of organizing business activity. The Court thus finds that the '572 Patent is most
accurately characterized as directed to the abstract idea of an address directory.
B. Inventie Concept
The second step in addressing patent eligibility is to determine whether the remaining
elements, either in isolation or combination, are sufficient to transform the nature of the claim into
a patent-eligible application. Alice, 134 S. Ct. at 2358. The inventive concept must "ensure that
the patent in practice amounts to significantly more than a patent upon the [abstract idea] itself."
Id. Rather, the claims must include "additional features" beyond "well-understood, routine,
conventional activity." Ultramercial, 772 F.3d at 715 (quoting Mayo, 132 S. Ct. at 1298). The
addition of a generic computer does not satisfy the additional features requirement. Alice, 134 S.
Ct. at 2359 (concluding claims that "simply instruct[ed] the practitioner to implement the abstract
idea of intermediated settlement on a generic computer" not patent eligible).
Plaintiff points to "the ordered combination of determining a proper email address from
another incorrect address" as the inventive concept embodied by the '572 Patent beyond the
abstract idea. (Plf. Resp. at 11.) Plaintiff contends that this inventive step of combining all the
elements of the '572 Patent is sufficiently transformative to turn the abstract idea into a
patent-eligible application because it represents an improvement to an existing technology that
enables computer network communication that would fail using conventional methods. Defendant,

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in turn, argues the '572 Patent merely automates an existing or conventional process
Since Alice, the Federal Circuit has recognized that claims "necessarily rooted in computer
technology in order to overcome a problem specifically arising in the realm of computer networks"
are patentable.

DDR Holdings, 773 F.3d at 1257. For example, another district court has

concluded a patent related to mapping between an object-oriented program and a relational
database overcame a computer specific problem because "object-oriented programs exist only in
the realm of computers, and relational databases are utilized primarily, if not exclusively, on
computers." DataTern, Inc. v. Microstrategy, Inc., 2015 WL 5190715 at *8 (D. Mass. Sept. 4,
2015).
Plaintiffs contend that the '572 Patent is analogous to the patents at issue in DataTern and
DDR Holdings because it overcomes a problem specifically arising in the realm of computer
networks. The Court disagrees. The claims of the '572 Patent do not overcome a problem
specifically arising in the realm of computer networks. Rather, those claims address a
long-standing problem (i.e. finding the correct destination address in order to make a message or
package deliverable) in a computer setting. The Supreme Court has made clear that simply
implementing a long standing practice on a computer is not enough for patentability. See Alice,
134 S. Ct. at 2358 ("limiting the use of an abstract idea to a particular technological environment
is not enough for patent eligibility."). Accordingly, the Court finds that the claims of the '572 Patent
do not have sufficient "additional features" beyond the abstract idea of an address directory to
transform the claims into patent eligible subject matter. Ultramercial, 772 F.3d at 715 (quoting
Mayo, 132 S. Ct. at 1298).
V. CONCLUSION
The Court hereby GRANTS Defendants’ Motion for Judgment on the Pleadings (Clerk’s Dkt.

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#39).
SIGNED on February 29, 2016.

ROBERT L. PITMAN
UNITED STATES DISTRICT JUDGE

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