Case 1:19-cv-00964-CFC-CJB Document 64 Filed 12/23/19 Page 1 of 10 PageID #: 1244
`Case 1:19-cv-00964-CFC-CJB Document 64 Filed 12/23/19 Page 1 of 10 PageID #: 1244
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF DELAWARE
`
`SOUND VIEW INNOVATIONS, LLC,
`
`Plaintiff,
`
`V.
`
`WALMART INC. and VUDU, INC.,
`
`Defendants.
`
`SOUND VIEW INNOVATIONS, LLC,
`
`Plaintiff,
`
`V.
`
`CIGNA CORP. and CIGNA HEALTH
`
`AND LIFE INSURANCE CO.,
`
`
`Defendants.
`
`vvvvvvvvvvvvvvvvvvv
`
`Civil Action No. 19—660-CFC—CJB
`
`Civil Action No. 19—964-CFC—CJB
`
`REPORT AND RECOMMENDATION
`
`Pending before the Court in these patent infringement cases are Defendants Walmart Inc.,
`
`Vudu, Inc. (collectively, the “Walmart Defendants”), Cigna Corp. and Cigna Health and Life
`
`Insurance Company’s (collectively, the “Cigna Defendants” and together with the Walmart
`
`Defendants, “Defendants”) motions to dismiss for failure to state a claim pursuant to Federal
`
`Rule of Civil Procedure 12(b)(6) (the “Motions”). (Civil Action No. 19-660—CFC—CJB (the
`
`“Walmart Action”), D.I. 10; Civil Action No. 19-964-CFC—CJB (the “Cigna Action”), D.I. 12)
`
`In their Motions, Defendants argue for dismissal on the grounds that:
`
`(1) certain patents asserted
`
`by Plaintiff Sound View Innovations, LLC (“Sound View” or “Plaintiff”) are directed to patent-
`
`ineligible subject matter pursuant to 35 U.S.C. § 101 (“Section 101”); and that (2) Sound View is
`
`collaterally estopped from asserting certain other patents in these litigations.1 This Report and
`
`These cases have been referred to the Court to hear and resolve all pretrial
`1
`matters, up to and including expert discovery. (Civil Action No. l9-660-CFC-CJB, Docket Item,
`
`

`

`Case 1:19-cv-00964-CFC-CJB Document 64 Filed 12/23/19 Page 2 of 10 PageID #: 1245
`Case 1:19-cv-00964-CFC-CJB Document 64 Filed 12/23/19 Page 2 of 10 PagelD #: 1245
`
`Recommendation will address the Motions as they relate to the issue of collateral estoppel only.2
`
`For the reasons that follow, the Court recommends that, as to that issue, the Motions be
`
`DENIED.
`
`I.
`
`BACKGROUND3
`
`In the Walmart Action, Sound View asserts five patents against the Walmart Defendants,
`
`including United States Patent No. 5,806,062 (the “'062 patent”). (Civil Action No. 19-660-
`
`CFC-CIB, D.I. 1 at ll 3) In the Cigna Action, Sound View asserts five patents against the Cigna
`
`Defendants, including the '062 patent and United States Patent No. 6,125,371 (the “'371 patent”).
`
`(Civil Action No. 19-964—CFC—CJB, D.I. 1 at 1l 3)
`
`The claims from the '062 and '371 patents that Sound View specifically asserted in its
`
`complaints in these actions have previously been found invalid in other proceedings.
`
`Specifically, Sound View asserts claim 14 of the '062 patent against both sets of Defendants.
`
`April 22, 2019; Civil Action No. 19—964-CFC-CJB, Docket Item, June 5, 2019) The Walmart
`Defendants’ Motion was fully briefed by July 22, 2019, (Civil Action No. 19-660—CFC-CJB, DJ.
`20), and the Cigna Defendants’ Motion was fully briefed by August 23, 2019, (Civil Action No.
`19-964-CFC—CJB, D.I. 18). The Court heard argument on the Motions on December 17, 2019.
`(Civil Action No. 19-660-CFC-CJB, BI. 60; Civil Action No. 19-964-CFC—CJB, BI. 63
`(hereinafter, “Tr.”)) The Court also heard argument regarding a motion to dismiss in related
`case: Sound View Innovations, LLC v. Delta Air Lines, Inc, Civil Action No. 19-659-CFC-CJB,
`in which Defendant Delta Air Lines, Inc. (“Delta”) argues that the patents asserted against it are
`directed to patent—ineligible subject matter pursuant to 35 U.S.C. § 101. (Civil Action No. 19—
`659—CFC-CJB, D.I. 9) Delta’s motion does not raise the issue of collateral estoppel as grounds
`for dismissal, and the Court therefore does not consider Delta’s motion in this Report and
`Recommendation.
`'
`
`The Court will address Defendants’ arguments relating to Section 101 in a
`2
`subsequent Report and Recommendation.
`
`The Court here writes primarily for the parties, who are well familiar with the
`3
`issues in these cases and who, in light of some recent related discovery disputes, desire a prompt
`resolution on the collateral estoppel issue.
`(See, e. g., Civil Action No. 19—964—CFC-CJ‘B, BI.
`59)
`
`2
`
`

`

`Case 1:19-cv-00964-CFC-CJB Document 64 Filed 12/23/19 Page 3 of 10 PageID #: 1246
`Case 1:19-cv-00964-CFC-CJB Document 64 Filed 12/23/19 Page 3 of 10 PageID #: 1246
`
`(Civil Action No. 19—660—CFC—CJB, D1. 1 at 11 85; Civil Action No. 19—964—CFC-CJB, D1. 1 at
`
`11 125) On April 30, 2019, the Honorable John A. Kronstadt of the United States District Court
`
`for the Central District of California issued an order in Sound View Innovations, LLC v. Hulu,
`
`LLC, Civil Action No. 17—4146 JAK (PLAX) granting Hulu, LLC’s “Motion for Partial Summary
`
`Judgment of Invalidity and Noninfringement of” the ‘062 patent, in which the Hulu Court held
`
`that claim 14 of the '062 patent is patent-ineligible under Section 101 (the “Hulu Order”). (Civil
`
`Action No. 19—660-CFC-CJB, D1. 11, ex. A at 4-12) Sound View also asserts claim 8 of the
`
`'371 patent against the Cigna Defendants. (Civil Action No. 19—964-CFC-CJB, D.I. 1 atil 142)
`
`In a trio of decisions issued on April 9, 2019, the United States Patent and Trademark Office’s
`
`Patent Trial and Appeal Board (“PTAB”) found by a preponderance of the evidence that claims
`
`1-3 and 8—10 of the '371 patent are unpatentable under 35 U.S.C. § 103 in connection with inter
`
`partes review proceedings (the “PTAB Decisions”). (Civil Action No. 19—964-CFC-CJB, D.I.
`
`13, exs. B-D)
`
`In their Motions, Defendants argue that, in light of the Hulu Order and the PTAB
`
`Decisions, Sound View is collaterally estopped from asserting these invalidated claims against
`
`them in these actions. (Civil Action No. 19-660~CFC-CJB, D.I. 11 at 3~5; D1. 20 at 1—3; Civil
`
`Action No. 19-964-CFC—CJB, D1. 13 at 3-6; D.I. 18 at 1-3) Because collateral estoppel applies,
`
`Defendants assert that dismissal of the claims as to these patents is warranted, as Sound View
`
`fails to “‘state a claim to relief that is plausible on its face’” with respect to these claims. (See
`
`Civil Action No. 19-964-CFC-CJB, D.I. 13 at 6) Sound View, for its part, argues that collateral
`
`estoppel does not bar Sound View’s claims of infringement with respect to the '062 and '371
`
`patents, and that the cases as to these patents should instead be stayed pending appeals of the
`
`

`

`Case 1:19-cv-00964-CFC-CJB Document 64 Filed 12/23/19 Page 4 of 10 PageID #: 1247
`Case 1:19-cv-00964-CFC-CJB Document 64 Filed 12/23/19 Page 4 of 10 PageID #: 1247
`
`Hulu Order and PTAB Decisions. (Civil Action No. l9—660-CFC—CJB, D.I. 18 at 2-5; Civil
`
`Action No. 19-964-CFC-CJB, D.I. 17 at 1-4)
`
`11.
`
`STANDARD OF REVIEW
`
`A.
`
`Motion to Dismiss Under Rule 12(b)(6)
`
`The standard of review here is the familiar two-part analysis applicable to motions made
`
`pursuant to Rule 12(b)(6). First, the court separates the factual and legal elements of a claim,
`
`accepting “all of the complaint’s well-pleaded facts as true, but [disregarding] any legal
`
`conclusions.” Fowler v. UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir. 2009). Second, the
`
`court determines “whether the facts alleged in the complaint are sufficient to show that the
`
`plaintiff has a ‘plausible claim for relief.” Id. at 211 (quoting Ashcroft v. Iqbal, 556 U.S. 662,
`G“
`
`679 (2009)). In assessing the plausibility of a claim, the court must
`
`construe the complaint in
`
`the light most favorable to the plaintiff, and determine whether, under any reasonable reading of
`
`the complaint, the plaintiff may be entitled to relief.” Id. at 210 (quoting Phillips v. Cty. of
`
`Allegheny, 515 F.3d 224, 233 (3d Cir. 2008)).
`
`B.
`
`Collateral Estoppel
`
`The doctrine of collateral estoppel (also known as issue preclusion) precludes a party
`
`from relitigating an issue that has previously been decided in another judicial proceeding.
`
`Anderson v. Gen. Motors LLC, Civ. No. 18—621—LPS, 2019 WL 4393177, at *4 (D. Del. Sept. 13,
`
`2019). Under the law of the United States Court of Appeals for the Third Circuit, collateral
`
`estoppel applies if: (1) the identical issue was previously adjudicated; (2) the issue was actually
`
`litigated; (3) the previous determination of the issue was necessary to the decision; and (4) the
`
`party being precluded from relitigating the issue was fully represented in the prior action. Stone
`
`v. Johnson, 608 F. App’x 126, 127 (3d Cir. 2015); Jean Alexander Cosmetics, Inc. v. L ’Oreal
`
`4
`
`

`

`Case 1:19-cv-00964-CFC-CJB Document 64 Filed 12/23/19 Page 5 of 10 PageID #: 1248
`Case 1:19-cv-00964-CFC-CJB Document 64 Filed 12/23/19 Page 5 of 10 PageID #: 1248
`
`USA, Inc. , 458 F.3d 244, 249 (3d Cir. 2006).4 The Third Circuit also considers whether the party
`
`being precluded had a full and fair opportunity to litigate the issue in question in the prior action,
`
`and whether the issue was determined by a final and valid judgment. Free Speech Coal, Inc. v.
`
`Attorney Gen. 0fU.S., 677 F.3d 519, 541 (3d Cir. 2012); Jean Alexander, 458 F.3d at 249.
`
`III.
`
`DISCUSSION
`
`'
`
`In the parties’ briefing, the only element of collateral estoppel in dispute here is whether
`
`the Hulu Order and PTAB Decisions constitute final judgments. Therefore, the Couit’s analysis
`
`focuses on this issue.
`
`There is no bright-line rule regarding what constitutes a “final judgment” for issue
`
`preclusion purposes. Free Speech Coal, 677 F.3d at 541. However, “a prior adjudication of an
`
`issue in another action must be sufficiently firm to be accorded conclusive effect.” Id. (internal
`
`quotation marks and citation omitted). “[F]inality for purposes of issue preclusion is a more
`
`pliant concept than it would be in other contexts, and [it] may mean little more than that the
`
`litigation of a particular issue has reached such a stage that a court sees no really good reason for
`
`permitting it to be litigated again.” Id. (internal quotation marks and citation omitted). To
`
`determine whether a prior ruling was “sufficiently firm” for preclusion purposes, couits should
`
`consider factors including, but not limited to, the following:
`
`(1) whether the parties were fully
`
`heard; (2) whether a reasoned opinion was filed; and (3) whether that decision could have been,
`
`or actually was, appealed.
`
`Id. None of these factors alone are dispositive.
`
`Id.
`
`The law of the regional circuit applies to the issue of collateral estoppel. See, e. g. ,
`4
`Allergan, Inc. v. Sandoz, Inc, 681 F. App’x 955, 959 (Fed. Cir. 2017); H0 Keung Tse v. Apple
`Inc, 635 F. App’x 864, 866 (Fed. Cir. 2015).
`
`5
`
`

`

`Case 1:19-cv-00964-CFC-CJB Document 64 Filed 12/23/19 Page 6 of 10 PageID #: 1249
`Case 1:19-cv-00964-CFC-CJB Document 64 Filed 12/23/19 Page 6 of 10 PageID #: 1249
`
`In light of the particular circumstances at play here, for the following three reasons, the
`
`Court recommends that:
`
`(1) Defendants’ Motions be denied; and (2) the cases be stayed (not
`
`dismissed) as to the '062 and '371 patents.
`
`First, the Coult notes that the Third Circuit’s decision in Free Speech Coal, Inc. v.
`
`Attorney Gen. of US, 677 F.3d 519 (3d Cir. 2012) provides some support to Plaintiffs position.
`
`In that case, the plaintiffs had brought an action against the government in the United States
`
`District Court for the District of Colorado (the “District of Colorado”) challenging the
`
`constitutionality of 18 U.S.C. § 2257 (a criminal law imposing recordkeeping, labeling, and
`
`inspection requirements on producers of sexually explicit depictions). 677 F.3d at 524, 540. The
`
`District of Colorado granted partial summary judgment for the government.
`
`Id. at 540. The
`
`plaintiffs then moved to alter or amend (“motion to amend”) that decision pursuant to Federal
`
`Rule of Civil Procedure 59, asserting that the facts of the case had drastically changed since
`
`briefing on the summary judgment motion. Id. at 540-41. While the plaintiffs’ motion to amend
`
`was pending, plaintiffs moved for dismissal of the case without prejudice pursuant to Federal
`
`Rule of Civil Procedure 41(a)(2).
`
`Id. at 541. The motion for dismissal was unopposed, and the
`
`District of Colorado granted the motion and dismissed the complaint without prejudice. Id. A
`
`group of plaintiffs including certain of the same plaintiffs (“FSC and Conners”) thereafter filed
`
`an action challenging Section 2257 in the United States District Court for the Eastern District of
`
`Pennsylvania (the “Eastern District of Pennsylvania”).
`
`Id. at 525, 529. The government moved
`
`to dismiss, arguing that, inter alia, FSC and Conners were barred by issue preclusion from
`
`challenging the constitutionality of Section 2257.
`
`Id. The district court granted the motion. Id.
`
`at 525, 529, 541.
`
`The Third Circuit disagreed. While it found the circumstances to present a “close call[,]”
`
`6
`
`

`

`Case 1:19-cv-00964-CFC-CJB Document 64 Filed 12/23/19 Page 7 of 10 PageID #: 1250
`Case 1:19-cv-00964-CFC-CJB Document 64 Filed 12/23/19 Page 7 of 10 PageID #: 1250
`
`the Free Speech Court ultimately determined that the District of Colorado’s grant of the partial
`
`motion for summary judgment was not “sufficiently firm” to be afforded preclusive effect.
`
`Id. at
`
`541. It reached this conclusion because:
`
`(1) subsequent to the District of Colorado’s grant of
`
`partial summary judgment, FSC and Conners remained as parties in that action and continued to
`
`maintain certain challenges to the statute at issue; (2) a final judgment had never been issued in
`
`that case with respect to all claims brought by FSC and Conners, such that the District of
`
`Colorado’s order granting partial summary judgment was never appealable; (3) at the time that
`
`the District of Colorado ultimately dismissed the case, the motion to amend the order in question
`
`was still pending before the district court; and (4) there was no indication that FSC or Conners
`
`were forum shopping or otherwise committing an abuse of process by bringing the instant claims
`
`in the Eastern District of Pennsylvania. Id. Free Speech is not on all fours with the facts of this
`
`case, as (for example) Sound View did not file a motion to amend (or a similar motion asking the
`
`factfinder to reconsider its decision) with regard to the Hulu Order, nor with regard to the
`
`PTAB’S decisions. But at a minimum, Free Speech suggests that if the relevant decision in
`
`another court may be appealable in the future or has not yet been resolved on appeal, and if (as
`
`here) there is no indication that the plaintiff is bringing the additional case in bad faith, then the
`
`equities could ultimately weigh in favor of non-dismissal of the similar claim in a later case.
`
`(See Tr. at 134—35)5
`
`Defendants rely, inter alia, on Intellectual Ventures 1, LLC v. Capital One Fin.
`5
`Corp, 850 F.3d 1332 (Fed. Cir. 2017) in support of their position. (Civil Action No. 19-660-
`CFC—CJB, D.I. 11 at 5; Civil Action No. 19-964-CFC-CJB, D.I. 13 at 6) In that case, the United
`States Court of Appeals for the Federal Circuit affirmed a decision of the United States District
`Court of the District of Maryland, which had barred the plaintiff from pursuing infringement
`claims of a patent that had been found invalid under Section 101 by the United States District
`Court for the Southern District of New York. 850 F.3d at 1334-35. However, in rendering its
`decision, the Federal Circuit repeatedly noted that it was applying Fourth Circuit law to the
`7
`
`

`

`Case 1:19-cv-00964-CFC-CJB Document 64 Filed 12/23/19 Page 8 of 10 PageID #: 1251
`Case 1:19-cv-00964-CFC-CJB Document 64 Filed 12/23/19 Page 8 of 10 PageID #: 1251
`
`Second, under the circumstances here, the Court cannot be blind to the real-world impact
`
`for Sound View were the Motions to be granted. The '371 patent is expired, and appears to have
`
`expired in 2017. (Civil Action No. 19-964, D1. 1, ex. E at 1; Tr. at 128) The '062 patent expired
`
`in 2015. (Civil Action No. 19-964, D1. 1, ex. D at 1; Tr. at 128, 139) Ifthe Court found that
`
`Sound View was collaterally estopped from asserting these patents here and granted dismissal,
`
`but then the Hulu Order and/or PTAB Decisions were later overturned on appeal, the result could
`
`be that Sound View would be left without the ability to collect much or any damages with
`
`respect to infringement of the '062 and '371 patents, were Sound View to later wish to file new
`
`cases as to those patents. (See Tr. at 138-41) In contrast, staying these actions as to these patents
`
`would maintain “the status quo for Sound View’s damages claim under 35 U.S.C. § 286[.]”
`
`(Civil Action No. 19-964—CFC-CJB, D.I. 17 at 3-4); see also, e. g., Buck v. Palmer, Case No. A-
`
`08-CA-572-SS, 2009 WL 10674187, at *2 (W.D. Tex. Mar. 9, 2009) (concluding that a stay of
`
`the litigation was the equitable remedy because it would maintain the status quo for the parties,
`
`and where the defendant’s ideal remedy would be to apply collateral estoppel, but that solution
`
`could force plaintiffs to forego damages because they would be forced to re—file on a later date).
`
`Third, the Court notes that with regard to the '062 patent, the Hulu Order involves an
`
`analysis under Section 101, which is a particularly complex, ever-evolving area of patent law.6
`
`collateral estoppel inquiry and that the Fourth Circuit’s law on this issue seemed particularly
`favorable to the movant’s position. Id. at 1337 (citing Swentek v. USAIR, Inc. , 830 F.2d 552 (4th
`Cir. 1987)). Here, the Third Circuit’s case law, particularly with regard to the Free Speech
`decision, seems a bit more friendly to the non-movant than did the Fourth Circuit’s case law
`discussed in Intellectual Ventures 1.
`
`See, e.g., Interval Licensing LLC v. AOL, Inc, 896 F.3d 1335, 1354—55 (Fed. Cir.
`6
`2018) (Plager, J., concurring-in—part and dissenting-in-part) (“There is little consensus among
`trial judges (or appellate judges for that matter) regarding whether a particular case will prove to
`have a patent with claims directed to an abstract idea, and if so whether there is an ‘inventive
`8
`
`

`

`Case 1:19-cv-00964-CFC-CJB Document 64 Filed 12/23/19 Page 9 of 10 PageID #: 1252
`Case 1:19-cv-00964-CFC-CJB Document 64 Filed 12/23/19 Page 9 of 10 PageID #: 1252
`
`New guidance is regularly provided by the United States Court of Appeals for the Federal
`
`Circuit. See, e.g., Cellspin Soft, Inc. v. Fitbit, Inc, 927 F.3d 1306, 1319 (Fed. Cir. 2019)
`
`(clarifying that issued patents are presumed patent eligible); Berkheimer v. HP Inc, 881 F.3d
`1360, 1370 (Fed. Cir. 2018) (clarifying that whether claims to computer technology perform
`
`well—understood, routine and conventional activities to a skilled artisan may implicate fact
`
`questions that preclude a finding of patent ineligibility as a matter of law). The Hulu Order is a
`
`detailed—and no doubt thorough—decision as to the patent eligibility of claim 14 of the '062
`
`patent. (Civil Action No. 19-660-CFC-CJB, D1. 11, ex. A) Yet in light of the unsettled state of
`
`the law with respect to Section 101, appellate reversal is certainly possible (and presumably
`
`more likely as to a Section 101 issueas compared to an issue relating to other, less-constantly-
`
`evolving areas of patent law). In that respect, the Court cannot say that the Hula Order is
`
`“sufficiently firm” such that it should be accorded preclusive effect.
`
`IV.
`
`CONCLUSION
`
`For the foregoing reasons, the Court recommends that Defendants’ Motions be DENIED.
`
`Further, the Court orders that:
`
`(1) the Walmart Action and Cigna Action be STAYED with
`
`respect to the '062 patent, pending the resolution of the appellate process as to the Hula Order (or
`
`absent further order of the Court); and (2) the Cigna Action be STAYED with respect to the ’371
`
`concept’ in the patent to save it”); United Cannabis Corp. v. Pure Hemp Collective Inc, Civil
`Action No. 18-cv-1922-WJM—NYW, 2019 WL 1651846, at *5 (D. Colo. Apr. 17, 2019) (“[T]he
`proper application of the Supreme Court’s Alice standard is an evolving and sometimes hazy area
`of law”); Location Based Servs., LLC v. Niantz'c, Inc, Case No. 17-cv—04413 NC, 2018 WL
`7569160, at *2 (ND. Cal. Feb. 16, 2018) (“The law under [Section] 101 is developing and
`quickly changing, and the question of whether a patent is directed at an abstract idea or whether
`it discloses an innovative concept is not easy to answer.”); YYZ, LLC v. Pegasystems, Inc, Civ.
`No. 13—581-SLR, 2016 WL 1761955, at *1 (D. Del. May 2, 2016) (“[T]he [Section] 101 analysis
`is an evolving state of the law and a difficult exercise[.]”).
`9
`
`

`

`Case 1:19-cv-00964-CFC-CJB Document 64 Filed 12/23/19 Page 10 of 10 PageID #: 1253
`Case 1:19-cv-00964-CFC-CJB Document 64 Filed 12/23/19 Page 10 of 10 PageID #: 1253
`
`patent pending resolution of the appeal of the PTAB Decisions at the Federal Circuit (or absent
`
`further order of the Court).7
`
`This Report and Recommendation is filed pursuant to 28 U.S.C. § 63 6(b)(1)(B), Fed. R.
`
`Civ. P. 72(b)(1), and D. Del. LR 72.1. The parties may serve and file specific written objections
`
`within fourteen (14) days after being served with a copy of this Report and Recommendation.
`
`Fed. R. Civ. P. 72(b)(2). The failure of a party to object to legal conclusions may result in the
`
`loss of the right to de novo review in the district court. See Henderson v. Carlson, 812 F.2d 874,
`
`878-79 (3d Cir. 1987); Sincavage v. Barnharf, 171 F. App’x 924, 925 n.1 (3d Cir. 2006).
`
`The parties are directed to the Court’s Standing Order for Objections Filed Under Fed. R.
`
`Civ. P. 72, dated October 9, 2013, a copy of which is available on the District Court’s website,
`
`located at http://www.ded.uscourts. gov.
`
`Dated: December 23, 2019
`
`W £1' W
`
`
`
`Christopher J. Burke
`UNITED STATES MAGISTRATE JUDGE
`
`With the exception that by no later than 14 days from today’s date, Sound View
`7
`shall send Defendants a letter indicating, as to the '062 and '371 patents, which claims of those
`patents Sound View is reserving the right to assert in these cases if the stay as to those patents is
`lifted in the future. (See Tr. at 148)
`
`10
`
`