Case 2:19-cv-00118-JRG Document 19 Filed 06/20/19 Page 1 of 33 PageID #: 100
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`MARSHALL DIVISION
`
`QUEST NETTECH CORPORATION,
`
`v.
`
`APPLE INC.,
`
`Plaintiff,
`
`Defendant.
`
`§
`§
`§
`§
`§
`§
`§
`§
`§
`
`C.A. No. 2:19-cv-00118-JRG
`
`JURY TRIAL DEMANDED
`
`APPLE INC.’S MOTION TO DISMISS UNDER
`FEDERAL RULE OF CIVIL PROCEDURE 12(b)(6)
`
`1
`
`

`

`Case 2:19-cv-00118-JRG Document 19 Filed 06/20/19 Page 2 of 33 PageID #: 101
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`TABLE OF CONTENTS
`
`INTRODUCTION .......................................................................................................................... 1
`ISSUES TO BE DECIDED ............................................................................................................ 2
`LEGAL STANDARD ..................................................................................................................... 2
`ANALYSIS ..................................................................................................................................... 2
`I.
`THE ’137 PATENT IS INVALID UNDER § 101 .................................................................. 2
`A. Background of the ’137 Patent ..................................................................................... 3
`1. The ’137 Patent Specification ........................................................................... 3
`2. The ’137 Patent Claims ..................................................................................... 5
`B. Patent Eligibility Under § 101 ...................................................................................... 7
`C. Alice Step 1: The Claims are Directed to the Patent-Ineligible Concept of Storing
`Financial Transaction Records in a Portable and Organized Manner ........................... 9
`1. The Claims Preempt Electronic Storage of Financial Transaction Records in a
`Portable and Organized Manner ..................................................................... 12
`2. The Claims Are Not Directed to an Improvement in Computer Functionality
`......................................................................................................................... 14
`D. Alice Step 2: No Claim Elements Transform the Claims Into Patent-Eligible Subject
`Matter .......................................................................................................................... 15
`1. The Independent Claims Recite Only “Well-Understood, Routine, [or]
`Conventional” Computer Components and are Not Transformative .............. 16
`2. Many Dependent Claims Only Add Generic Computer Structure ................. 19
`3. All Other Dependent Claims Merely Adapt the Abstract Idea to a Particular
`Technological Environment ............................................................................ 21
`II. NETTECH’S CLAIMS FOR INDIRECT AND WILLFUL INFRINGEMENT SHOULD
`BE DISMISSED .................................................................................................................... 22
`A. NetTech’s Indirect and Willful Infringement Allegations .......................................... 22
`B. NetTech Does Not Allege that Apple Knew of the ’137 Patent Before It Expired .... 23
`C. NetTech Does Not Adequately Allege Specific Intent for Indirect Infringement ...... 25
`CONCLUSION ............................................................................................................................. 26
`
`ii
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`
`TABLE OF AUTHORITIES
`
`
`
`Page(s)
`
`Cases
`
`Aatrix Software, Inc. v. Green Shades Software, Inc.,
`882 F.3d 1121 (Fed. Cir. 2018)..................................................................................................9
`
`Affinity Labs of Texas v. Amazon.com Inc.,
`838 F.3d 1266 (Fed. Cir. 2016)................................................................................................13
`
`Alice Corp. Pty. Ltd. v. CLS Bank Intl.,
`134 S.Ct. 2347 (2014) ...................................................................................................... passim
`
`Am. Vehicular Scis. LLC v. Mercedes-Benz U.S. Int’l, Inc.,
`No. 6:13cv307 MHS-JDL, 2014 WL 10291478 (E.D. Tex. Feb. 7, 2014) .........................2, 26
`
`Apple, Inc. v. Ameranth, Inc.,
`842 F.3d 1229 (Fed. Cir. 2016)................................................................................................12
`
`Ashcroft v. Iqbal,
`556 U.S. 662 (2009) ...................................................................................................................2
`
`Automated Tracking Sols., LLC v. Coca-Cola Co.,
`723 F. App’x 989 (Fed. Cir. 2018) ............................................................................................9
`
`Babbage Holdings, LLC v. Activision Blizzard, Inc.,
`No. 2:13-cv-750, 2014 WL 2115616 (E.D. Tex. May 14, 2014) ......................................24, 25
`
`Bilski v. Kappos, 561 U.S. 593 (2010) .......................................................................................8, 21
`
`buySAFE, Inc. v. Google, Inc.,
`765 F.3d 1350 (Fed. Cir. 2014)........................................................................................ passim
`
`Clinicomp Int’l, Inc. v. Cerner Corp.,
`No. 17cv2479-GPC(BLM), 2018 WL 2229364 (S.D. Cal. May 16, 2018).......................24, 25
`
`Coinstar, Inc. v. Coinbank Automated Sys., Inc.,
`998 F. Supp. 1109 (N.D. Cal. 1998) ........................................................................................17
`
`Content Extraction & Transmission LLC v. Wells Fargo Bank, Nat’l Ass’n,
`776 F.3d 1343 (Fed. Cir. 2014)........................................................................................ passim
`
`Core Wireless Licensing S.A.R.L. v. Apple Inc.,
`No. 6:14-cv-752-JRG-JDL, 2015 WL 4910427 (E.D. Tex. Aug. 14, 2015) .....................25, 26
`
`DDR Holdings, LLC v. Hotels.com, L.P.,
`773 F.3d 1245 (Fed. Cir. 2014)................................................................................................14
`
`iii
`
`

`

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`
`Digitech Image Techs., LLC v. Elecs. For Imaging, Inc.,
`758 F.3d 1344 (Fed. Cir. 2014)..................................................................................................8
`
`Electric Power Grp., LLC v. Alstom S.A.,
`830 F.3d 1350 (Fed. Cir. 2016)......................................................................................9, 10, 13
`
`Enfish, LLC v. Microsoft Corp.,
`822 F.3d 1327 (Fed. Cir. 2016)................................................................................................14
`
`Global-Tech Appliances, Inc. v. SEB S.A.,
`563 U.S. 754 (2011) .................................................................................................................23
`
`Halo Elecs., Inc. v. Pulse Elecs., Inc.,
`136 S. Ct. 1923 (2016) .............................................................................................................23
`
`Intellectual Ventures I LLC v. Capital One Bank (USA),
`792 F.3d 1363 (Fed. Cir. 2015)..................................................................................................9
`
`Intellectual Ventures II LLC v. Sprint Spectrum, L.P.,
`No. 2:17-cv-00662-JRG-RSP, 2019 WL 1987172 (E.D. Tex. Apr. 4, 2019) ..........................23
`
`Internet Patents Corp. v. Active Network, Inc.,
`790 F.3d 1343 (Fed. Cir. 2015)..................................................................................................9
`
`Interval Licensing LLC v. AOL, Inc.,
`896 F.3d 1335 (Fed Cir. 2018).............................................................................................9, 13
`
`Laguna Hermosa Corp. v. United States,
`671 F.3d 1284 (Fed. Cir. 2012)..................................................................................................2
`
`Mass. Inst. of Tech. v. Abacus Software, Inc.,
`No. 5:01-cv-344, 2004 WL 5268128 (E.D. Tex. Aug. 24, 2004) ......................................24, 25
`
`Maxon, LLC v. Funai Corp., Inc.,
`726 F. App’x 797 (Fed. Cir. 2018) ............................................................................................9
`
`Mortg. Grader, Inc. v. First Choice Loan Servs. Inc.,
`811 F.3d 1314 (Fed. Cir. 2016)................................................................................................15
`
`NobelBiz, Inc. v. Insidesales.com, Inc.,
`No. 6:13-cv-360-MHS, 2014 WL 12378804 (E.D. Tex. Oct. 14, 2014) ...........................23, 26
`
`O’Connor v. Uber Techs., Inc.,
`58 F. Supp. 3d 989 (N.D. Cal. 2014) .......................................................................................17
`
`OIP Techs., Inc. v. Amazon.com, Inc.,
`788 F.3d 1359 (Fed. Cir. 2015)........................................................................................ passim
`
`iv
`
`

`

`Case 2:19-cv-00118-JRG Document 19 Filed 06/20/19 Page 5 of 33 PageID #: 104
`
`Parker v. Flook,
`437 U.S. 584 (1978) .................................................................................................................21
`
`Preservation Wellness Technologies LLC v. Allscripts Healthcare Solutions,
`No. 2:15-CV-1559-WCB, 2016 WL 2742379 (E.D. Tex. May 10, 2016) ...................... passim
`
`Pure Data Sys., LLC v. Ubisoft, Inc.,
`329 F. Supp. 3d 1054 (N.D. Cal. 2018) .............................................................................24, 25
`
`SAP Am. Inc. v. Investpic, LLC,
`898 F.3d 1161 (Fed. Cir. 2018)..................................................................................................9
`
`Smart Sys. Innovations, LLC v. Chicago Transit Auth.,
`873 F.3d 1364 (Fed. Cir. 2017)........................................................................................ passim
`
`Standard Havens Prods., Inc. v. Gencor Indus., Inc.,
`897 F.2d 511 (Fed. Cir. 1990)..................................................................................................17
`
`Superior Indus., LLC v. Thor Global Enters. Ltd.,
`700 F.3d 1287 (Fed. Cir. 2012)................................................................................................26
`
`In re TLI Communs. LLC Patent Litig.,
`823 F.3d 607 (Fed. Cir. 2016).......................................................................................... passim
`
`TriDim Innovations LLC v. Amazon.com, Inc.,
`207 F.Supp.3d 1073 (N.D. Cal. 2016) .....................................................................................13
`
`Ultramercial, Inc. v. Hulu, LLC,
`772 F.3d 709 (Fed. Cir. 2014)..................................................................................................19
`
`Voter Verified, Inc. v. Election Sys. & Software LLC,
`887 F.3d 1376 (Fed. Cir. 2018)..................................................................................................9
`
`Statutes
`
`35 U.S.C. § 101 ...................................................................................................................... passim
`
`35 U.S.C. § 154(a)(2) ...............................................................................................................22, 25
`
`Other Authorities
`
`Fed. R. Evid. 201 ...........................................................................................................................17
`
`Fed. R. Civ. Prod. 12..............................................................................................................1, 2, 17
`
`v
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`

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`Case 2:19-cv-00118-JRG Document 19 Filed 06/20/19 Page 6 of 33 PageID #: 105
`
`INTRODUCTION
`
`Defendant Apple Inc. (“Apple”) moves to dismiss Plaintiff Quest NetTech Corp.’s
`
`(“NetTech”) First Amended Complaint (“FAC,” ECF No. 5) for failure to state a claim under Rule
`
`12(b)(6). NetTech’s FAC should be dismissed in its entirety because the sole asserted patent (U.S.
`
`Reissue Patent No. RE 38,137) does not claim patent eligible subject matter under 35 U.S.C. § 101.
`
`Individuals often have multiple financial accounts that they wish to track. But because the
`
`account records are not “convenient to carry” and may be associated with different institutions,
`
`“labor [is] required to track data” related to account transactions. ’137 Pat. 1:39-58. The NetTech
`
`concept is storing account data for two or more accounts on a single “multiple account electronic
`
`credit card” that a person can carry. See, e.g., id. claim 10. This is nothing more than the common
`
`sense, organizational decision to store an individual’s transaction data on the same instrument used
`
`to conduct the transactions. In other words, the ’137 Patent, at its core, is about the simple, abstract
`
`idea of storing financial transaction records in a portable and organized manner. This is no
`
`different than the age-old ideas of carrying a combined ledger in a briefcase and traveling with two
`
`or more check registers in a purse. The purported innovation is simply the use of conventional
`
`components that have been known since the inception of the art to perform this abstract idea—
`
`essentially “store this information electronically.”
`
`In the alternative, Apple moves to dismiss NetTech’s claims for indirect and willful
`
`infringement. NetTech’s complaint contains no allegations that Apple knew of the ʼ137 Patent
`
`before it expired. Because knowledge of the patent is an essential element of inducement,
`
`contributory infringement, and willfulness, NetTech cannot state a claim for indirect or willful
`
`infringement.
`
`1
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`

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`ISSUES TO BE DECIDED
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`1) Whether the claims of the ’137 patent are invalid under 35 U.S.C. § 101.
`
`2) Whether NetTech has adequately plead indirect and willful infringement where there
`
`is no allegation that Apple knew of the asserted patent before it expired.
`
`LEGAL STANDARD
`
`Under Rule 12(b)(6), a cause of action should be dismissed “when the facts asserted do not
`
`give rise to a legal remedy, or do not elevate a claim for relief to the realm of plausibility.” Laguna
`
`Hermosa Corp. v. United States, 671 F.3d 1284, 1288 (Fed. Cir. 2012) (citations omitted). To
`
`demonstrate plausibility, a plaintiff must go beyond pleading facts that, when assumed to be true,
`
`are “merely consistent with a defendant’s liability” and, instead, must plead facts sufficient to
`
`permit the “reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft
`
`v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks and citations omitted). A complaint
`
`is insufficient to state a claim if it “tenders naked assertion[s] devoid of further factual
`
`enhancement.” Id. (internal quotation marks and citations omitted); accord Am. Vehicular Scis.
`
`LLC v. Mercedes-Benz U.S. Int’l, Inc., No. 6:13cv307 MHS-JDL, 2014 WL 10291478, at *4 (E.D.
`
`Tex. Feb. 7, 2014).
`
`ANALYSIS
`
`I. THE ’137 PATENT IS INVALID UNDER § 101
`
`All of the claims in the ’137 patent are invalid under § 101.
`
`2
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`

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`A. Background of the ’137 Patent
`
`1. The ’137 Patent Specification
`
`The ’137 patent describes a “smart universal financial data card which allows its holder to
`
`keep track of all his financial data and financial transaction data in a highly portable package.”
`
`’137 patent at 2:5-8. But as the specification shows, this “card” was nothing more than the use of
`
`basic, conventional hardware and concepts, which were well-known in the field.
`
`Credit cards were nothing new in 1995 when the priority application for the ’137 patent
`
`was filed. The specification acknowledges that “familiar” credit cards like those from Visa and
`
`MasterCard were well-known—their only alleged flaw being that the “amount and types of data”
`
`they store was “limited.” Id. at 1:17-23. The ’137 patent also acknowledges that the prior art
`
`contained many financial data storage systems, including the ubiquitous Quicken accounting
`
`software from Intuit Corporation for “managing data related to financial accounts and
`
`transactions.” Id. at 1:39-44. The drawbacks the patent identifies for software like Quicken is that
`
`it is not “convenient to carry,” its function “is purely bookkeeping,” and “users would have to
`
`manually enter the transaction data.” Id., 1:45-55. Because of this “additional labor required to
`
`track data related to transactions, users are often discouraged from consistently using these
`
`products to manage their financial data.” Id. at 1:44-57. What the specification alleges as the
`
`invention, then, is simply the storage of the information that is commonly kept in software like
`
`Quicken on a small electronic device the size of a Visa card. Id. at 1:59-67; 6:67-7:4.
`
`The preferred embodiment of the alleged invention of the ’137 patent is the “universal
`
`financial data card” (“UFDC”) depicted in Fig. 2:
`
`3
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`The ’137 patent focuses on the information that the UFDC stores, rather than what the
`
`UFDC is. The stated hallmark of the UDFC is its ability to “store, in an organized manner,
`
`financial transaction records related to multiple accounts from different financial institutions.”
`
`’137 patent at 5:15-18. This “advantageously reduces the number of cards a user has to carry” and
`
`“represents an improvement over the current situation in which the user has to carry one card for
`
`each financial account or each financial institution.” Id. at 5:17-22. In contrast to prior art cards,
`
`which made “the job of reconciling account balances or financial planning difficult,” the UFDC is
`
`said to reduce the “transactional costs (in terms of both time and money)” needed to obtain account
`
`information by querying a central data system. Id. at 5:37-49.
`
`The UFDC itself is comprised of nothing more than a collection of conventional computer
`
`components. All of the components recited in the ’137 patent claims are depicted as generic boxes
`
`in Fig. 2: a standard “processor” (302), “memory circuit” (300), “wireless interface” (318), and
`
`“frequency select circuit” (324). The specification makes clear that even the named inventor
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`4
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`understood them all to be so well-known by persons of ordinary skill in the art that they need not
`
`be described in the patent. For example, there is no new processor described—just reference to a
`
`standard “micro-controller,” such as one from Intel Corp. Id. at 7:45-48. The same is true of the
`
`memory circuit (id. at 7:4-14, referring to standard Intel flash memory) and wireless interface (id.
`
`at 7:64-67, referring to standard RF Monolithics, Inc. transmitter and receiver).
`
`The frequency select circuit (324) is also simply a conventional component, as it is
`
`described in the specification functionally, rather than structurally, and is not described as an
`
`inventive component. Id. at 8:1-21. This is confirmed by the inventor’s repeated admission during
`
`the prosecution of the ’137 patent that the “specific details of the interface for communicating with
`
`a card reader, including the frequency select circuit,” are “not necessary to distinguish [original]
`
`claim 1 over the prior art,” and so the frequency select circuit is not an inventive aspect. See Ex.
`
`A, 1/8/2001 Declaration at 4; Ex. B, 11/7/2002 Further Supplemental Declaration at 2. Indeed,
`
`the removal of the “frequency select circuit” from certain claims was one of the applicant’s bases
`
`for filing a reissue application. Id.
`
`2. The ’137 Patent Claims
`
`All of the ’137 patent claims are directed to the embodiment shown in Fig. 2, with the
`
`UFDC retitled as a “multiple account electronic credit card.” See, e.g., ’137 patent at 5:1-3. The
`
`patent contains 35 claims, of which claims 1, 3, 10, and 33 are independent. Claim 1 is
`
`representative:
`
`1. A multiple account electronic credit card comprising:
`
`a processor for controlling operation of the card;
`a memory circuit for storing financial transaction records of multiple accounts;
`a wireless interface for communication with a card reader;
`a frequency select circuit for communicating with said card reader using any
`one of a number of preselected frequencies;
`
`5
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`said memory circuit also storing holder information and secondary account
`information;
`wherein said holder information comprises name, address, telephone number
`and personal identification number and wherein said secondary account
`information comprises institution name, account number, and account
`password;
`wherein said memory circuit is of sufficient size to store financial transaction
`records related to a predetermined time period and wherein the data in the
`memory circuit may be transferred to a new multiple account electronic
`credit card at the end of said predetermined time period.
`
`’137 patent at 20:22-44.
`
`As explained in the previous section, the hardware components recited in claim 1—i.e., a
`
`“processor,” “a “memory circuit,” a “wireless interface,” and a “frequency select circuit”—are
`
`generic computer components that perform generic computer functions that were well-understood,
`
`routine, and conventional. None of these components perform actions beyond what they were
`
`ordinarily expected to do. For example, the “memory circuit” of claim 1 is merely for “storing”
`
`information.
`
`The remaining claim limitations serve only to define the particular kinds of information
`
`that is stored in memory, list basic size and time conditions for their storage, and acknowledge that
`
`the records may be transferred. These are all simply basic, conventional functions of memory—
`
`i.e., to store information in a manner that can be retrieved.
`
`The remaining independent claims, all of which are also apparatus claims, similarly recite
`
`only basic, conventional computer components. For example, independent claim 3 recites that the
`
`information is stored on “storage means,” that the information is transferred to a new card by
`
`“transfer means,” and that the transfer occurs at the “time of the loss or destruction” of the device.
`
`The “storage means” corresponds to the memory circuit (300), discussed previously. The “transfer
`
`means” presumably corresponds to the wireless interface (318), which is the only method of
`
`transfer discussed in the specification. Accordingly, the structures in the specification that
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`6
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`correspond to both means-plus-function limitations are conventional computing components that
`
`do not transform claim 1 beyond an abstract idea.
`
`Independent claims 10 and 33 are even broader than claim 1 in two ways: (1) they do not
`
`recite the “frequency select circuit”; and (2) the stored “holder information” can be any kind of
`
`personal information and the “secondary account information” can be any kind of card issuer
`
`information.
`
`The dependent claims of the ’137 patent all merely recite additional generic computer
`
`components (e.g., claim 12 adds a “non-wireless interface” and claim 13 repeats the frequency
`
`select circuit already recited in claim 1), or performing the same “idea” in particular contexts (e.g.,
`
`claim 2 stores the records for “at least one calendar year,” claim 4 transmits the records “in the
`
`form of voice data,” and claim 27 adds that the records are stored in “a plurality of data fields”).
`
`As both the ’137 patent and its parent ’419 patent were prosecuted nearly two decades ago,
`
`long before Alice, neither was considered by the PTO under the current § 101 standard and neither
`
`prosecution history discusses § 101 at all.
`
`B. Patent Eligibility Under § 101
`
`Title 35 U.S.C. § 101 defines the subject matter eligible for patent protection: “Whoever
`
`invents or discovers any new and useful process, machine, manufacture, or composition of matter,
`
`or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions
`
`and requirements of this title.” In 2014, the Supreme Court explained a two-step framework for
`
`evaluating whether a patent claim is unpatentable under § 101 because it is directed to a law of
`
`nature, natural phenomena, or abstract idea. Alice Corp. Pty. Ltd. v. CLS Bank Intl., 134 S.Ct.
`
`2347, 2355 (2014). First, the court determines “whether the claims at issue are directed to a patent-
`
`7
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`

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`Case 2:19-cv-00118-JRG Document 19 Filed 06/20/19 Page 13 of 33 PageID #: 112
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`ineligible concept,” and second, it considers whether any additional elements in the claim
`
`“transform the nature of the claim into a patent-eligible application.” Id.
`
`Alice and post-Alice Federal Circuit opinions have consistently and repeatedly held that,
`
`under this framework, methods and systems relating to storing and organizing information using
`
`only generic computer or other conventional components are unpatentable abstract ideas. See,
`
`e.g., Alice, 134 S. Ct. at 2355 (invalidating claims directed to abstract idea of “intermediated
`
`settlement”); Bilski v. Kappos, 561 U.S. 593, 612 (2010) (same for abstract idea of “hedging risk”);
`
`OIP Techs., Inc. v. Amazon.com, Inc., 788 F.3d 1359, 1362 (Fed. Cir. 2015) (“offer-based price
`
`optimization”); Content Extraction & Transmission LLC v. Wells Fargo Bank, Nat’l Ass’n, 776
`
`F.3d 1343, 1347 (Fed. Cir. 2014) (“data collection, recognition, and storage”); Digitech Image
`
`Techs., LLC v. Elecs. For Imaging, Inc., 758 F.3d 1344, 1350 (Fed. Cir. 2014) (“process[es] of
`
`organizing information.”); In re TLI Communs. LLC Patent Litig., 823 F.3d 607, 611 (Fed. Cir.
`
`2016) (“classifying and storing digital images in an organized manner”).
`
`Alice Step 1. In the first step of the Alice framework, the Court must “determine whether
`
`the claims at issue are directed to one of those patent-ineligible concepts.” Alice, 134 S.Ct. at
`
`2355. Specifically, abstract ideas may relate to “longstanding practices” tied to human activity
`
`and are not required to be limited to “preexisting, fundamental truths” in a vacuum. Id. at 2356.
`
`Alice Step 2. The second step of the Alice inquiry requires the Court to determine whether
`
`the claims add any additional elements that “transform the nature of the claim into a patent-eligible
`
`application.” Alice, 134 S.Ct. at 2355 (internal quotation marks omitted). This step has been
`
`described as a “search for an ‘inventive concept’ . . . ‘sufficient to ensure that the patent in practice
`
`amounts to significantly more than a patent upon the [ineligible concept] itself.’” Id. Claims that
`
`merely combine an abstract idea with “well-understood, routine, conventional activities” fail the
`
`8
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`second step of this test. Internet Patents Corp. v. Active Network, Inc., 790 F.3d 1343, 1348 (Fed.
`
`Cir. 2015); see also Intellectual Ventures I LLC v. Capital One Bank (USA), 792 F.3d 1363, 1368
`
`(Fed. Cir. 2015) (claims that “‘apply’ an abstract idea and recit[e] no more than generic computer
`
`elements performing generic computer tasks” are not patent-eligible). The Federal Circuit has
`
`held that “routine data-gathering steps” and “conventional computer activity” do not transform an
`
`abstract idea into a patentable invention. OIP Techs., 788 F.3d at 1360-61.
`
`“The ultimate determination of eligibility under § 101 is a question of law.” Aatrix
`
`Software, Inc. v. Green Shades Software, Inc., 882 F.3d 1121, 1128 (Fed. Cir. 2018). While in
`
`certain circumstances there can be subsidiary fact questions which must be resolved en route to
`
`this ultimate legal determination, the Federal Circuit has continued to hold that patent eligibility
`
`under § 101 “may be, and frequently has been, resolved on a Rule 12(b)(6) or (c) motion” as a
`
`matter of law, before formal claim construction or fact discovery, where there are no genuine issues
`
`of material fact regarding the relevant facts. SAP Am. Inc. v. Investpic, LLC, 898 F.3d 1161, 1166
`
`(Fed. Cir. 2018). See also, e.g., Interval Licensing LLC v. AOL, Inc., 896 F.3d 1335, 1341 (Fed
`
`Cir. 2018) (holding claims invalid under § 101 on the pleadings); Voter Verified, Inc. v. Election
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`Sys. & Software LLC, 887 F.3d 1376, 1379 (Fed. Cir. 2018) (same); Automated Tracking Sols.,
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`LLC v. Coca-Cola Co., 723 F. App’x 989, 996 (Fed. Cir. 2018) (same); Maxon, LLC v. Funai
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`Corp., Inc., 726 F. App’x 797, 798 (Fed. Cir. 2018) (same).
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`C. Alice Step 1: The Claims are Directed to the Patent-Ineligible Concept of Storing
`Financial Transaction Records in a Portable and Organized Manner
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`Alice step one centers on looking at the “focus” of the claims, or their “character as a
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`whole.” Electric Power Grp., LLC v. Alstom S.A., 830 F.3d 1350, 1353 (Fed. Cir. 2016); see also
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`buySAFE, Inc. v. Google, Inc., 765 F.3d 1350, 1354-55 (Fed. Cir. 2014) (determining what the
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`claims are “squarely about”). Here, that “focus”—in each claim of the asserted patent—is the
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`Case 2:19-cv-00118-JRG Document 19 Filed 06/20/19 Page 15 of 33 PageID #: 114
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`abstract idea of storing financial transaction records in a portable and organized manner. This is
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`the very type of “abstract idea” that the Federal Circuit has found invalid in cases like Smart
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`Systems and In re TLI, and as this Court did in Preservation Wellness.
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`In Smart Systems Innovations, LLC v. Chicago Transit Authority, for example, the Federal
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`Circuit held that the claims at issue related to the abstract idea of “collecting financial data using
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`generic computer components.” 873 F.3d 1364, 1375 (Fed. Cir. 2017). The asserted patents in
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`Smart Systems addressed problems analogous to those addressed by the ’137 patent, specifically
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`that mass transit systems in the United States were inconvenient because riders were required to
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`use dedicated fare cards, paper tickets, or tokens. Id. at 1368. The Smart Systems patents addressed
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`these “operational costs” by providing an “open-payment fare system [that] allows riders to
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`conveniently and quickly access mass transit by using existing bankcards,” such as credit cards.
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`Id. This concept was manifested in, for example, claim 1 of the ’816 patent in Smart Systems,
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`which was directed to a method of funding transit rides “from a plurality of funding sources” by
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`way of a conventional “processor” configured to access information including “a transit account
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`and a respective plurality of balances” stored on a conventional “memory.” Id. at 1369-70.
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`The “focus” of the ’137 patent claims is at least as much an abstraction as the claims at
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`issue in Smart Systems, as the presently challenged claims are also “directed to the collection,
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`storage, and recognition of data.” Id. at 1372 (citing Electric Power, 830 F.3d at 1353 (we “have
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`treated collecting information . . . as within the realm of abstract ideas”)); Content Extraction, 776
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`F.3d at 1347 (“claims directed to the mere formation and manipulation of economic relations”
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`through “financial transactions” are abstract). This is true even when the patent at issue addresses
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`organizational problems, such as “challenges created by the storage limitations that exist with
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`conventional tangible bankcards.” Smart Sys., 873 F.3d at 1371.
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`Case 2:19-cv-00118-JRG Document 19 Filed 06/20/19 Page 16 of 33 PageID #: 115
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`Similarly, in TLI, the patent-at-issue taught the “abstract idea of classifying and storing
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`digital images in an organized manner.” 823 F.3d at 611. The patentee argued that the claims
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`recited “concrete, tangible components” such as a “telephone unit” and a “server,” but the Federal
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`Circuit held that this was immaterial because those components “merely provide a generic
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`environment in which to carry out the abstract idea.” Id. The same is true of the ’137 patent—as
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`discussed above in Section I.A.1, the specification makes clear that the generic, functionally-
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`described components in the claims exist only to further the claimed abstract idea by making “the
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`job of reconciling account balances or financial planning” less “difficult,” and reducing the
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`“transactional costs” needed to obtain account information. See ’137 patent at 5:37-49.
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`This Court’s opinion in Preservation Wellness Technologies LLC v. Allscripts Healthcare
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`Solutions, No. 2:15-CV-1559-WCB, 2016