Case 1:17-cv-01692-CFC-SRF Document 48 Filed 12/12/18 Page 1 of 36 PageID #: 1478
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF DELA WARE
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`REAL TIME ADAPTIVE STREAMING
`LLC,
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`Plaintiff,
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`~
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`NETFLIX, INC., and NETFLIX
`STREAMING SERVICES, INC.,
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`Defendants.
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`Civil Action No. 17-1692-CFC-SRF
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`REPORT AND RECOMMENDATION
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`I.
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`INTRODUCTION
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`On November 21, 2017, Realtime Adaptive Streaming LLC ("Realtime") originally filed
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`this patent infringement action against Netflix, Inc. and Netflix Streaming Services, Inc.
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`(collectively, "Netflix"), asserting infringement of United States Patent Numbers 8,934,535 ("the
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`'535 patent"), 9,769,477 ("the '477 patent"), 9,762,907 ("the '907 patent"), and 7,386,046 ("the
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`'046 patent") ( collectively, the "Fallon patents"). 1 (D.I. 1 at ,r 8) Additionally, Realtime asserts
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`Netflix's infringement of United States Patent Numbers 8,634,462 ("the '462 patent") and
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`9,578,298 ("the '298 patent") (collectively, the "Non-Fallon patents"). (Id.) Realtime is the
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`owner by assignment of the patents-in-suit, which relate to the concept of encoding and decoding
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`data, and the digital compression of data. (Id. at ,r,r 9-14) Pending before the court is the motion
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`to dismiss the Fallon patent claims for failure to state a claim pursuant to Federal Rule of Civil
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`1 The Complaint's paragraphs are numbered incorrectly. On pages 45 to 46, ,r 95 is followed by
`,r 77 and, as a result, ,r,r 77-95 are duplicated. (See D.I. 1 at 45-46) Citations to D.I. 1 at ,r,r 77-
`95 shall be followed by a page number or series of pages numbers in parentheses for clarity (i.e.,
`See D.I. 1 at ,r 77-95 (pg. 38-45)).
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`

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`Case 1:17-cv-01692-CFC-SRF Document 48 Filed 12/12/18 Page 2 of 36 PageID #: 1479
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`Procedure 12(b)(6) and 35 U.S.C. §101, the Non-Fallon patent claims pursuant to Federal Rule
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`of Civil Procedure l 2(b )( 6), and the indirect infringement claims pursuant to Federal Rule of
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`Civil Procedure 12(b)(6). (D.I. 11) For the following reasons, I recommend granting-in-part and
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`denying-in-part Netflix's motion to dismiss.
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`II.
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`BACKGROUND
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`A. Procedural History
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`On February 5, 2018, Netflix filed this pending motion to dismiss for failure to state a
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`claim. (D.I. 11) On April 10, 2018, Realtime filed a motion to transfer pursuant to 28 U.S.C. §
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`1407 with the United States Judicial Panel on Multidistrict Litigation ("the Panel") to consolidate
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`in the District of Colorado actions it originally brought in Delaware, California, Texas,
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`Massachusetts, and Colorado. (D.I. 19) On May 1, 2018, Netflix also filed a motion to transfer
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`the present case to the Northern District of California. (D.I. 20) On August 1, 2018, the Panel
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`denied Realtime's motion due to the need for defendant-by-defendant analysis of individual
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`design elements. (D.I. 3 7)
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`On October 2, 2018, the court heard oral argument on the pending motion to dismiss.2
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`(D.I. 42) On October 12, 2018, this court issued a Report and Recommendation denying
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`Netflix's motion to transfer. (D.I. 44) District Judge Colm F. Connolly adopted the Report and
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`Recommendation on November 9, 2018. (D.I. 46)
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`B. Related Cases
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`There is a related Realtime case currently pending before the court, Realtime Adaptive
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`Streaming LLC v. Haivision Network Video Inc., C.A. No. 17-1520-CFC-SRF (the "Haivision
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`2 At oral argument, the court also heard arguments regarding a similar motion to dismiss in a
`related case, Realtime Adaptive Streaming LLC v. Haivision Network Video Inc., C.A. No. 17-
`1520-CFC-SRF. (D.I. 42; see also C.A. No. 17-1520-CFC-SRF, D.I. 23)
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`2
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`Litigation").3 In the Haivision Litigation, Realtime asserts claims for infringement of the Fallon
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`patents, as well as U.S. patent No. 8,929,442 ("the '442 patent"). (C.A. No. 17-1520-CFC-SRF,
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`D.I. 1) There is a pending motion to dismiss the complaint for failure to state a claim pursuant to
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`Rule 12(b)(6) and 35 U.S.C. § 101 filed by Haivision. (C.A. No. 17-1520-CFC-SRF, D.I. 23)
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`C. Patents-in-Suit
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`The '535 patent is titled "Systems and Methods for Video and Audio Data Storage and
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`Distribution." (D.I. 1 at ,r 11) Representative claim 15 recites:
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`15. A method, comprising:
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`Determining a parameter of at least a portion of a data block;
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`Selecting one or more asymmetric compressors from among a plurality of compressors
`based upon the determined parameter or attribute;
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`Compressing the at least the portion of the data block with the selected one or more
`asymmetric compressors to provide one or more compressed data blocks; and
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`Storing at least a portion of the one or more compressed data blocks.
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`('535 patent, col. 22:1-12) The '477 patent is titled "Video Data Compression Systems." (D.1. 1
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`at ,r 14) Representative claim 1 recites:
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`1. A system, comprising:
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`A plurality of different asymmetric data compression encoders,
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`3 Two other related cases were before this court: (1) Realtime Adaptive Streaming LLC v.
`Brightcove Inc. et al, C.A. No. 17-1519-CFC-SRF (the "Brightcove Litigation"), and (2)
`Realtime Adaptive Streaming LLC v. Sony Electronics, Inc., C.A. No. 17-1693-CFC-SRF (the
`"Sony Litigation"). The parties in the Brightcove Litigation filed a joint motion to dismiss on
`October 29, 2018. (C.A. No. 17-1519-CFC-SRF, D.I. 40) On October 31, 2018, Judge Connolly
`dismissed plaintiffs claims with prejudice and defendant's claims without prejudice. (C.A. No.
`17-1519-CFC-SRF, D.I. 41) The parties in the Sony Litigation also filed a joint motion to
`dismiss on November 1, 2018. (C.A. No. 17-1693-CFC-SRF, D.I. 27) On November 5, 2018,
`Judge Connolly dismissed plaintiffs claims with prejudice and defendant's claims without
`prejudice. (C.A. No. 17-1693-CFC-SRF, D.I. 28)
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`3
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`Wherein each asymmetric data compression encoder of the plurality of different
`asymmetric data compression encoders is configured to utilize one or more data
`compression algorithms, and
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`Wherein a first asymmetric data compression encoder of the plurality of different
`asymmetric data compression encoders is configured to compress data blocks containing
`video or image data at a higher data compression rate than a second asymmetric data
`compression encoder of the plurality of different asymmetric data compression encoders;
`and
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`One or more compressors configured to:
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`Determine one or more data parameters, at least one of the determined one or more data
`parameters relating to a throughput of a communications channel measured in bits per
`second; and
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`Select one or more asymmetric data compression encoders from among the plurality of
`different asymmetric data compression encoders based upon, at least in part, the
`determined one or more data parameters.
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`('477 patent, col. 20:57-21 :13) The '907 patent is titled "System and Methods for Video and
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`Audio Data Distribution." (D.I. 1 at ,r 13) Representative claim 1 recites:
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`1. A system comprising:
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`One or more different asymmetric data compression algorithms, wherein each algorithm
`of the one or more different asymmetric data compression algorithms utilizes one or more
`asymmetric data compression routines of a plurality of different asymmetric data
`compression routines, wherein a first asymmetric data compression routine of the
`plurality of different asymmetric data compression routines is configured to produce
`compressed data with a higher data rate for a given data throughput than a second
`asymmetric data compression routine of the plurality of different asymmetric data
`compression routines; and
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`A processor configured:
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`To analyze one or more data parameters from one or more data blocks containing video
`data, wherein at least one data parameter relates to an expected or anticipated throughput
`of a communications channel; and
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`To select two or more different data compression routines from among a plurality of
`different data compression routines based upon, at least in part, the one or more data
`parameters relating to the expected or anticipated throughput of the communications
`channel.
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`4
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`('907 patent, col. 20:49-21 :6) The '046 patent is titled "Bandwidth Sensitive Data Compression
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`and Decompression." (D.I. 1 at ,r 9) Representative claim 1 recites:
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`1. A method comprising:
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`Compressing data using a first compression routine providing a first compression rate,
`wherein the first compression routine comprises a first compression algorithm;
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`Tracking the throughput of a data processing system to determine if the first compression
`rate provides a throughput that meets a predetermined throughput threshold, wherein said
`tracking throughput comprises tracking a number of pending requests for data
`transmission; and
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`When the tracked throughput does not meet the predetermined throughput threshold,
`compressing data using a second compression routine providing a second compression
`rate that is greater than the first compression rate, to increase the throughput of the data
`processing system to at least the predetermined throughput level, wherein the second
`compression routine comprises a second compression algorithm.
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`('046 patent, col. 20:14-32)
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`III.
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`LEGAL STANDARD
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`A. Federal Pleading Standards under Rule 12(b)(6)
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`Rule 12(b)(6) permits a party to move to dismiss a complaint for failure to state a claim
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`upon which relief can be granted. Fed. R. Civ. P. 12(b )( 6). When considering a Rule 12(b )( 6)
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`motion to dismiss, the court must accept as true all factual allegations in the complaint and view
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`them in the light most favorable to the plaintiff. Umland v. PLANCO Fin. Servs. Inc., 542 F.3d
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`59, 64 (3d Cir. 2008).
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`To state a claim upon which relief can be granted pursuant to Rule 12(b)(6), a complaint
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`must contain a "short and plain statement of the claim showing that the pleader is entitled to
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`relief." Fed. R. Civ. P. 8(a)(2). Although detailed factual allegations are not required, the
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`complaint must set forth sufficient factual matter, accepted as true, to "state a claim to relief that
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`is plausible on its face." Bell At!. Corp. v. Twombly, 550 U.S. 544, 570 (2007); see also Ashcroft
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`5
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`v. Iqbal, 556 U.S. 662, 663 (2009). A claim is facially plausible when the factual allegations
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`allow the court to draw the reasonable inference that the defendant is liable for the misconduct
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`alleged. Iqbal, 556 U.S. at 663; Twombly, 550 U.S. at 555-56.
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`When determining whether dismissal is appropriate, the court must take three steps. 4 See
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`Santiago v. Warminster Twp., 629 F.3d 121, 130 (3d Cir. 2010). First, the court must identify
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`the elements of the claim. Iqbal, 556 U.S. at 675. Second, the court must identify and reject
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`conclusory allegations. Id. at 678. Third, the court should assume the veracity of the well(cid:173)
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`pleaded factual allegations identified under the first prong of the analysis, and determine whether
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`they are sufficiently alleged to state a claim for relief. Id.; see also Malleus v. George, 641 F .3d
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`560, 563 (3d Cir. 2011). The third prong presents a context-specific inquiry that "draw[s] on
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`[the court's] experience and common sense." Iqbal, 556 U.S. at 663-64; see also Fowler v.
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`UPMC Shadyside, 578 F.3d 203,210 (3d Cir. 2009). As the Supreme Court instructed in Iqbal,
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`"where the well-pleaded facts do not permit the court to infer more than the mere possibility of
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`misconduct, the complaint has alleged- but it has not 'show[n]' - 'that the pleader is entitled to
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`relief."' Iqbal, 556 U.S. at 679 (quoting Fed. R. Civ. P. 8(a)(2)).
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`B. Patent Eligibility under 35 U.S.C. § 101
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`Section 101 provides that patentable subject matter extends to four broad categories,
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`including "new and useful process[ es], machine[ s], manufacture, or composition[ s] of matter."
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`35 U.S.C. § 101; see also Bilski v. Kappas, 561 U.S. 593,601 (2010) ("Bilski If'); Diamondv.
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`Chakrabarty, 447 U.S. 303,308 (1980). The Supreme Court recognizes three exceptions to the
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`4 Although Iqbal describes the analysis as a "two-pronged approach," the Supreme Court
`observed that it is often necessary to "begin by taking note of the elements a plaintiff must plead
`to state a claim." 556 U.S. at 675, 679. For this reason, the Third Circuit has adopted a three(cid:173)
`pronged approach. See Santiago v. Warminster Twp., 629 F.3d 121, 130 n.7 (3d Cir. 2010);
`Malleus v. George, 641 F.3d 560, 563 (3d Cir. 2011).
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`6
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`statutory subject matter eligibility requirements: "laws of nature, physical phenomena, and
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`abstract ideas." Bilski II, 561 U.S. at 601 (internal quotations omitted). In this regard, the
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`Supreme Court has held that "[t]he concepts covered by these exceptions are 'part of the
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`storehouse of knowledge of all men ... free to all men and reserved exclusively to none."' Id. at
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`602 (quoting Funk Bros. Seed Co. v. Kala Inoculant Co., 333 U.S. 127, 130 (1948)). At issue in
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`the present case is the third category pertaining to abstract ideas, which "embodies the
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`longstanding rule that an idea of itself is not patentable." Alice Corp. Pty. Ltd. v. CLS Bank Int 'l,
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`134 S. Ct. 2347, 2355 (2014) (internal quotations omitted).
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`In Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U.S. 66 (2012),
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`the Supreme Court articulated a two-step "framework for distinguishing patents that claim laws
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`of nature, natural phenomena, and abstract ideas from those that claim patent-eligible
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`applications of those concepts." Alice, 134 S. Ct. at 2355. In accordance with the first step of
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`the Alice test, the court must determine whether the claims at issue are directed to a patent(cid:173)
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`ineligible concept, such as an abstract idea. See id. If so, the court must tum to the second step,
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`under which the court must identify an "'inventive concept'-i. e., an element or combination of
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`elements that is 'sufficient to ensure that the patent in practice amounts to significantly more
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`than a patent upon the [ineligible concept] itself."' Id. (internal citation omitted). The two steps
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`are "plainly related" and "involve overlapping scrutiny of the content of the claims." Elec.
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`Power Grp., LLC v. Alstom S.A., 830 F.3d 1350, 1353 (Fed. Cir. 2016).
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`At step 1, "the claims are considered in their entirety to ascertain whether their character
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`as a whole is directed to excluded subject matter." Internet Patents Corp. v. Active Network,
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`Inc., 790 F.3d 1343, 1346 (Fed. Cir. 2015); see also Affinity Labs of Texas, LLC v. DIRECTV,
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`LLC, 838 F.3d 1253, 1257 (Fed. Cir. 2016) ("The 'abstract idea' step of the inquiry calls upon us
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`to look at the 'focus of the claimed advance over the prior art' to determine if the claim's
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`'character as a whole' is directed to excluded subject matter."). However, "courts must be
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`careful to avoid oversimplifying the claims by looking at them generally and failing to account
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`for the specific requirements of the claims." McRO, Inc. v. Bandai Namco Games Am. Inc., 837
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`F.3d 1299, 1313 (Fed. Cir. 2016) (internal quotations and citations omitted). "Whether at step
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`one or step two of the Alice test, in determining the patentability of a method, a court must look
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`to the claims as an ordered combination, without ignoring the requirements of the individual
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`steps." Enjish, LLC v. Microsoft, 822 F.3d 1327, 1338 (Fed. Cir. 2016).
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`At step 2, the Federal Circuit instructs courts to "look to both the claim as a whole and
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`the individual claim elements to determine whether the claims contain an element or
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`combination of elements that is sufficient to ensure that the patent in practice amounts to
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`significantly more than a patent upon the ineligible concept itself." McRO, 837 F.3d at 1312
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`(internal brackets and quotation marks omitted). Under the step 2 inquiry, the court must
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`consider whether claim elements "simply recite 'well-understood, routine, conventional
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`activit[ies]."' Bascom Glob. Internet Servs., Inc. v. AT&T Mobility LLC, 827 F.3d 1341, 1350
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`(Fed. Cir. 2016) (quoting Alice, 134 S. Ct. at 2359) (alteration in original). "Simply appending
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`conventional steps, specified at a high level of generality, [is] not enough to supply an inventive
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`concept." Alice, 134 S. Ct. at 2357 (internal quotations omitted).
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`The Federal Circuit looks to the claims as well as the specification in performing the
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`"inventive concept" inquiry. See Affinity Labs, 838 F.3d at 1271 ("[N]either the claim nor the
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`specification reveals any concrete way of employing a customized user interface."). "The
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`inventive concept inquiry requires more than recognizing that each claim element, by itself, was
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`known in the art." Bascom, 827 F.3d at 1350. In Bascom, the Federal Circuit held that "the
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`limitations of the claims, taken individually, recite generic computer, network and Internet
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`components, none of which is inventive by itself," but nonetheless determined that the patent
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`adequately alleged an ordered combination of these limitations to be patent-eligible under step 2
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`at the pleading stage. Id. at 1349.
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`The "mere recitation of a generic computer cannot transform a patent-ineligible abstract
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`idea into a patent-eligible invention" under step two. Alice, 134 S. Ct. at 2358. "Given the
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`ubiquity of computers ... wholly generic computer implementation is not generally the sort of
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`additional feature that provides any practical assurance that the process is more than a drafting
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`effort designed to monopolize the abstract idea itself." Id. (internal quotations and citations
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`omitted). The Federal Circuit has held that certain improvements in computer software are not
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`abstract ideas under Alice step one. Enjish, LLC v. Microsoft Corp., 822 F.3d 1327, 1335 (Fed.
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`Cir. 2016); see also Visual Memory LLC v. NVIDIA Corp., 867 F.3d 1253, 1259 (Fed. Cir.
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`2017). The relevant question in determining if computer technology is directed to an abstract
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`idea is whether the claims direct to an improvement on computer functionality itself, or an
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`improvement on economic or other tasks for which a computer is merely used as a tool. 5 Enjish,
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`822 F.3d at 1335-36.
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`Patent eligibility under § 101 is a question of law suitable for resolution on a motion to
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`dismiss for failure to state a claim under Rule 12(b)(6). See In re TL! Commc 'ns LLC Patent
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`Litig., 823 F.3d 607,610 (Fed. Cir. 2016) (applying regional circuit law to the de nova review of
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`a district court's patent eligibility determination under§ 101 on a Rule 12(b)(6) motion to
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`5 "Where the claims at issue provide for an improvement in the operation of a computer, such as
`a new memory system, a new type of virus scan, or a new type of interface that makes a
`computer function more accessible, the Federal Circuit has found the claims patent-eligible."
`Epic IP LLC v. Backblaze, Inc., 2018 WL 6201582 (D. Del. Nov. 26, 2018) (citing Data Engine
`Techs. LLC v. Google LLC, 906 F.3d 999 (Fed. Cir. 2018)).
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`9
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`dismiss). However, the Federal Circuit recently emphasized that, "like many legal questions,
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`there can be subsidiary fact questions which must be resolved en route to the ultimate legal
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`determination." Aatrix Software, Inc. v. Green Shades Software, Inc., 882 F.3d 1121, 1128 (Fed.
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`Cir. 2018). "The question of whether a claim element or combination of elements is well(cid:173)
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`understood, routine and conventional to a skilled artisan in the relevant field is a question of
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`fact[]" that goes beyond what was simply known in the prior art. Berkheimer v. HP Inc., 881
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`F.3d 1360, 1368 (Fed. Cir. 2018). On a motion to dismiss, this question of fact, like all questions
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`of fact, must be resolved in the plaintiffs favor. Aatrix Software, Inc., 882 F.3d at 1128.
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`IV.
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`DISCUSSION
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`A. Alice Step 1
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`Applying the first step of the Alice framework to the asserted claims, the court concludes
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`that the Fallon patents are directed to the abstract idea of encoding and decoding data, and the
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`digital compression of data. As a preliminary matter, the court addresses a few recurring
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`arguments between Netflix and Realtime. First, Netflix claims the representative claims are:
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`claim 15 of the '535 patent, claim 1 of the '477 patent, claim 1 of the '907 patent, and claim 1 of
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`the '046 patent. (D.I. 13 at 8, 11, 13, 14) Realtime does not explain why the court should not
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`consider the claims representative in arguing that Netflix has failed to address each claim
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`separately. (D.I. 14 at 15) Under Content Extraction and Transmission LLC v. Wells Fargo
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`Bank, Nat. Ass 'n, 776 F.3d 1343 (Fed. Cir. 2014), each claim does not need to be repeatedly
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`attacked individually, so long as "all the claims are substantially similar and linked to the same
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`abstract idea." Content Extraction, 776 F.3d at 1348 (internal quotations and citations omitted).
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`Here, the court recommends finding that that the above listed claims are representative of
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`each of the Fallon patents. Similar to the plaintiff in Content Extraction, Realtime has not
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`identified claims that "it believe[s] would not be fairly represented" by these claims in a§ 101
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`analysis. Id. Nor has Realtime identified "any other claims as purportedly containing an
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`inventive concept." Id. Ultimately, Realtime has failed to "present any meaningful argument for
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`the distinctive significance of any claim limitations not found in the representative claim[ s]."
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`Berkheimer, 881 F.3d at 1365 (citing Elec. Power Grp., 830 F.3d at 1352; Intellectual Ventures I
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`LLCv. Symantec Corp., 838 F.3d 1307, 1316 & n.9 (Fed. Cir. 2016)). Therefore, for the purpose
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`of our§ 101 analysis, claim 15 of the '535 patent, claim 1 of the '477 patent, claim 1 of the '907
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`patent, and claim 1 of the '046 patent are representative of the Fallon patents.
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`Additionally, Realtime contends that claim construction should be completed to
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`"illuminate the eligibility of the patents" prior to any§ 101 analysis. (D.I. 14 at 15-16)
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`However, "claim construction is not an inviolable prerequisite to a validity determination under§
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`101." Content Extraction, 776 F.3d at 1349 (affirming the district court's dismissal of the patent
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`claims as "patent-ineligible under § 101 at the pleading stage"); see also GIP Techs., Inc. v.
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`Amazon.com, Inc., 788 F.3d 1359, 1360-62 (Fed. Cir. 2015) (affirming dismissal on the
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`pleadings); Ultramercial, Inc. v. Hulu, LLC, 772 F.3d 709, 717 (Fed. Cir. 2014) (affirming Rule
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`12(b)(6) dismissal); Modern Telecom Sys. LLC v. Juno Online Servs., Inc., 2015 WL 1240182, at
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`*7 (C.D. Cal. Mar. 17, 2015) ("[A]fter Alice, courts have frequently decided patent-eligibility on
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`the pleadings."). Realtime does not identify any claim construction issues that need resolution or
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`any facts in dispute. See Smart Software, Inc. v. PlanningEdge, LLC, 192 F. Supp. 3d 243,247
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`(D. Mass. 2016) (deciding§ 101 eligibility without claim construction where plaintiff failed to
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`offer any specific claim construction issues that would affect the analysis). Therefore, claim
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`construction is not necessary and determining whether the patents-in-suit are patent eligible
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`under § 101 is appropriate at this stage of the proceedings.
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`11
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`Finally, Realtime argues that the court must find the patents-in-suit patent eligible
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`because other courts have so held. (D.I. 14 at 6-7). However, these cases were decided by the
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`District Courts for the District of Colorado, Eastern District of Texas, and Central District of
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`California. (Id.; D.I. 45, Ex. 1) These decisions are not binding on this court and remain only
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`persuasive authority.
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`i. The '535 Patent
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`Realtime contends that the '535 patent marked an improvement in computer functionality
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`because it "overcame limitations and issues relating to 'a compromise between efficient data
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`storage, access speed, and addressable data space."' (D.I. 14 at 10) (citing '535 patent at col.
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`6:31-53) However, Realtime has not identified how the '535 patent solved these issues, or how
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`the solution is reflected in the claim language. Instead, Realtime repeatedly concludes that the
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`Fallon patents provide "technical solutions to technical problems" and are directed to a
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`"particularized subset of novel digital data compression." (Id. at 3, 11) Realtime does not
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`provide any evidence to support these statements, or provide any clarity as to what
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`"particularized subset" of data compression the Fallon patents are directed.
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`The '535 patent does not improve the functioning of a computer. Claim 15 of the '535
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`patent is drawn to the abstract idea of: (1) determining a parameter, (2) selecting a method of
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`compression, (3) compressing the data with the chosen algorithm, and (4) storing the data. The
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`claims use a wholly generic computer system to obtain functional results of determining a
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`parameter, selecting a compression algorithm, applying that algorithm, and storing the resulting
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`data, with no technical detail describing how to achieve those results. The claims of the '535
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`patent "do[] not sufficiently describe how to achieve" the results "in a non-abstract way." Two(cid:173)
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`Way Media Ltd. v. Comcast Cable Commc 'ns, LLC, 874 F.3d 1329, 1337 (Fed. Cir. 2017).
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`Case 1:17-cv-01692-CFC-SRF Document 48 Filed 12/12/18 Page 13 of 36 PageID #: 1490
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`Similar claims that recite a computer "evaluating and selecting" have been found to be abstract
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`and patent ineligible. See SmartGene, Inc. v. Advanced Biological Labs., SA, 555 F. App'x 950,
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`955 (Fed. Cir. 2014) The Federal Circuit has also found that "the concept of data collection,
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`recognition, and storage is undisputedly well-known." Content Extraction, 776 F.3d at 1347.
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`Netflix asserts that claim 15 of the '535 patent is strikingly similar to the patent at issue
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`in RecogniCorp, LLC v. Nintendo Co., Ltd., 855 F.3d 1322 (Fed. Cir. 2017). (D.I. 13 at 8)
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`Realtime argues that the method described in claim 15 of the '535 patent differs from that in
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`RecogniCorp because the method cannot be performed verbally, does not claim mathematical
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`formulas, and discusses data "not easily recognizable to humans." (D.I. 14 at 8) (citing '535
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`patent, col. 2:28-30) These distinctions are not relevant and Realtime fails to focus on the
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`subject matter of the claims as a whole. See RecogniCorp, 855 F.3d at 1326. The method
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`described in the '535 patent resembles that in RecogniCorp, which described a method of
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`displaying facial feature images, selecting and manipulating the inputs, deriving an output code,
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`and reproducing the composite image on a second display by performing the sequence in reverse.
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`Id. at 1324-25. The Federal Circuit concluded that the patent was directed to the "abstract idea
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`of encoding and decoding image data," and was essentially a process that "started with data,
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`added an algorithm, and ended with a new form of data." Id. at 1326-27 (citing Digitech Image
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`Techs., LLC v. Elecs. for Imaging, Inc., 758 F.3d 1344, 1350-51 (Fed. Cir. 2014)). Here, claim
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`15 details a system that applies a compression algorithm based on the data received and then
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`stores the resulting data. The method described here follows the formulaic method of adding an
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`algorithm that changes the data to a new form of data - a method that rendered the claim abstract
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`in RecogniCorp and Digitech.
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`Case 1:17-cv-01692-CFC-SRF Document 48 Filed 12/12/18 Page 14 of 36 PageID #: 1491
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`Because the '535 patent is directed to an abstract idea, the court must then search for an
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`inventive concept according to Alice step two.
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`ii. The '477 Patent
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`Realtime does not provide any specific arguments regarding the '477 patent's patent
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`eligibility. Instead of countering Netflix's arguments regarding each representative claim,
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`Realtime provides arguments addressing all Fallon patents generally. Realtime's briefs linger on
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`certain facets of the '535 patent and, in oral argument, Realtime discussed the '046 patent at
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`length. (D.I. 14 at 10-11; D.I. 42 at 31:22-38:17) However, there are few, if any, arguments
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`specifically addressing the patent eligibility of the other Fallon patents. (See D.I. 14 at 1-11)
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`Realtime generally argues that the Fallon patents provide "technological solutions to
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`technological problems" and improve computer functionalities as a "particularized subset of
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`novel digital data compression." (Id. at 3, 11) Realtime has not mentioned what the specific
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`technological problems the '477 patent purportedly solves, and has not identified where within
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`the claim language one might deduce such an improvement to computer functionality. See
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`Enjish, 822 F.3d at 1335-36; Two-Way, 874 F.3d at 1337.
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`The '4 77 patent is also directed to an abstract idea. Representative claim 1 of the '4 77
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`patent is directed to a system that determines a parameter, selects an encoder, and encodes data.
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`The '477 patent differs from the '535 patent in that at least one of the parameters is a throughput.
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`However, this addition does not render the system described in the '477 patent non-abstract.
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`Like the '535 patent, claim 1 of the '477 patent describes the abstract idea of: (1) determining a
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`parameter, (2) selecting a method of compression, and (3) encoding data. The addition of a
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`throughput does not provide sufficient specificity or improvement to computer functionality that
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`would make the claim non-abstract. "Generic devices do not make a claim non-abstract." 3G
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`Case 1:17-cv-01692-CFC-SRF Document 48 Filed 12/12/18 Page 15 of 36 PageID #: 1492
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`Licensing, S.A. v. Blackberry Ltd., 302 F. Supp. 3d 640,652 (D. Del. 2018).6 Like the '535
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`patent, the claims in the '477 patent utilize a generic computer system to obtain functional results
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`of determining a parameter, selecting a compression algorithm, and applying that algorithm, with
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`no technical detail of how to achieve these results.
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`Courts have found the ideas of both selecting and encoding to be abstract ideas. See
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`SmartGene, 555 F. App'x at 955; RecogniCorp, 855 F.3d at 1326-27. Furthermore, the system
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`described by the '4 77 patent applies an algorithm to a set of data to receive data in a different
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`form, thereby directing the patent towards an abstract idea similar to the method described in
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`RecogniCorp. See RecogniCorp, 855 F.3d at 1326-27. Like claim 15 of the '535 patent, the
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`'477 patent is directed towards an abstract idea and must be analyzed under Alice step two.
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`iii. The '907 Patent
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`Realtime does not provide any specific arguments regarding the '907 patent's patent
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`eligibility and generally states that the Fallon patents are "technological solutions to
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`technological problems." (D.I. 14 at 11) Claim 1 of the '907 patent describes a system
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`comprising different compression algorithms that applies one or more asymmetric data
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`compression routines and a processor that analyzes data parameters and selects two or more data
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`compression routines. This patent is directed to the abstract idea of analyzing and selecting
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`compression routines, prior to encoding with the selected routine.
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`The Federal Circuit has rejected patents directed to the idea of "selecting" as abstract and
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`patent ineligible. See SmartGene, 555 F. App'x at 955 (concluding that a patent reciting that a
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`computer "evaluat[ es] and select[ s ]" was abstract). Claims directed to the idea of encoding and
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`6 A timely appeal of this decision to the Federal Circuit was made on April 23, 2018, but the
`appeal has not yet been decided.
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`15
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`Case 1:17-cv-01692-CFC-SRF Document 48 Filed 12/12/18 Page 16 of 36 PageID #: 1493
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`decoding data have also been held abstract. See RecogniCorp, 855 F.3d at 1326 ("This method
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`reflects standard encoding and decoding, an abstract concept long ut