Case 5:15-cv-02008-EJD Document 80-1 Filed 03/18/16 Page 1 of 8
`Case 5:l5—cv—O2008—EJD Document 80-1 Filed 03/18/16 Page 1 of 8
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`ADDENDUM
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`ADDENDUM
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`Case: 1:14-cv-08053 Document #: 102 Filed: 11/10/15 Page 1 of 7 PageID #:3167Case 5:15-cv-02008-EJD Document 80-1 Filed 03/18/16 Page 2 of 8
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`UNITED STATES DISTRICT COURT
`FOR THE NORTHERN DISTRICT OF ILLINOIS
`EASTERN DIVISION
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`No. 14 C 08053
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`Judge Edmond E. Chang
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`SMART SYSTEMS INNOVATIONS, LLC,
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`Plaintiff,
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`v.
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`CHICAGO TRANSIT AUTHORITY,
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`CUBIC CORPORATION, CUBIC
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`TRANSPORTATION SYSTEMS, INC., and
`CUBIC TRANSPORTATION SYSTEMS
`CHICAGO, INC.,
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`Defendants.
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`ORDER
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`In this patent-infringement case, Smart Systems alleges that the Chicago
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`Transit Authority’s Ventra transit-fare collection system infringes on five patents
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`owned by Smart Systems. As detailed in a prior opinion, the Court deemed invalid
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`four of those patents. R. 81. Specifically, the Court held that U.S. Patent Nos.
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`7,566,003, 7,568,617, 8,505,816, and 8,662,390 were invalid because the patents’
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`claims are directed to a patent-ineligible abstract idea, R. 81 at 10-12, and the
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`claims did not otherwise incorporate an inventive concept that could transform the
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`patent into covering something more than the ineligible concept, R. 81 at 13-17.
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`Accordingly, the four patents were invalid because they sought to claim
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`unpatentable subject matter under 35 U.S.C. § 101.
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`The remaining patent is No. 5,828,044. The defense did not target the ’044
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`patent in the § 101 challenge, and unlike the other four patents, the ’044 does
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`Case: 1:14-cv-08053 Document #: 102 Filed: 11/10/15 Page 2 of 7 PageID #:3168Case 5:15-cv-02008-EJD Document 80-1 Filed 03/18/16 Page 3 of 8
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`appear to cover more-concrete credit-card systems in the three independent claims
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`that are at issue in this case, namely, Claims 1, 6, and 46. Generally speaking, the
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`independent claims describe a non-contacting credit-card system that uses a radio-
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`frequency (RF) card, of a specified type, for a transaction. R. 91-2 at 3, 4. The
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`system includes a terminal that receives the card’s number data via a radio
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`frequency, so there is no need to insert the card into a reader. In turn, the terminal
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`sends the card number data to a computer that checks the card number for approval
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`(or disapproval) of the transaction. The claims reflect various differences from that
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`general description (which is essentially Claim 1), including whether the
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`transaction is specific to a transit system (Claim 6) or a bus (Claim 46) or to a 16-
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`numeral credit-card number (also Claim 46).
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`Rather than litigate this remaining patent to judgment and then enter a final
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`judgment on all the patents, Smart Systems asks that this Court certify the
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`decision on the other four patents for an interlocutory appeal by entering a partial
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`final judgment under Federal Rule of Civil Procedure 54(b). In pertinent part, Rule
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`54(b) says that entry of final judgment on a subset of claims is permitted, though to
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`do so is the exception and not the general practice:
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`the court may direct entry of a final judgment as to one or more, but fewer
`than all, claims or parties only if the court expressly determines that there is
`no just reason for delay.
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`Fed. R. Civ. P. 54(b). The Federal Circuit instructs that “it must be apparent, either
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`from the district court’s order or from the record itself, that there is a sound reason
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`to justify departure from the general rule that all issues decided by the district
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`2
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`Case: 1:14-cv-08053 Document #: 102 Filed: 11/10/15 Page 3 of 7 PageID #:3169Case 5:15-cv-02008-EJD Document 80-1 Filed 03/18/16 Page 4 of 8
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`court should be resolved in a single appeal of a final judgment.” iLor, LLC v. Google,
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`Inc., 550 F.3d 1067, 1072 (Fed. Cir. 2008).1 In determining whether to enter a Rule
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`54(b) judgment, the Court must balance the needs of the parties versus the strong
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`presumption that judicial efficiency generally requires only one appeal at the end of
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`the entirety of the case. See Spraytex, Inc. v. DJS&T, 96 F.3d 1377, 1382 (Fed. Cir.
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`1996). Each time a court gears up to decide a case, including an appeal, it invests
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`time in learning, and re-learning, the case’s procedural background, factual setting,
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`and general legal issues, even if the specific issues are not precisely the same (the
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`district-court analogue to this is generally requiring only one-round of summary-
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`judgment motions, rather than piecemeal motions throughout discovery). And if the
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`appeal would hold-up the trial litigation on the remaining claims, then that delay
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`would also counsel in favor of getting to the finish line and allowing just one appeal.
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`Indeed, there might not ever be an appeal at all, depending on the outcome of the
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`trial litigation. (All of this assumes that the district-court decision on the subset of
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`claims (or parties) really is a “final” one on those claims (or parties). Here, the CTA
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`and the co-defendants do not dispute that the § 101 invalidation of the four patents
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`was final as to those claims for purposes of Rule 54(b).)
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`With those background principles in place, the Court turns to the specifics of
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`this case. Here, there is a sound reason to allow an interlocutory appeal on the four
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`patents: the possibility of avoiding two trials. If the parties move along promptly in
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`the Federal Circuit, then there is a solid chance that the appeal will be decided
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`1 Federal Circuit law applies to Rule 54(b)-certification issues, rather than regional Circuit
`law. Storage Tech. Corp. v. Cisco Sys., Inc., 329 F.3d 823, 830 (Fed. Cir. 2003).
`3
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`Case: 1:14-cv-08053 Document #: 102 Filed: 11/10/15 Page 4 of 7 PageID #:3170Case 5:15-cv-02008-EJD Document 80-1 Filed 03/18/16 Page 5 of 8
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`before the remaining claims go to trial down here in the district court. The ’044
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`patent still requires claim construction; post-construction discovery; and, probably,
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`a round of summary judgment briefing and decision. The proposed appeal would
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`present a question of law on a limited record, and as noted, there is a solid chance of
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`an appellate decision before trial (if there is one) on the ’044 patent. If this Court’s
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`decision is reversed, then the Court will have a chance to put the brakes on before
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`the trial on the ’044 trial, and will have a chance to consolidate the litigation on the
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`four patents into one trial. To hold a jury trial requires significant investment of
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`judicial and, more importantly, community resources, and it would be much better
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`to hold one trial in this case, rather than two.
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`So there is an affirmative reason to allow appeal, but do the usual reasons for
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`waiting (as discussed above) outweigh it? To start, Smart Systems contends that
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`there is no risk that the Federal Circuit would have to decide the same issues twice.
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`Stated at that level of generality, this reason obfuscates the real issue, because it
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`always is the case that there is no need to consider the “same” issue twice: the first
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`appellate decision would always be binding when the same issue arose again. Really
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`the question is, even if the precise “same” issue will not arise again, will there be
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`some overlap or relationship between the proposed appellate issue and the
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`remaining trial-court issues such that the Federal Circuit would have to devote, in a
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`second appeal, the time in re-learning the facts of the litigation, figuring out the
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`applicable legal principles, and applying the principles to facts that are similar to
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`the proposed appeal?
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`Case: 1:14-cv-08053 Document #: 102 Filed: 11/10/15 Page 5 of 7 PageID #:3171Case 5:15-cv-02008-EJD Document 80-1 Filed 03/18/16 Page 6 of 8
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`On overlap and relatedness, Smart Systems first argues that the four
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`patents, claims, specifications, and so on are different from the ’044 patent. R. 83 at
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`6-7. But of course they are different. If the inventors had tried to present essentially
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`the same patents again and again, they presumably would have been rejected. More
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`importantly, however, is what Smart Systems truly is relying on (as its motion
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`eventually does): the patents in substance are so different that the risk of overlap
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`and relatedness is small. For example, Smart Systems points out that the defense
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`cited 25 prior-art references against the remaining patent (the ’044 patent), but at
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`most only three of those 25 references were cited against the other patents. R. 83 at
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`7. It is true that the dissimilarity in prior-art references is some evidence of the
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`dissimilarity of the patents. More to the point, however, is that the specifics of the
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`patents themselves and the parties’ claim-construction briefing (which is now
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`complete, R. 92, 98, 100) show that there is little risk of overlap and relatedness
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`between the proposed appeal and the remaining trial litigation (indeed, Smart
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`Systems says it is ready to continue litigating the ’044 patent even as the proposed
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`appeal is litigated). As discussed above, even the independent claims of the ’044
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`patent describe credit-card systems that are much more concrete2 than the
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`invalidated four patents, and the proposed claim-construction terms (there are
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`seven total, as stated in the briefing, as well as charted-out in R. 101) do not appear
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`to require the Court to refer back to some interpretation of the other four patents.
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`Put another way, the Court acknowledges that it is possible that a district court, in
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`2 The defense does argues that the word “several” in the independent claims is too
`indefinite; of course, the Court reserves judgment on that issue.
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`Case: 1:14-cv-08053 Document #: 102 Filed: 11/10/15 Page 6 of 7 PageID #:3172Case 5:15-cv-02008-EJD Document 80-1 Filed 03/18/16 Page 7 of 8
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`deciding a § 101 challenge, will engage in interpretation of challenged patents in
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`such a way that the interpretation would have some bearing on related,
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`unchallenged patents. But that does not appear to be the case here. The proposed
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`claim-construction terms in ’044’s independent claims simply will not be influenced
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`by the § 101 decision. So, if the proposed appeal is allowed, the Federal Circuit is
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`not likely to be forced into wasting judicial resources by having to gear-up again on
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`a second appeal over related issues.
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`Against this, the defense argues that the accused transit-fare system is the
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`same for the ’044 patent-infringement claim as it is on the other four patents. That
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`is true, as far is it goes. But deciding the § 101 opinion did not require a deep-dive,
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`or really any in-depth examination, of the details of the CTA’s Ventra system. The
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`point of the challenge, and of the decision, was that the four patents themselves are
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`invalid as trying to cover unpatentable subject matter—no matter what system is
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`accused. In view of the absence of a risk of overlap, there is no just reason to await
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`the final end of the case before allowing an appeal on the four invalidated patents.
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`As a final note, though it does not undermine the Rule 54(b)-certification’s
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`propriety, the Court does reject Smart Systems’s other argument, namely, that
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`putting off the appeal of the four patents would keep a “cloud” over these patents
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`and hamper Smart Systems’s ability to enforce them. R. 83 at 8. It is par for the
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`course that a decision in litigation on a subset of claims puts a “cloud” on either the
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`plaintiff or the defendant in the case. In corporate litigation, unless the cloud has a
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`bet-the-company influence on a litigant, then that “cloud” is a business risk that
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`Case: 1:14-cv-08053 Document #: 102 Filed: 11/10/15 Page 7 of 7 PageID #:3173Case 5:15-cv-02008-EJD Document 80-1 Filed 03/18/16 Page 8 of 8
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`corporations routinely bear when engaging in litigation. Non-parties to the
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`litigation, whether they are potential other plaintiffs, defendants, or investors, will
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`analyze the district-court decision bearing in mind that it is a trial-level decision. So
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`there is nothing inherently unjust about a litigant having to deal with the
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`consequences of a trial-level decision on a subset of claims. And, here, there is no
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`record evidence (and Smart Systems did not try to submit any) that the decision has
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`a right-now drastic effect on its business. As mentioned earlier, however, the real
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`benefit to allowing an appeal now is the possibility of avoiding two trials.
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`For the reasons discussed above, Smart Systems’s motion to enter partial
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`judgment under Rule 54(b) is granted. There is no just reason to delay entering
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`judgment against Smart Systems on Counts Two through Five, namely, the
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`infringement claims premised on the ’003, ’617, ’816, and ’390 patents.
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`ENTERED:
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`s/Edmond E. Chang
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`Honorable Edmond E. Chang
`United States District Judge
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`DATE: November 10, 2015
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