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Enfish, LLC v. Microsoft Corp.

United States District Court, C.D. California, Western Division

November 3, 2014

ENFISH, LLC, Plaintiff,
v.
MICROSOFT CORPORATION; FISERV, INC.; INTUIT, INC.; SAGE SOFTWARE, INC.; and JACK HENRY & ASSOCIATES, INC., Defendants

Page 1168

For Enfish LLC, Plaintiff: Britton F Davis, LEAD ATTORNEY, Cooley LLP, Broomfield, CO; Matthew J Leary, LEAD ATTORNEY, PRO HAC VICE, Cooley LLP, Broomfield, CO; J Adam Suppes, PRO HAC VICE, Cooley LLP, Reston, VA; James P Brogan, Sarah J Guske, Cooley LLP, Broomfield, CO; Jose R. Rodriguez, Cooley LLP, San Diego, CA; Mark R Schafer, Orion Armon, Peter Sauer, PRO HAC VICE, Cooley LLP, Broomfield, CO; Robyn Gould, Cooley LLP, Santa Monica, CA; Thomas J Friel, Jr, Cooley LLP, San Francisco, CA.

For Microsoft Corporation, Fiserv Inc, Intuit Inc, Defendants: Amanda J Tessar, PRO HAC VICE, Perkins Coie LLP, Denver, CO; Amy E Simpson, Perkins Coie LLP, San Diego, CA; Chad S Campbell, Perkins Coie LLP, Phoenix, AZ; Theodore H Wimsatt, PRO HAC VICE, Perkins Coie LLP, Phoenix, AZ; Lauren C Sliger, Perkins Coie LLP, Los Angeles, CA.

For Sage Software Inc, Defendant: William J Brown, Jr, Brown Wegner McNamara LLP, Irvine, CA.

For Jack Henry and Associates Inc, Defendant: Amanda J Tessar, PRO HAC VICE, Perkins Coie LLP, Denver, CO; Amy E Simpson, Perkins Coie LLP, San Diego, CA; Chad S Campbell, Perkins Coie LLP, Phoenix, AZ; Theodore H Wimsatt, PRO HAC VICE, Perkins Coie LLP, Phoenix, AZ; Lauren C Sliger, Perkins Coie LLP, Los Angeles, CA; Wesley D Hurst, Polsinelli LLP, Los Angeles, C A.

For Sage Software Inc, Counter Claimant: William J Brown, Jr, Brown Wegner McNamara LLP, Irvine, CA.

For Enfish LLC, Counter Defendant: Britton F Davis, Cooley LLP, Broomfield, CO; J Adam Suppes, PRO HAC VICE, Cooley LLP, Reston, VA; James P Brogan, Sarah J Guske, Cooley LLP, Broomfield, CO; Mark R Schafer, Peter Sauer, PRO HAC VICE, Orion Armon, Cooley LLP, Broomfield, CO; Matthew J Leary, PRO HAC VICE, Cooley LLP, Broomfield, CO; Robyn Gould, Cooley LLP, Santa Monica, CA; Thomas J Friel, Jr, Cooley LLP, San Francisco, CA.

For Microsoft Corporation, Jack Henry and Associates Inc, Intuit Inc, Fiserv Inc, Counter Claimants: Amanda J Tessar, PRO HAC VICE, Perkins Coie LLP, Denver, CO; Amy E Simpson, Perkins Coie LLP, San Diego, CA; Chad S Campbell, Perkins Coie LLP, Phoenix, AZ; Theodore H Wimsatt, PRO HAC VICE, Perkins Coie LLP, Phoenix, AZ; Lauren C Sliger, Perkins Coie LLP, Los Angeles, CA.

Page 1169

ORDER GRANTING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT ON INELIGIBILITY UNDER 35 U.S.C. § 101

Hon. Mariana R. Pfaelzer, United States District Judge.

I. Introduction

Plaintiff Enfish, LLC (" Enfish" ) has sued Defendants Microsoft Corporation (" Microsoft" ), Fiserv, Inc., Intuit, Inc., Sage Software, Inc., and Jack Henry & Associates, Inc. (collectively, " Defendants" ) for infringement of two patents: U.S. Patent Nos. 6,151,604 (" the '604 Patent" ) and 6,163,775 (" the '775 Patent" ).[1] In an order issued March 31, 2014, the Court invalidated claims 1, 2, and 16 of the '604 patent as single means claims prohibited by 35 U.S.C. § 112(a). See Enfish, LLC v. Microsoft Corp., 9 F.Supp.3d 1126 (C.D. Cal. 2014). In a separate order issued March 31, 2014, the Court invalidated claims 31, 32, 46, and 47 of the '604 patent and claims 31, 32, and 47 of the '775 patent as anticipated under 35 U.S.C. § 102. See Enfish, LLC v. Microsoft Corp., No. 2:12-cv-07360, (C.D. Cal. Mar. 31, 2014).

Defendants move for summary judgment on the basis that all asserted claims are unpatentable under 35 U.S.C. § 101.[2] For the reasons set forth in this order, the Court grants the motion.

II. Background

The abstract of the patents provides a clear explanation of the invention. See '604 Patent, Abstract. The patents are directed to an information management and database system. The patents improve upon prior art by employing a flexible, self-referential table to store data. This table is composed of rows and columns. Each column and each row has an object identification number (" OID" ). Rows correspond to records and columns correspond to attributes. The intersection of a row and column comprises a cell, which may contain information for a particular record relating to a particular attribute. A cell also may simply point to another record. Columns are entered as rows in the table. The record corresponding to a column contains information about the column, rendering the table self-referential.

The invention includes an index structure to allow for searching. A key word index contains text from each cell in the table. This index is itself stored in the table. Text cells in the table contain pointers to entries in the index, and the index contains pointers to the cells. This arrangement provides for extended inquiries. See '604 Patent, 2:66-3:6.

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III. Standard for Summary Judgment

The Court shall grant summary judgment if there is no genuine dispute as to any material fact, as supported by facts on the record that would be admissible in evidence, and if the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56; see Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Ineligibility under § 101 is a question of law.[3] In re Comiskey, 554 F.3d 967, 975 (Fed. Cir. 2009). The Court may appropriately decide this issue at the summary judgment stage.

IV. Ineligibility Under 35 U.S.C. § 101

Section 101 of the Patent Act defines patentable subject matter: " 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." 35 U.S.C. § 101. Section 101 defines four broad categories of patentable inventions: processes, machines, manufactures, and compositions of matter. " Congress took this permissive approach to patent eligibility to ensure that ingenuity should receive a liberal encouragement." Bilski v. Kappos, 561 U.S. 593, 601, 130 S.Ct. 3218, 177 L.Ed.2d 792 (2010) (internal quotation marks omitted). But § 101 does not encompass all products of human effort and discovery. Laws of nature, physical phenomena, and abstract ideas are not patentable. Diamond v. Chakrabarty, 447 U.S. 303, 309, 100 S.Ct. 2204, 65 L.Ed.2d 144 (1980). These exceptions are well established. See, e.g., Chakrabarty, 447 U.S. at 309; Diamond v. Diehr, 450 U.S. 175, 185, 101 S.Ct. 1048, 67 L.Ed.2d 155 (1981); Parker v. Flook, 437 U.S. 584, 600, 98 S.Ct. 2522, 57 L.Ed.2d 451 (1978) (Stewart, J., dissenting); Gottschalk v. Benson, 409 U.S. 63, 67, 93 S.Ct. 253, 34 L.Ed.2d 273 (1972); Funk Bros. Seed Co. v. Kalo Inoculant Co., 333 U.S. 127, 130, 68 S.Ct. 440, 92 L.Ed. 588, 1948 Dec. Comm'r Pat. 671 (1948); Le Roy v. Tatham, 55 U.S. 156, 175, 14 L.Ed. 367 (1853).

On occasion, the Federal Circuit has described § 101 as a " coarse eligibility filter," barring only " manifestly abstract" inventions and leaving § § 102, 103, and 112 as the finer sieves. See Ultramercial, Inc. v. Hulu, LLC, 722 F.3d 1335, 1341, 1354 (Fed. Cir. 2013 ), vacated sub nom. WildTangent, Inc. v. Ultramercial, LLC, 134 S.Ct. 2870, 189 L.Ed.2d 828 (2014). But in the Supreme Court's last few terms, it has indicated that patentability is a higher bar. See Alice Corp. Pty. Ltd. v. CLS Bank Int'l, 134 S.Ct. 2347, 2354-55, 82 L.Ed.2d 296, 189 L.Ed.2d 296 (2014); Ass'n for Molecular Pathology v. Myriad Genetics, Inc., 133 S.Ct. 2107, 2116, 186 L.Ed.2d 124 (2013); Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S.Ct. 1289, 1293-94, 182 L.Ed.2d 321 (2012); Bilski,

Page 1171

130 S.Ct. at 3230-31. As noted by Judge Mayer of the Federal Circuit, a " robust application" of § 101 ensures " that patent protection promotes, rather than impedes, scientific progress and technological innovation." I/P Engine, Inc. v. AOL Inc., 576 F.App'x 982, 996 (Fed. Cir. 2014) (nonprecedential) (Mayer, J., concurring).

The concern underlying § 101 is preemption: the idea that allowing a patent on the invention will impede innovation more than it incentivizes it. Of course, a court should not overstate this concern. By definition, every patent preempts an area of technology. A patentee with a groundbreaking invention is entitled to monopolize a segment of technology, subject to the limits of the Patent Act.[4] The court must be wary of litigants who exaggerate preemption concerns in order to avoid developing innovative workarounds. See McRO, Inc. v. Sega of America,, Inc., No. 2:12-cv-10327, 2014 WL 4749601, at *7 (C.D. Cal. Sept. 22, 2014) (Wu, J.) (" [W]e must be wary of facile arguments that a patent preempts all applications of an idea. It may often be easier for an infringer to argue that a patent fails § 101 than to figure out a different way to implement an idea, especially a way that is less complicated." (internal quotation mark omitted)). Nonetheless, § 101 prevents patentees from too broadly claiming a building block of research and development. Building blocks include basic tools of mathematics or formulas describing preexisting natural relationships. See Mayo, 132 S.Ct. 1296-97; Benson, 409 U.S. at 68, 72. But " a novel and useful structure created with the aid of knowledge of scientific truth" may be patentable. Mackay Radio & Tel. Co. v. Radio Corp. of America, 306 U.S. 86, 94, 59 S.Ct. 427, 83 L.Ed. 506, 1939 Dec. Comm'r Pat. 857 (1939).

Concerns over preemption have called into question when, if ever, computer software is patentable. A basic truth is that algorithms comprise computer software and computer codes. See J. Glenn Brookshear, Computer Science: An Overview 2 (6th ed. 2000) (" A machine-compatible representation of an algorithm is called a program. Programs, and the algorithms they represent, are collectively referred to as software." ). But Supreme Court precedents make clear that " a scientific truth, or the mathematical expression of it, is not a patentable invention." Benson, 409 U.S. at 67. In light of this principle, the Supreme Court has heavily scrutinized algorithms and mathematical formulas under § 101. See, e.g., Flook, 437 U.S. at 594-95 (finding unpatentable mathematical formula for updating alarm limits); Benson, 409 U.S. at 71-72 (finding unpatentable mathematical formula for converting binary-coded decimal to pure binary). In early § 101 decisions on computer technology, the Supreme Court suggested that Congress, rather than courts, should determine whether software is patentable. See Flook, 437 U.S. at 596 (" It is our duty to construe the patent statutes as they now read, in light of our prior precedents, and we must proceed cautiously when we are asked to extend patent rights into areas wholly unforeseen by Congress." ); Benson, 409 U.S. at 73 (" If these programs are to be patentable, considerable problems are raised

Page 1172

which only committees of Congress can manage, for broad powers of investigation are needed, including hearings which canvass the wide variety of views which those operating in this field entertain." ).

But intervening precedents and Congressional action have demonstrated that software is patentable. In Diamond v. Diehr, 450 U.S. 175, 101 S.Ct. 1048, 67 L.Ed.2d 155 (1981), the Supreme Court found patentable a method claim implementing a mathematical formula on a computer. See Diehr, 450 U.S. at 179 n.5, 192-93 (finding patentable claim on " method of operating a rubber-molding press for precision molded compounds with the aid of a digital computer" ). More recently, in Alice Corp. Pty. Ltd. v. CLS Bank International, 134 S.Ct. 2347, 82 L.Ed.2d 296, 189 L.Ed.2d 296 (2014), the Supreme Court again suggested that software is patentable. See id. at 2359 (suggesting that software which improves function of a computer may be patentable).[5] Moreover, the America Invents Act mentions " computer program product[s]" in a section discussing tax strategy patents. See Leahy-Smith America Invents Act, 112 P.L. 29, § 14, 125 Stat. 284, 327-28 (2011). This section implicitly affirms software as eligible subject matter. See Mark J. Patterson & M. Andrew Pitchford, First to File, 47 Tenn. B.J. 14, 16 (November 2011) (" [T]ax strategies are no longer patentable, but . . . computer implemented methods and computer program products (e.g., software) have been implicitly affirmed as patentable subject matter." ); see also Bilski, 561 U.S. at 595 (noting that courts should not " violate the canon against interpreting any statutory provision in a manner that would render another provision superfluous" ); Cal. Inst. of Tech. v. Hughes Commc'ns, Inc. ( Caltech ), No. 2:13-cv-7245, 59 F.Supp.3d 974, at *23 (C.D. Cal. Nov. 3, 2014)

The aftermath of Alice tells a different but misleading story about software patentability. Alice brought about a surge of decisions finding software patents ineligible. See, e.g., buySAFE, Inc. v. Google, Inc., 765 F.3d 1350, 1355 (Fed. Cir. 2014) (invalidating claim addressed to a " transaction performance guaranty" performed on a computer); Digitech Image Techs., LLC v. Elec. for Imaging, Inc., 758 F.3d 1344, 1349, 1351 (Fed. Cir. 2014) (invalidating method claim for generating and combining data sets for device profile); Eclipse IP LLC v. McKinley Equip. Corp., No. 8:14-cv-742, 2014 WL 4407592 (C.D. Cal. Sept. 4, 2014) (invalidating claims reciting methods for communications). Despite this flurry of § 101 invalidations, in reality, Alice did not significantly increase the scrutiny that courts must apply to software patents. It held only that an ineligible abstract idea does not become patentable simply because the claim recites a generic computer. See Alice, 134 S.Ct. at 2360 (" [T]he claims at issue amount to 'nothing significantly more' than an instruction to apply the abstract idea of intermediated settlement using some unspecified, generic computer. Under our precedents, that is not ' enough ' to transform an abstract idea into a patent-eligible invention." (citations omitted)). Courts must not extend the reach of Alice too far, lest they read in § 101 limitations that do not exist. Cf. Bilski, 561 U.S. at 603

Page 1173

(" This Court has not indicated that the existence of these well-established exceptions gives the Judiciary carte blanche to impose other limitations that are inconsistent with the text and the statute's purpose and design." ). In evaluating the patentability of computer software, courts must continue to rely on the Supreme Court's long line of § 101 precedents. Alice 's holding is only a small part of evaluating patentability.

Other than its narrow holding, Alice reaffirmed that courts must evaluate patent eligibility using the two-part test applied in Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S.Ct. 1289, 182 L.Ed.2d 321 (2012). First, a court must ask if the claim is " directed to one of those patent-ineligible concepts" : a law of nature, physical phenomenon, or abstract idea. Alice, 134 S.Ct. at 2355. Second, if the claim is directed to one of these concepts, the court must ask " [w]hat else is there in the claims before us?" Mayo, 132 S.Ct. at 1297. This second step determines whether there is an " inventive concept" that " ensure[s] that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself." Alice, 134 S.Ct. at 2355. These steps are ...


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