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Hybrid Audio, LLC v. ASUS Computer International

United States District Court, N.D. California

July 11, 2019

HYBRID AUDIO, LLC, Plaintiff,
v.
ASUS COMPUTER INTERNATIONAL, et al., Defendants.

          ORDER RE MOTION TO DISMISS RE: DKT. NO. 49

          JAMES DONATO, UNITED STATES DISTRICT JUDGE

         In this patent dispute, Asus Computer International and ASUSTeK Computer Inc. (together, “Asus”) move to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6). Dkt. No. 49. The motion is denied.

         BACKGROUND

         The patent-in-suit is U.S. Reissue Patent No. RE40, 281 (“'281 patent”), entitled “Signal Processing Utilizing a Tree-Structured Array.” Dkt. No. 1 ¶¶ 10-15. It is a reissue of U.S. Patent No. 6, 252, 909, and a reexamnination certificate was issued in December 2015. Id. The original patent was issued on June 26, 2001, and claimed priority to September 21, 1992. Dkt. No. 1-2 at 1. The patent expired on September 21, 2012. Dkt. No. 1 ¶ 16. The claimed invention “relates to audio compression and decompression systems, ” Dkt. 1-2 at 1:22-23, and is alleged to be a component of the MP3 audio format, Dkt. No. 1 ¶ 22; Dkt. No. 1-4 at 1.

         Hybrid Audio, LLC (“Hybrid Audio”) filed this patent infringement suit against Asus in April 2016, seeking royalties from when Asus received notice of the patent, January 5, 2011, to the expiration date, September 21, 2012, among other relief. Dkt. No. 1 ¶ 18. The previous owner of the '281 patent was prevented from seeking royalties during the pendency of a patent reexamination from June 2012 to December 2015. Id. at ¶ 16.

         The case was filed in the District of Massachusetts and transferred to this district in October 2017 under 28 U.S.C. § 1406(a), after the Supreme Court published TC Heartland LLC v. Kraft Foods Group Brands LLC, 137 S.Ct. 1514 (2017). Dkt. Nos. 25, 27, 30. Hybrid Audio asserts that Asus infringed claims 5-6, 9-13, 15-22, 24-30, 32-35, 38-42, 45-49, 50, 51, 53, 55-61, 63 and 65-121 of the '281 patent in multiple products and services that utilize the MP3 audio file format. Dkt. No. 1 ¶¶ 24, 33.

         Asus moved to dismiss for patent ineligibility under 35 U.S.C. § 101 and Alice Corp. Pty. Ltd. v. CLS Bank International, 573 U.S. 208 (2014). Dkt. No. 49. Asus says that the '281 patent states claims that are nothing more than an unadorned abstract idea in the form of mathematical algorithms, with no saving inventive concept. See Id. at 7-8. But the plain language of the patent and other sources “properly considered on a motion to dismiss, such as the complaint, ” Aatrix Software, Inc. v. Green Shades Software, Inc., 882 F.3d 1121, 1128 (Fed. Cir. 2018), demonstrate that the claims are “directed to a specific improvement to the way computers operate, ” Enfish, LLC v. Microsoft Corp., 822 F.3d 1327, 1336 (Fed. Cir. 2016), and therefore constitute a non-abstract patent-eligible invention.

         DISCUSSION

         I. LEGAL STANDARDS

         Rule 8(a)(2) of the Federal Rules of Civil Procedure requires the complaint to provide “a short and plain statement of the claim showing that the pleader is entitled to relief.” To meet that rule and survive a Rule 12(b)(6) motion to dismiss, a plaintiff must allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). This does not impose a probability requirement at the pleading stage. It simply calls for enough “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556). The plausibility analysis is “context-specific” and not only invites, but “requires the reviewing court to draw on its judicial experience and common sense.” Id. at 679.

         The Federal Circuit has “repeatedly recognized that in many cases it is possible and proper to determine patent eligibility under 35 U.S.C. § 101 on a Rule 12(b)(6) motion. In many cases, too, evaluation of a patent claim's subject matter eligibility under § 101 can proceed even before a formal claim construction.” Genetic Techs. Ltd. v. Merial L.L.C., 818 F.3d 1369, 1373-74 (Fed. Cir. 2016) (citations omitted); see also Aatrix, 882 F.3d at 1125. But as the circuit has recently emphasized, the question of eligibility may be determined at the pleadings stage “only when there are no factual allegations that, taken as true, prevent resolving the eligibility question as a matter of law.” Aatrix, 882 F.3d at 1125 (citing FairWarning IP, LLC v. Iatric Sys., Inc., 839 F.3d 1089, 1097 (Fed. Cir. 2016)); see also Cellspin Soft, Inc. v. Fitbit, Inc., No. 18-2178, 2019 WL 2588278, at *10 (Fed. Cir. June 25, 2019) (vacating Rule 12(b)(6) and Rule 12(c) dismissals where complaint made plausible and “well-pleaded allegations” of eligibility). This is particularly true for the element of an inventive concept, which raises a question of fact that can be resolved in a motion to dismiss only if the answer may be found in the complaint, the patent, and matters subject to judicial notice. Aatrix, 882 F.3d at 1128.

         To be sure, a patentee cannot avoid dismissal for ineligible claims purely on the basis of conclusory or generalized statements, and fanciful or exaggerated allegations that later prove to be unsupported may lead to fee shifting or other sanctions. See Cellspin, 2019 WL 2588278, at *8 (“While we do not read Aatrix to say that any allegation about inventiveness, wholly divorced from the claims or the specification, defeats a motion to dismiss, plausible and specific factual allegations that aspects of the claims are inventive are sufficient.”); Berkheimer v. HP Inc., 890 F.3d 1369, 1373 (Fed. Cir. 2018) (Moore, J., concurring in denial of rehearing en banc) (“[I]f the allegations in the complaint about the invention as claimed ultimately lack evidentiary support or if the case is exceptional, district courts can award attorneys' fees to the accused infringer under either Rule 11 or [35 U.S.C.] § 285 to compensate the accused infringer for any additional litigation costs it incurs.”). But the inquiry in a motion to dismiss is focused on the contents of the complaint and the plain words of the patent that is incorporated by reference. To the extent claim construction issues might arise, the Court should adopt the patentee's proposed constructions. Aatrix, 882 F.3d at 1125; IPLearn-Focus, LLC v. Microsoft Corp., No. 14-cv-00151-JD, 2015 WL 4192092, at *3 (N.D. Cal. July 10, 2015), aff'd, 667 Fed.Appx. 773 (Fed. Cir. July 11, 2016).

         Here, the Rule 12(b)(6) evaluation has been substantially streamlined by the complaint and the parties' arguments. Plaintiff does not object to resolving the Section 101 question in the context of defendants' motion and neither side has called for claim construction as part of the eligibility inquiry. No construction disagreements were identified in the briefs. Consequently, the Section 101 inquiry may properly be made at this stage of the case.

         For the merits of the Section 101 issue, the scope of patentable subject matter includes “any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.” 35 U.S.C. § 101. The “laws of nature, physical phenomena, and abstract ideas” are “specific exceptions to § 101's broad patent-eligibility principles.” Bilski v. Kappos, 561 U.S. 593, 601 (2010) (citation omitted). These exclusions are intended to guard against undue preemption of innovation and invention. Alice, 573 U.S. at 216 (citing U.S. Const. art. I, § 8, cl. 8). The Court must “distinguish between patents that claim the ‘buildin[g] block[s]' of human ingenuity and those that integrate the building blocks into something more, ...


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