MicroStrategy Inc. v. Apttus Corp.

Citations: 118 F. Supp. 3d 888; 2015 U.S. Dist. LEXIS 93419; 2015 WL 4425828Docket: Case No. 3:15-cv-21-JAG

Court: District Court, E.D. Virginia; July 17, 2015; Federal District Court

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MicroStrategy filed a lawsuit against Apttus for patent infringement concerning three patents: '798, '577, and '303. The Court ruled that these patents cover patent-ineligible subject matter under 35 U.S.C. § 101, as they relate to abstract ideas involving report generation and data storage. The Court found no elements within the claims that would transform these abstract ideas into patentable subject matter, referencing the Supreme Court’s Alice decision. Consequently, the Court granted Apttus's motion to dismiss the complaint.

MicroStrategy, a provider of enterprise software for business intelligence, alleges that Apttus infringed its patents by using and selling infringing products in the United States, claiming that Apttus directs its employees and customers to do so. The specific patents include: the '798 patent for an intelligence server system, the '577 patent for a method of providing business intelligence web content, and the '303 patent for remote manipulation of analytic reports.

Apttus argued that the patents fall under the category of patent-ineligible concepts, specifically abstract ideas, as defined by 35 U.S.C. § 101, which outlines what constitutes patentable subject matter. The decision references significant Supreme Court cases that have raised the standards for patentability under this statute, emphasizing that claims must contain elements that go beyond the abstract idea itself to qualify for protection. Courts have increasingly ruled against software and computer-related inventions based on this abstract idea exception.

The Court evaluates claims to determine if they are directed at an abstract idea, progressing to assess whether they contain an 'inventive concept' that transforms the abstract idea into patent-eligible subject matter. This transformation requires more than merely appending the phrase 'apply it' to an abstract idea; rather, claims must include additional features that are not merely conventional or routine. 

In analyzing the '798 Patent, which pertains to a reporting system, the Court examines each claim individually and collectively to assess their eligibility under patent law. Apttus argues that the claims focus on the abstract idea of report generation, while MicroStrategy contends that the inventions offer new ways for businesses to analyze data. Claim 1 of the '798 patent outlines a reporting system with components like an intelligence server and analytical engine, indicating a structured approach to data processing and report generation.

The first step in the analysis for the '798 patent involves determining if the claims are directed at a patent-ineligible concept. The claims are viewed as directed at the abstract idea of data storage and report generation, supported by precedent indicating that similar patents have been deemed abstract and lacking tangible applications. The claims involve gathering, sorting, and presenting information, which the Court considers to be abstract ideas devoid of concrete applications.

The patent in question is characterized as a 'reporting system' and a 'method for generating a report,' focused on data warehousing, which is fundamentally an abstract idea related to data storage. Courts have consistently recognized electronic record-keeping and data collection as abstract concepts. For example, in *In re TLI Communications*, the patent claims were deemed directed to the abstract idea of organizing and storing photographs. Furthermore, a recent case highlighted the lack of precedents where processes involving data manipulation and presentation were considered non-abstract. The court found that the basic operations of selecting, organizing, and disseminating data are core functions in today's economy, leading to the conclusion that the '798 patent is similarly directed at abstract concepts of report generation and data storage.

In the second step of the patent eligibility analysis, the court examines whether the patent includes an 'inventive concept' that differentiates it from the abstract idea. The mere inclusion of a generic computer is insufficient to render an abstract idea patentable. The '798 patent's reliance on conventional computer operations and components, such as 'query engines' and 'intelligence servers,' fails to meet the standard established by the *Alice* decision, which requires additional inventive features beyond routine activities. The court reiterates that simply tying an abstract idea to a conventional computer does not confer patent eligibility, as established in cases like *In re TLI Communications* and *buySAFE, Inc. v. Google, Inc.* The plaintiff's argument regarding the complexity of electronic records does not transform the abstract idea, as data storage is regarded as a conventional function. The court, referencing *Amdocs*, concluded that the claims merely described conventional computer and database functions, rendering them unpatentable as abstract ideas.

MicroStrategy contends that its patented solutions leverage computer technology to address specific challenges associated with complex and incompatible data portfolios. The company asserts that the patents feature specialized layered components rather than generic computer elements, emphasizing their relevance in business intelligence. Despite this, the act of synthesizing data and generating reports does not render an idea patent-eligible, as humans can also perform these tasks. The patent illustrates a scenario where a restaurant manager queries sales data, followed by a data storage search that generates results, which merely organizes human activity—an aspect deemed presumptively patent-ineligible under established legal precedents.

MicroStrategy cites the Federal Circuit's DDR Holdings case, which upheld claims for generating a composite web page that effectively kept traffic on a host website, arguing that it was rooted in computer technology to solve a specific problem. However, the court ultimately finds the '798 patent ineligible under the Alice test, stating it merely covers the abstract idea of report generation and data storage.

Turning to the '577 patent, which describes a system for exchanging reporting information over a network without executable file downloads, the analysis begins by assessing whether its claims pertain to a patent-ineligible concept. The court concludes that this patent is also directed at the abstract idea of data collection and report generation, analogous to prior cases involving similar concepts.

The patent in question relates to a method and system for delivering business intelligence web content with minimized client-side processing. It facilitates the communication of reports from a reporting system to users via a web server, allowing analysts and managers to query multiple databases for demographic, sales, and financial data. The invention is characterized as gathering information and generating reports, which the court deems an abstract idea not eligible for patent protection. 

In evaluating the patent’s claims, the court notes that simply incorporating a generic computer does not suffice to convert an abstract idea into a patentable invention. Claims must present additional features beyond routine and conventional activities. MicroStrategy argues that the server’s automatic archiving based on classification makes it innovative; however, the court finds that the server performs standard computer functions without demonstrating a novel operational method. 

MicroStrategy also contends that the patent addresses challenges posed by large electronic records, but the court points out that data collection and analysis are longstanding concepts, predating modern computing. The patent’s description parallels prior rulings, indicating it is aimed at well-established practices of data collection and storage.

Regarding the 303 Patent, titled “System and Method for Remote Manipulation of Analytic Reports,” it outlines a system for interactive data access, allowing users to remotely manipulate reports generated from data sources. This includes receiving user input to modify reports, presenting markup language constructs for user actions, and translating user input between different network-enabled codes. The reporting server and user interface are configured to facilitate these interactions.

The '303 patent pertains to data processing, specifically enabling remote viewing and modification of analytic reports through a network interface such as a web browser. It emphasizes the convenience of accessing and utilizing systems for report generation and data storage. The court identifies the patent as an abstract idea and proceeds to a two-step analysis under Section 101, noting that merely incorporating a generic computer does not convert an abstract idea into a patentable invention. The court cites precedents indicating that many patents, including the '303 patent, were drafted under outdated standards of patent law, leading to their ineligibility. 

Consequently, the court grants the defendant's motion to dismiss the case, while also mentioning that the plaintiff did not adequately state a claim under the Twombly and Iqbal standards, although the court would have allowed an amendment if the case had continued. The document references 35 U.S.C. § 271 regarding patent infringement and notes that patentability under 35 U.S.C. § 101 can be determined at the pleading stage. The court emphasizes that claim construction is unnecessary for dismissing patent claims at this stage, referencing various case law to support its decisions.

The Court determines that the nature of the subject matter is clear from the patent itself, allowing for a proceeding with the Section 101 inquiry. MicroStrategy contends that Apttus must provide clear and convincing evidence that the patents in question are directed at patent-ineligible subject matter. However, courts are divided on the standard of proof applicable in Section 101 challenges. Past rulings indicate that irrespective of the standard, the patents are likely directed at patent-ineligible subject matter. The Court references the framework established in Alice to differentiate between patent-eligible applications and abstract ideas, acknowledging that all inventions may relate to laws of nature or abstract concepts at some level. Specific patents deemed ineligible include those related to intermediated settlement risk, risk-hedging, and data handling, whereas certain patents involving technological improvements, like enhancing user interfaces and electronic trading, have been upheld. The Court will analyze Claim 1 of the '798 patent as a representative claim, consistent with Federal Circuit precedent that permits the invalidation of a patent based on one claim analysis. The assessment applies uniformly across different claim types, whether method, system, or computer-readable medium claims.

The Court will assess the patent eligibility of the '577 and '303 patents, concluding that data storage is categorized as an abstract idea not eligible for patenting under 35 U.S.C. § 101. Previous rulings, such as In re TLI Communications and CyberSource Corp., established that methods performable solely by human thought, like data storage and information classification, fall under abstract ideas. Similarly, the collection, separation, and transmission of classified information have been deemed abstract concepts. Courts have consistently ruled that merely adding generic data processing functions—such as compiling or formatting data—does not elevate these abstract ideas to patent-eligible methods. Citing cases such as Market Track and Content Extraction, the legal precedent emphasizes that methods involving well-known concepts of data collection and storage are also not patent-eligible.