Court: District Court, N.D. Indiana; January 15, 2018; Federal District Court
Motions for Summary Judgment have been filed by both parties in the case involving Agri-Labs Holding LLC and Taplogic, LLC. Taplogic seeks summary judgment on grounds of non-infringement, patent invalidity, and challenges related to personal jurisdiction and venue. Conversely, Agri-Labs seeks summary judgment on the issue of patent infringement concerning its U.S. Patent No. 8,286,857, which pertains to a Soil Sample Tracking System and Method.
The litigation began on January 22, 2015, when Agri-Labs filed its Complaint, alleging infringement of the '857 Patent. Taplogic responded on February 17, 2015, asserting multiple affirmative defenses and counterclaims, including a declaration of non-infringement and patent invalidity. The '857 Patent addresses a method and system for soil sampling to assess nutrient levels, aiming to improve the accuracy and efficiency of sample collection and data recording, which had historically been hindered by time-consuming and error-prone manual methods.
Two independent claims are particularly relevant, with Independent Claim 1 detailing a process that includes generating unique identifiers for sample containers, manually collecting soil samples, scanning these identifiers with a handheld device, and obtaining geographic coordinates for proper association of samples with their respective locations.
Independent Claim 13 describes a system consisting of multiple containers, each with a unique identifier, and a handheld remote terminal equipped with a device that reads these identifiers and includes a geographic position sensor. Soil samples are collected from a field and stored in the containers, with the handheld terminal associating each sample with its unique identifier and geographic position, which are then stored in a database. A secondary application on the terminal syncs this database with a lab device, which reads the identifiers upon receiving the containers. A test instrument analyzes the soil samples and uploads test results linked to the unique identifiers.
The Plaintiff accuses the Defendant of infringing on the '857 Patent through its AgPhD Soil Test application for smartphones, asserting that the use of the app by end-users infringes both the method and system claims. The Plaintiff holds the Defendant liable for both direct and indirect infringement, claiming all relevant method steps and system components are attributable to the Defendant.
The Court addresses the Defendant's arguments regarding personal jurisdiction and venue. The Plaintiff contends that the Defendant waived its right to contest personal jurisdiction by participating in the case and asserting counterclaims. The Court agrees, stating that by seeking relief from the court, the Defendant consented to jurisdiction. Even if a valid jurisdiction defense exists, it is waived if the party litigates the case on its merits. The Defendant, having litigated for nearly three years before raising this defense at summary judgment, has thus waived it.
Regarding venue, the Court notes that patent actions are governed by 28 U.S.C. § 1400(b), allowing suits in the district where the defendant resides or where infringement has occurred. The Supreme Court's ruling in TC Heartland LLC v. Kraft Foods Group Brands LLC clarifies that a domestic corporation's residence for venue purposes is where it is incorporated.
The Defendant contends that venue is improper because it resides in Kentucky and lacks a "regular and established" business presence in Indiana. The Defendant asserts it has not waived its venue challenge, referencing a recent ruling by the Federal Circuit in *In re Micron Tech. Inc.*, which clarified that venue challenges under TC Heartland were not previously available to defendants, and thus not waived according to Rules 12(g)(2) and 12(h)(1)(A). The Federal Circuit acknowledged that district courts have the authority to determine the timeliness and adequacy of venue objections beyond these rules, as established by 28 U.S.C. 1406(b). This statute affirms that a district court's jurisdiction remains intact even if a party does not timely object to venue.
While the Federal Circuit did not define all factors that may affect the timeliness of a venue objection, it recognized that courts can consider other aspects, such as the proximity of trial dates and judicial efficiency. The court emphasized its inherent powers to manage cases effectively, maintaining that any exercise of this power must be a reasonable response to the court's needs for justice administration. In this case, the Court determined that the Defendant did not waive its venue objection under the specified rules; however, it concluded that the objection was untimely given the case circumstances. District courts have previously considered factors like impending trial dates and the Defendant's litigation behavior since the TC Heartland decision when deciding venue motions, with outcomes varying based on these considerations.
The Defendant's objection to venue was raised a month after the Supreme Court's TC Heartland decision, but the Court denied the motion as untimely, noting the case has been pending for nearly three years with significant judicial resources already invested. The Court emphasized that allowing the motion at this late stage would hinder the just, speedy, and inexpensive resolution of the dispute.
Regarding summary judgment, the Court highlighted that it is appropriate when the evidence shows no genuine issue of material fact, with the moving party first needing to present the basis for the motion. The non-movant must then provide evidence demonstrating a genuine dispute to avoid summary judgment. If they fail to do so, judgment will be entered against them.
In analyzing the validity of the '857 Patent, the Defendant contended it is directed toward an abstract idea, rendering it ineligible under 35 U.S.C. § 101. The Court stated that determining patent eligibility is a legal question requiring a two-step analysis: first, to ascertain if the claims are directed to a patent-ineligible concept, and second, to evaluate if the claim's elements transform the concept into a patent-eligible application. The Court clarified that inventions are not ineligible merely for involving abstract ideas, as applications of such concepts can still qualify for patent protection if they achieve a new and useful end.
Simply appending conventional steps to a well-known method does not provide the 'inventive concept' necessary for patent eligibility. The Defendant contends that soil sampling is a recognized method for assigning identifiers to soil samples and tracking their results. While the Court acknowledges that soil sampling for evaluating nutritional deficiencies is an abstract idea, it distinguishes this from methods of performing soil sampling, which can be patent-eligible if they present a new and useful technique. Citing precedents like Diamond v. Diehr, the Court emphasizes that technological improvements to existing processes qualify for patent protection. The '857 Patent specifically claims a technique for soil sampling that aims to solve existing method inefficiencies, thus not qualifying as an abstract idea. Even if the '857 Patent were considered abstract, the analysis would require assessing whether it contains an "inventive concept," with the Defendant’s cited cases being inapplicable to this context.
The Federal Circuit has established that subject matter can be deemed abstract if it merely involves collecting and analyzing information without a specific tool for presentation, as seen in FairWarning IP, LLC v. Latric Systems, Inc., where the court highlighted the lack of a particular inventive technology (839 F.3d 1089, 1093). Similarly, in Electric Power Group, LLC v. Alstom S.A., the court ruled the subject matter abstract because it described a general process of gathering and analyzing information without claiming a specific technological means for these functions (830 F.3d 1350, 1354). The distinction between the ends sought and the specific means to achieve them is critical, as patenting an abstract idea is not permissible (Id. at 1356). In Secured Mail Solutions LLC v. Universal Wilde, Inc., the court invalidated a patent for failing to provide specific details or technology related to barcodes, noting it did not offer a concrete solution to a specific problem (873 F.3d 905, 910-11).
In contrast, the '857 Patent provides a specific method to address a problem in soil sampling that was previously unsolved in the industry. Unlike prior techniques that were time-consuming and error-prone, such as handwritten identifiers or pre-printed labels, the '857 Patent offers an improved technological process that enhances the tracking and association of soil samples with their geographic locations. This represents a concrete solution rather than an abstract idea.
The Defendant contends that the Plaintiff's claims in the '857 Patent merely incorporate a generic computer into a known method. Citing Multimedia Plus, Inc. v. Playerlync, LLC, the court emphasized that for a computer to meaningfully limit a claim, it must significantly enable the claimed method, rather than serve merely as an expedient tool. The court in Burnett v. Panasonic Corp. similarly determined that the computer was merely a tool in a conversion process. For a computer's use to salvage a patent-ineligible process, it must be integral to the invention, enabling a method that is otherwise unachievable by manual calculations, as outlined in Bancorp Servs. L.L.C. v. Sun Life Assur. Co.
The '857 Patent demonstrates this integral role, as the smartphone application facilitates soil sampling in a manner unattainable through manual computation. The presence of specific functionalities, such as scanning unique identifiers, distinguishes it from mere data classification methods deemed abstract in other cases. The '857 Patent also improves upon prior methods by reducing recording errors, showcasing an inventive step, leading the court to conclude it is not invalid under 35 U.S.C. § 101.
Regarding the claim of obviousness, the Defendant must overcome the presumption of validity by providing clear and convincing evidence. Under 35 U.S.C. § 103, a patent is invalid if it would have been obvious to a person of ordinary skill in the art at the time of invention, based on the differences from prior art. The court will evaluate the scope of prior art, differences from the claimed invention, and the level of skill in the art, as well as secondary considerations like commercial success and unmet needs.
Courts must thoroughly evaluate all relevant evidence, including objective considerations, before determining patent obviousness to avoid hindsight bias. A party challenging a patent's validity must provide clear and convincing evidence that a skilled artisan would have been motivated to combine prior art teachings and would have had a reasonable expectation of success. This evaluation often requires examining the interrelated teachings of multiple patents, market demands, and the background knowledge of a person skilled in the art. Conclusions on obviousness must be supported by articulated reasoning rather than mere assertions.
In the case at hand, the Defendant's argument for invalidating the '857 Patent relies heavily on a conclusory declaration by a patent attorney, which fails to satisfy the burden of proof for invalidity. The declaration lacks factual support and does not adequately address the scope and content of the prior art or the level of ordinary skill in the art, both of which are essential for assessing obviousness. Without this information, the court is unable to evaluate the invention's obviousness at the time it was made. The Defendant's failure to identify the level of ordinary skill in the art or pertinent prior art renders their argument ineffective. The declaration's vague reference to prior art and inadequate comparisons further undermines the Defendant's position.
The declaration lacks clarity regarding the references to prior art and does not provide specific citations within the court record, failing to meet the burden of proof for invalidity of the Covely '857 claims. It mentions the existence of other valid prior art but does not specify their location in the record. The Court is not required to search through submissions for relevant arguments. The declaration also fails to identify reasons for combining prior art references, which is necessary to demonstrate obviousness. Expert testimony must explain how specific prior art elements could be combined and why a skilled practitioner would do so. The declaration claims that motivation to combine exists due to the references being in agriculture, but this broad characterization is insufficient. Citing Federal Circuit cases, the document emphasizes that merely stating that references belong to the same field does not establish a valid rationale for combination. In a subsequent reply, the Defendant introduces prior art, specifically U.S. Patent No. 6,947,866, suggesting it provides motivation due to its mention of smartphone compatibility, yet this was not part of the initial summary judgment record.
The Defendant claims that the '866 Patent includes all steps of claim 1 and most of claim 13 of the '857 Patent, asserting that both patents relate to the same field and referencing the Tanner declaration for motivation to combine. However, the Court finds this argument insufficient to establish invalidity by clear and convincing evidence. The Defendant neglected to address objective considerations of nonobviousness, justifying this omission by suggesting the Plaintiff did not incorporate these in their patent application and lacks expert testimony on the matter. The Court challenges this reasoning, emphasizing that a patentee is not required to present secondary considerations in the application, particularly since commercial success may not have been known at that time. Furthermore, legal precedent indicates that the burden does not shift to the Plaintiff to disprove obviousness after the Defendant establishes a prima facie case based solely on prior art. The Court also notes that evidence exists regarding the commercial success of the AgPhD App, and the Plaintiff's failure to counter the Defendant's arguments on objective indicia does not assist the Defendant in proving obviousness. Consequently, the Court denies the Defendant's Motion for Summary Judgment on Invalidity.
On the issue of whether the AgPhD App infringes the '857 Patent, the analysis involves two steps: determining the scope and meaning of the patent claims, followed by comparing those claims to the accused device or method. The Defendant contends it is not the appropriate party to the lawsuit, arguing that another company distributes the AgPhD App and that it does not own or control the related website.
The Defendant acknowledges the development of the accused product and that the Plaintiff has presented evidence suggesting the Defendant's responsibility for its sale and maintenance. This evidence could lead a jury to find the Defendant liable for direct or indirect infringement of the patent in question. The Defendant's defenses include claims of non-ownership and non-control over the AgPhD App, arguing that it does not directly infringe the '857 Patent because (1) the App fails to meet all claim limitations, and (2) no single entity performs all method steps. Additionally, the Defendant contends it does not indirectly infringe due to a lack of evidence of direct infringement and the presence of substantial non-infringing uses for the App.
Direct infringement is defined under 35 U.S.C. § 271(a), which states that making, using, offering to sell, or selling a patented invention without authority constitutes infringement. A party may infringe either literally or through the "doctrine of equivalents." Literal infringement requires that each limitation of a patent claim be found in the accused product exactly. If literal infringement cannot be established, the doctrine of equivalents allows for a finding of infringement if the accused product performs the same function in a similar way and achieves the same result as the patented invention.
For method claims, direct infringement occurs when all steps are performed by or attributable to a single entity. The Court must assess whether there are genuine issues of material fact regarding the performance of all method steps and whether these can be attributed to the same entity, particularly concerning the use of the AgPhD App.
Independent Claim 1 encompasses eight steps that the Plaintiff must prove are executed in the use of the AgPhD App. The first step involves generating soil sample containers with unique identifiers, which the Court defined as a machine-readable representation of data, potentially including QR codes. The Defendant contends that QR codes do not qualify as unique identifiers; however, evidence from the AgPhD Soil Test App’s instructions suggests that QR codes can indeed serve this function. The second step requires the manual collection of soil samples, which the App's instructions also support. The third step mandates scanning the unique identifier with a handheld remote terminal, defined by the Court as a smartphone. The Defendant argues that taking a photo does not constitute scanning; nonetheless, a reasonable jury could conclude that photographing the QR code fulfills the scanning requirement by converting it into a digital format. The fourth step necessitates that the handheld terminal includes a sampling application, which the AgPhD App provides. The fifth step states that this application must enable users to input a farm/client name and field identifier. The Defendant argues against this step by pointing out that users can enter this information through other devices, but the patent does not restrict input to smartphones alone.
In Vulcan Engineering Co. v. Fata Aluminium, Inc., the Federal Circuit established that additional capabilities of an element do not negate infringement if the basic features of the patent are adopted. Specifically, even if an accused device performs functions beyond those claimed, it can still infringe if it embodies the essential features of the patent. In this context, the court emphasized that it is unnecessary for a claim to encompass the entirety of an accused device to establish infringement.
In the case at hand, the claim in question requires a handheld remote terminal sampling application that includes a scanning application to read a unique identifier. The court defined "application" as software performing multiple functions. The Defendant contends that the AgPhD App does not comply with this requirement because it operates as a single piece of software without a separate scanner. The court found the Defendant's argument unconvincing, noting that taking an image of a QR code to generate a unique identifier aligns with the court's definition of scanning, as it involves converting an image into a digital format.
The court further clarified that combining functions into one element does not absolve infringement if that element performs both functions as specified in the claim. The court concluded that a reasonable fact-finder could determine that a single application may fulfill the requirements of Claim 1.
Regarding the geographic coordinate reading, the Defendant argued that the AgPhD App does not meet this limitation since it allows readings from various locations, not just fields. However, the court pointed out that the patent does not restrict readings to field locations, indicating that extra functionalities do not inherently constitute non-infringement.
Lastly, the court addressed the requirement of associating a soil sample with a unique identifier and geographic coordinate reading. Although the Defendant claimed this step was not necessary, it acknowledged that the app can associate these elements, leaving genuine issues of material fact regarding whether the AgPhD App performs all steps of Claim 1. Dependent Claim 2 specifies that the unique identifier includes a barcode.
The soil sampling bags from Midwest Laboratories included QR codes, which the Plaintiff argues are a type of barcode. The Defendant counters that the Plaintiff's sole evidence is a Wikipedia article, which is inadmissible. The Court agrees with the Defendant, stating that QR codes and their connection to barcodes are not within a lay juror's common understanding and that the Plaintiff lacks expert testimony to establish its claims.
The Court emphasizes that without expert evidence, the Plaintiff cannot prove that the bags meet the requirements of Claim 3, which involves storing a unique identifier and geographic coordinates in a database linked to a handheld remote terminal. While "database" may be understood by professionals in the field, it is not commonly known to lay jurors. The Plaintiff's reliance on deposition testimony does not demonstrate that the database is associated with the terminal as claimed.
Furthermore, Claim 4, which depends on Claim 3, also cannot be proven without satisfying the limitations of Claim 3. The status of the remaining claims (Dependent Claims 5-12) is uncertain, but since they require the "database" limitation from Claim 3, the Plaintiff fails to establish infringement for these claims as well. As a result, the Court grants summary judgment of non-infringement for Dependent Claims 2-12.
For the system claims, the Plaintiff must demonstrate that all components of the claimed system are present when end-users use the AgPhD App as intended, including the requirement that the unique identifier and geographic position are stored in a database.
The Plaintiff's claim of infringement for Claim 13 is unsupported due to lack of expert testimony or admissible evidence demonstrating that the database limitation is met, leading to insufficient proof of infringement. The Court notes that for cases involving multiple actors, it must determine if one actor's actions can be attributed to another, establishing a single entity's responsibility for infringement. This determination can arise if one entity directs or controls another's actions or if a joint enterprise exists. A joint enterprise requires: (1) an agreement among members, (2) a common purpose, (3) a shared financial interest, and (4) equal control rights. The existence of a joint enterprise is a factual question for the jury. In this instance, the Defendant does not perform all steps of the claimed method and lacks evidence of directing end-users of the AgPhD App or being involved in a joint enterprise with them. Therefore, even if infringement occurred, the Defendant cannot be held liable as the actions are attributable to the end-users, who independently complete the steps by ordering soil sample containers through a specific website. The Court grants summary judgment for the Defendant, ruling no direct infringement of the '857 Patent.
Contracting for the generation of containers does not exempt end-users from liability for patent infringement, as established in Marley Mouldings, Ltd. v. Mikron Indus. Inc. A reasonable fact-finder could determine that end-users of the AgPhD App directly infringed the '857 Patent by purchasing soil sample containers and testing samples through entities like Midwest Laboratories, potentially making the Defendant liable for indirect infringement.
Even without direct infringement, the Defendant may still face liability under 35 U.S.C. § 271(b) for actively inducing infringement or under § 271(c) for contributory infringement if it sells components that are specifically made for a patented process. The Defendant argues that the Plaintiff lacks evidence of direct infringement and claims it is not liable for contributory infringement due to the AgPhD App’s substantial non-infringing uses and lack of intent to induce infringement.
Liability for inducement or contributory infringement requires evidence of direct infringement. The Defendant emphasizes that the Plaintiff has not provided specific instances of direct infringement, asserting that mere hypotheticals are insufficient. However, it is well-established that circumstantial evidence can satisfy the burden of proof for direct infringement. In previous cases, such as Koninklijke, the Federal Circuit has indicated that market share and usage patterns can infer direct infringement, countering the argument that a lack of direct evidence negates liability. Additionally, instruction sheets can be used to demonstrate acts of direct infringement by end-users.
In Golden Blount, Inc. v. Robert H. Peterson Co., the court affirmed the findings of induced and contributory infringement. It recognized that instruction manuals can be used as evidence of direct infringement by customers, without any prohibitory case law against such reliance. The court reiterated that when an alleged infringer designs a product for infringing use and instructs users accordingly, there is enough evidence for a jury to establish direct infringement. The court referenced several precedents, noting that a reasonable juror could conclude that the instructions for the AgPhD App promoted infringing use of the '857 Patent.
Inducement requires proving that the inducer knew of the patent, intentionally induced the infringing acts, and had a specific intent to encourage infringement. Mere knowledge of potential infringement is insufficient; active steps, such as advertising or instructing on infringing use, indicate affirmative intent. However, general instructions that do not promote or recommend an infringing use do not meet this standard. If instructions suggest or recommend an infringing use, a jury may find the necessary intent to induce infringement. The jury had evidence of the defendant's online training resources that provided detailed instructions for using the accused technology, supporting the case for inducement.
A jury may find that the instructions for the AgPhD App teach an infringing use and could consider the Defendant's user support services as evidence of inducement. The Defendant acknowledges awareness of the '857 Patent since at least December 2014, and it is irrelevant whether the Plaintiff sent the initial notification regarding the patent or was the assignee at that time. For inducement claims, the critical factor is the Defendant's knowledge of the patent and its claims, regardless of how that knowledge was obtained. If the jury concludes that the App instructions lead to infringement, they could determine that the Defendant intended to induce such infringement, thus supporting a claim of indirect infringement of the '857 Patent, leading the Court to deny the motion for summary judgment on this issue.
Regarding contributory infringement under 35 U.S.C. § 271(c), liability arises when a party sells an apparatus specifically designed for use in infringing a patented method, with knowledge that it is not a staple article suitable for substantial non-infringing use. Substantial non-infringing uses are defined as those that are not unusual, impractical, or experimental. Factors such as frequency, practicality, intended purpose, and market relevance are considered when assessing substantiality. If a product can be used interchangeably for both infringing and substantial non-infringing purposes, a claim for contributory infringement cannot be sustained. However, having a component with non-infringing uses does not negate liability if the product also includes components that can only be used to infringe a process patent.
The court vacated the grant of summary judgment of non-infringement, ruling that the accused product, while capable of both infringing and non-infringing uses, contained distinct components solely for allegedly infringing methods. The Federal Circuit has established that an infringing product cannot evade liability merely due to the inclusion of a non-infringing component. The Defendant claimed that the AgPhD App had substantial non-infringing uses similar to its Soiltest Pro App, suggesting users could manually enter information rather than scanning it. The court acknowledged this non-infringing use as viable, given the app's design and instructions, thus ruling that the Defendant was not liable for contributory infringement under § 271(c).
The court granted summary judgment of non-infringement on all claims except for Independent Claim 1, while also granting summary judgment of no direct or contributory infringement of Claim 1. Conversely, the court denied the Defendant's motion for summary judgment of invalidity, the request to dismiss the case based on improper venue and lack of personal jurisdiction, and the Plaintiff's motion for summary judgment of infringement. The court noted that the Defendant's motions were not timely filed according to local rules and criticized the affidavit submitted, highlighting its reliance on conclusory statements, legal arguments, and speculative content, which did not meet the standards for admissibility under Rule 56(c)(4). Consequently, the court disregarded parts of the affidavit that failed to comply with these requirements.
The Court interprets the submission as an expert report for summary judgment analysis. The declaration claims that the '857 Patent is invalid under 35 U.S.C. § 102 for anticipation and under § 112 for indefiniteness; however, the Defendant does not raise these arguments in its brief, leading the Court to disregard them. The report references an amendment made to the '857 Patent during prosecution to address a prior art issue, concluding that while the Examiner accepted the amendment, it may have been obvious to a person of ordinary skill in the field. Nonetheless, the determination of what is "not unreasonable" is irrelevant at the summary judgment stage, where the Defendant must demonstrate that no reasonable juror could reach a different conclusion. The Defendant's obligation is to establish obviousness with clear and convincing evidence, as opposed to merely a preponderance of the evidence, which is a higher standard than the "explicit" analysis mandated by the Federal Circuit.
