Court: District Court, E.D. North Carolina; February 27, 2017; Federal District Court
Defendants’ motion to dismiss, filed under Federal Rule of Civil Procedure 12(b)(6), has been granted by the court. The case involves plaintiff, the inventor of U.S. Patent No. 6,477,503, who sued Fandango, LLC for patent infringement and induced infringement under 35 U.S.C. § 271(a) and (b). After initial proceedings and an amended complaint filed on March 7, 2014, Fandango denied liability and filed counterclaims. The court stayed the proceedings pending the Supreme Court's decision in Limelight Networks, Inc. v. Akamai Technologies, Inc., which clarified that induced infringement requires direct infringement. Following the Supreme Court's ruling, the stay was lifted, and the plaintiff moved to dismiss Fandango’s counterclaims. On February 26, 2015, the court granted judgment on the pleadings for Fandango, but the plaintiff's motion to dismiss was held in abeyance. Fandango later voluntarily dismissed its counterclaims. Subsequently, the Federal Circuit issued a decision in Akamai IV, altering the legal standards applicable to the case and vacating the court’s earlier judgment. The Federal Circuit remanded the case for reconsideration under the new standards. Following this, the court directed the plaintiff to file a second amended complaint, which was submitted on June 30, 2016, asserting new claims of patent infringement against both Fandango and Regal Entertainment Group, seeking declaratory and injunctive relief, monetary damages, and a jury trial.
On August 24, 2016, Fandango filed a motion to dismiss the complaint, which Regal supported. The defendants contend that the plaintiff's patent claims pertain to an abstract idea, thus failing to meet the patentable subject matter requirements under 35 U.S.C. § 101. The plaintiff owns the ’503 patent, issued on November 5, 2002, titled “Active Reservation System.” This patent describes methods for managing inventory in a system that controls sales both online and in physical locations. Traditionally, inventory is shared between these venues, leading to a lack of real-time inventory data and frequent underselling.
The ’503 patent presents a reservation system that allows vendors to manage all inventory at a single location using a local server, which communicates inventory availability to an online reservation server. This system enables online access to inventory, and when sales occur, the local server updates inventory records accordingly, ensuring accurate data flow between the local site and online consumers. The claims of the patent focus on this integrated inventory control process. Specifically, Claims 1 to 3 are contested, with Claim 1 outlining a comprehensive method for operating an Internet-based active reservation system, detailing the roles of both local and active reservation servers in managing and communicating inventory and purchase requests.
Claims 2 and 3 introduce specific modifications to Claim 1. Claim 2 requires that inventory information be transmitted through two separate Internet connections and that the local event server establish a pricing structure for the goods and services. Claim 3 mandates that the reservation server present available Internet inventory in a designated format on a website for potential customers. The defendants, Fandango and Regal, are involved in a ticket reservation system for movie screenings, with Regal operating a local reservation system and a box office for onsite sales, both of which closely resemble the system detailed in the ’503 patent.
The standard of review for a motion to dismiss under Rule 12(b)(6) assesses the complaint’s legal sufficiency without delving into factual disputes or the merits of the claims. A complaint must present enough factual matter, accepted as true, to establish a plausible claim for relief. The court evaluates well-pled facts favorably towards the plaintiff but excludes legal conclusions, unsupported assertions, or unwarranted inferences. In assessing a motion to dismiss, the court may also consider documents integral to the complaint.
The defendants seek dismissal based on the argument that the ’503 patent is invalid under 35 U.S.C. § 101, a legal question that can be determined via a Rule 12(b)(6) motion. Patent eligibility under this statute allows for patents on new and useful inventions, but excludes laws of nature, natural phenomena, and abstract ideas. The Supreme Court has clarified that while inventions may involve abstract concepts, this does not inherently disqualify them from patent eligibility.
The Supreme Court's two-step process for evaluating patent eligibility involves first determining if a patent claim is directed toward an abstract idea. If so, the second step assesses whether the patent includes an "inventive concept" that adds significantly more than the abstract idea itself. Although the Supreme Court has not precisely defined "abstract idea," past rulings provide guidance. In *Alice*, claims related to intermediated settlement were deemed abstract as they reflected a long-standing economic practice. Similarly, in *Bilski v. Kappos*, a method for hedging risk was ruled abstract.
In the current case, the patent claims are identified as directed to the abstract idea of allocating, tracking, and controlling inventory, akin to prior cases. The claims describe a reservation system for event vendors to manage inventory through a local server while allowing consumer purchases online. This concept is characterized as a fundamental economic practice.
The plaintiff disputes this classification, arguing that the invention is an integrated reservation method, not merely a known business concept applied to a computer. He contends that the claims' specific limitations are overlooked and cites *McRO, Inc. v. Bandar Namco Games Am.* and *Enfish, L.L.C. v. Microsoft Corp.* to support his stance. However, these cases are distinguished from the current situation, as *McRO* involved a specific improvement in computer animation, which was deemed patent-eligible, unlike the claims at issue here.
The court determined that assessing whether a claim is directed to an abstract idea involves evaluating whether it focuses on a specific means or method that enhances relevant technology or simply employs generic processes and machinery. In the case of Enfish, the Federal Circuit ruled that claims related to a data storage and retrieval system were not abstract because they aimed to improve computer functionality. The plaintiff argues that his claims are patent-eligible, akin to those in McRO and Enfish, as they include specific rules that enhance existing technology, particularly in managing inventory via a local event server. However, the court found that these claims, unlike those in McRO and Enfish, merely invoke generic processes and machinery without demonstrating an improvement in computer functionality. The claimed methods use standard computers for inventory control, lacking the specificity needed for patent eligibility. The claims do not present an inventive concept beyond the abstract idea of inventory management, as they involve generic computer implementation, which is insufficient to render them patent-eligible. The court cited previous cases affirming that merely executing a common business practice with conventional technology does not meet the requirements for patentability.
Plaintiff contends that his patent claims, despite being abstract, are nonetheless patent-eligible due to their improvement of computer-based inventory management. He cites Bascom Global Internet Services, which recognized an inventive concept in the unique arrangement of conventional components that, while individually non-inventive, created a novel functionality. However, the court distinguishes plaintiff's claims from those in Bascom, noting that they do not constitute a software-based invention that enhances computer performance. The claims simply describe a method for managing inventory information between two servers without innovating the conventional use of computer or Internet technology. Consequently, the court concludes that the claims lack an inventive concept and are therefore patent-ineligible under 35 U.S.C. § 101.
The court grants the defendants’ motion to dismiss the case with prejudice, instructing the clerk to close the matter. Additionally, it notes the existence of a related lawsuit by the plaintiff against another ticket reservation system operator, which had been voluntarily dismissed. The court also states that it can consider the contents of the '503 patent, referenced in plaintiff's complaint, without requiring claim construction, as the parties have not identified any claim terms needing interpretation.
