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Vaporstream, Inc. v. Snap Inc.

United States District Court, C.D. California

January 13, 2020

VAPORSTREAM, INC., Plaintiff,
v.
SNAP INC. d/b/a/ Snapchat, Inc., Defendant.

         ORDER: (1) DENYING DEFENDANT'S MOTION FOR RECONSIDERATION OF THE COURT'S FEBRUARY 27, 2018 SUMMARY JUDGMENT ORDER; [DOC. NO. 183.] (2) DENYING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT OF NON-INFRINGEMENT AND GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT OF NO WILLFUL INFRINGEMENT; AND [DOC. NO. 178.] (3) GRANTING PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT OF OBVIOUSNESS BASED ON IPR ESTOPPEL [DOC. NO. 179.]

          MARILYN L. HUFF, UNITED STATES DISTRICT COURT DISTRICT JUDGE

         On November 12, 2019, Defendant Snap Inc. filed: (1) a motion for summary judgment of non-infringement and no willful infringement; and (2) a motion for reconsideration of the Court's February 27, 2018 order denying Snap's motion for summary judgment that the patents-in-suit are invalid under 35 U.S.C. § 101. (Doc. Nos. 178, 183.) On November 12, 2019, Plaintiff Vaporstream, Inc. filed a motion for partial summary judgment of Snap's obviousness defense based on inter partes review estoppel under 35 U.S.C. § 315(e)(2). (Doc. No. 179.) On November 26, 2019, the parties filed their respective responses in opposition to the motions for summary judgment. (Doc. Nos. 190, 193, 194.) On December 6, 2019, the parties filed their respective replies. (Doc. Nos. 202, 203, 205.) On January 9, 2020, the Court issued a tentative supplemental claim construction order. (Doc. No. 220.)

         The Court held a hearing on the matter on January 10, 2020. Meng Xi appeared for Plaintiff Vaporstream. Heidi L. Keefe, Michael A. Attanasio, Reuben H. Chen, Elizabeth L. Stameshkin, and Lam K. Nguyen appeared for Defendant Snap. For the reasons below, the Court: (1) denies Snap's motion for reconsideration of the Court's February 27, 2018 summary judgment order; (2) denies Snap's motion for summary judgment of non-infringement; (3) grants Snap's motion for summary judgment of no willful infringement; and (4) grants Vaporstream's motion for partial summary judgment of no obviousness based on IPR estoppel.

         Background

         I. Procedural Background

         On January 10, 2017, Plaintiff Vaporstream filed a complaint for patent infringement against Defendant Snap, alleging infringement of U.S. Patent Nos. 8, 886, 739, 8, 935, 351, 9, 306, 885, 9, 306, 886, 9, 313, 155, 9, 313, 156, 9, 313, 157, 9, 338, 111, and 9, 413, 711. (Doc. No. 1.) On June 26, 2017, Snap filed an answer to the complaint. (Doc. No. 61.)

         On February 27, 2018, the Court issued a claim construction order. (Doc. No. 118.) On February 27, 2018, the Court also denied Snap's motion for summary judgment that the patents-in-suit are invalid under 35 U.S.C. § 101. (Doc. No. 117.)

         Starting on June 6, 2018, the Patent Trial and Appeal Board instituted inter partes review of the challenged claims for each of the patents-in-suit. See Snap Inc. v. Vaporstream, Inc., Nos. IPR2018-00200, IPR2018-00312, IPR2018-00369, IPR2018-00397, IPR2018-00404, IPR2018-00408, IPR2018-00416, IPR2018-00439, IPR2018-00455, IPR2018-00458. On June 12, 2018, the parties filed a joint motion to stay the action pending the IPR proceedings as to the patents-in-suit. (Doc. No. 148.) On June 13, 2018, the Court granted the parties' joint motion and stayed the action pending the last final written decision by the PTAB in the IPR proceedings for the patents-in-suit. (Doc. No. 150.)

         Between June 4, 2019 and August 30, 2019, the PTAB issued final written decisions in each of the IPR proceedings for the patents-in-suit. In those decisions, the PTAB held that the challenged claims from the '739 patent, the '885 patent, the '155 patent, the '351 patent, and the '156 patent are all unpatentable, and the PTAB held that the challenged claims from the '886 patent, the '111 patent, the '711 patent, and the '157 patent had not been shown to be unpatentable. (Doc. Nos. 156-1, 157-1, 158-1, 158-2, 158-3, 158-4, 159-1.)

         In light of this, on September 13, 2019, the Court partially lifted the stay of the action. (Doc. No. 160.) The Court lifted the stay as to the '886 patent, the '111 patent, the '711 patent, and the '157 patent. (Id. at 3.) The Court continued the stay of the action as to the '739 patent, the '885 patent, the '155 patent, the '351 patent, and the '156 patent. (Id.)

         By the present motions for summary judgment: (1) Snap moves for summary judgment of non-infringement and of no willful infringement; and (2) Vaporstream moves for partial summary judgment of Snap's obviousness defense based on IPR estoppel under 35 U.S.C. § 315(e)(2). (Doc. No. 178-1 at 1; Doc. No. 179 at 1-2, 21.) In addition, Snap moves for reconsideration of the Court's February 27, 2018 order denying Snap's motion for summary judgment that the patents-in-suit are invalid under 35 U.S.C. § 101. (Doc. No. 183-1 at 4.)

         II. The Patents-In-Suit

         The patents-in-suit are closely related, claim priority to the same July 28, 2005 provisional application, and share a substantially identical specification. (Doc. No. 23 at 2.) The patents-in-suit relate generally to systems and methods for “reducing the traceability” of electronic messages. See U.S. Patent No. 9, 306, 886, at 18:57-19 (filed Apr. 5, 2016).

         The common Background section of the specification explains some perceived problems with conventional email messaging:

Typically, an electronic message between two people is not private. It may travel along a public network, such as the Internet, and be susceptible to interception by unintended third parties. Messages are also logged and archived by the communication systems themselves. They may also be copied, cut, pasted, printed, forwarded, blind copied, or otherwise manipulated. This may give a message a “shelf-life” that is often uncontrollable by the sender or even the recipient. Surreptitious logging (e.g., by keystroke and message recording software) may occur by third parties that have gained authorized access to either the computer of the sender and/or the recipient. Electronic messages include the message content itself coupled to identifying information regarding the sender, the recipient, the location of the message, times and dates associated with the message, etc. This allows a third party that is logging messages, intercepting messages, or simply gaining access to the messaging system's logs or inbox archives to associate the potentially important identifying information (typically referred to as header information) with the message content. These are only some of the ways in which electronic messages can be misused. There is a demand for a system and method for reducing the traceability of electronic messages.

'886 Patent at 2:7-29. To address these problems, the claimed inventions disclose systems and methods purporting to reduce the traceability of electronic messages. See id. at 3:48-4:6.

         In the present action, Vaporstream asserts infringement of claims 1, 5, 9, 10, 11, and 13 of the '886 patent; claims 1, 4, 5, 9, 10, and 11 of the '111 patent; and claims 1, 4, 5, 6, 11, 13, 15, and 16 of the '711 patent.[1] Independent claim 1 of the '886 patent, independent claim 1 of the '111 patent, and independent claim 1 of the '711 patent are the only asserted independent claims from the patents-in-suit.

         Independent claim 1 of the '886 patent recites:

1. A computer-implemented method of handling an electronic message at a recipient user device in a networked environment, the electronic message including a message content and a header information that corresponds to the message content, the recipient user device having access to electronic instructions, the method comprising:
providing a plurality of reduced traceability displays via the recipient user device using a display generator that acts upon a display element of the recipient user device to provide the plurality of reduced traceability displays, the display generator including the electronic instructions, the plurality of reduced traceability displays including a first display presenting a header information of an electronic message received at the recipient user device and a second display presenting a message content of the electronic message, the message content including a media component, the message content and the header information having been related to each other using a correlation previously assigned to each of the message content and the header information; receiving a selection by the recipient user via the first display, the selection directed to a portion of a message list corresponding to the header information; and in response to the selection, providing the second display via the recipient user device such that the second display does not include a display of the header information via the second display such that a single screen capture of both the header information and the media component is prevented.

'886 Patent at 18:57-19.

         Independent claim 1 of the '111 patent recites:

1. A computer-implemented method of handling an electronic message at a recipient user mobile device in a networked environment, the electronic message including a message content and a header information that corresponds to the message content, the recipient user mobile device having access to electronic instructions, the electronic instructions being stored at the recipient user mobile device and/or at a server, the method comprising:
providing a plurality of reduced traceability displays via the recipient user mobile device using a display generator that acts upon a display element of the recipient user mobile device to provide the plurality of reduced traceability displays, the display generator including the electronic instructions, the plurality of reduced traceability displays including a first display presenting a header information of an electronic message received at the recipient user mobile device and a second display presenting a message content of the electronic message, the message content including a media component, the first display being generated by the display generator such that the first display does not include a display of the media component via the first display such that a single screen capture of both the header information and the media component is prevented, the first and second displays not being displayed to the user at the same time; receiving a selection by the recipient user via the first display, the selection directed to a portion of a message list corresponding to the header information; and in response to the selection, providing a second display via the recipient user device, the second display displaying the message content including the media component.

U.S. Patent No. 9, 338, 111, at 18:58-19:21 (filed May 10, 2016).

         Independent claim 1 of the '711 patent recites:

1. A method of handling an electronic message between a sending user device and a recipient user device in a networked environment, the method comprising:
providing a first reduced traceability electronic messaging application program to a sending user device, the first reduced traceability electronic messaging application program including instructions executable by a first processor of the sending user device to provide a first plurality of reduced traceability displays via the sending user device; providing a second reduced traceability electronic messaging application program to a recipient user device, the second reduced traceability electronic messaging application program including instructions executable by a second processor of the recipient user device to provide a second plurality of reduced traceability displays via the recipient user device; receiving an electronic message at a server via a first network, the electronic message sent from the sending user device, wherein the electronic message received at the server includes an identifier of a recipient and a message content including a media component, the first plurality of reduced traceability displays including a first display and a second display, the first display configured to allow a user of the sending user mobile device to associate the message content including a media component with the electronic message, the second display configured to allow the user of the sending user mobile device to associate the identifier of a recipient with the electronic message, the instructions executable by the first processor providing the first and second displays such that the identifier of the recipient is not displayed with the media component via the first display preventing a single screen capture of both the identifier of a recipient and the media component; and transmitting th/e electronic message from the server to the recipient user device via a second network that includes a wireless communications portion, wherein the electronic message transmitted to the recipient user device includes an identifier of a sending user and the message content including a media component, the second plurality of reduced traceability displays including a third display and a fourth display, the third display presenting the identifier of a sending user, the fourth display presenting the media component, the instructions executable by the second processor providing the third and fourth displays such that the identifier of a sending user is not displayed with the media component via the fourth display preventing a single screen capture of both the identifier of a sending user and the media component, wherein the identifier of a recipient and the message content received at the server each optionally include a correlation to allow the server to receive the identifier of a recipient and the message content separately and to relate the identifier of a recipient to the message content if the identifier of a recipient is received separately from the message content at the server, and wherein the identifier of a recipient and the message content transmitted from the server each optionally include a correlation to allow the identifier of a recipient and the message content to be related to each other by the second reduced traceability electronic messaging application program if the identifier of a recipient and the message content are transmitted from the server separately.

U.S. Patent No. 9, 413, 711, at 24:8-25:4 (filed Aug. 9, 2016).

         Discussion

         I. Legal Standards for Summary Judgment

         Summary judgment is appropriate under Rule 56 of the Federal Rules of Civil Procedure if the moving party demonstrates that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). A fact is material when, under the governing substantive law, it could affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Fortune Dynamic, Inc. v. Victoria's Secret Stores Brand Mgmt., Inc., 618 F.3d 1025, 1031 (9th Cir. 2010). “A genuine issue of material fact exists when the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Fortune Dynamic, 618 F.3d at 1031 (internal quotation marks and citations omitted); accord Anderson, 477 U.S. at 248. “Disputes over irrelevant or unnecessary facts will not preclude a grant of summary judgment.” T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987).

         A party seeking summary judgment always bears the initial burden of establishing the absence of a genuine issue of material fact. Celotex, 477 U.S. at 323. The moving party can satisfy this burden in two ways: (1) by presenting evidence that negates an essential element of the nonmoving party's case; or (2) by demonstrating that the nonmoving party failed to establish an essential element of the nonmoving party's case that the nonmoving party bears the burden of proving at trial. Id. at 322-23; Jones v. Williams, 791 F.3d 1023, 1030 (9th Cir. 2015). Once the moving party establishes the absence of a genuine issue of material fact, the burden shifts to the nonmoving party to “set forth, by affidavit or as otherwise provided in Rule 56, ‘specific facts showing that there is a genuine issue for trial.'” T.W. Elec. Serv., 809 F.2d at 630 (quoting former Fed.R.Civ.P. 56(e)); accord Horphag Research Ltd. v. Garcia, 475 F.3d 1029, 1035 (9th Cir. 2007). To carry this burden, the non-moving party “may not rest upon mere allegation or denials of his pleadings.” Anderson, 477 U.S. at 256; see also Behrens v. Pelletier, 516 U.S. 299, 309 (1996) (“On summary judgment, . . . the plaintiff can no longer rest on the pleadings.”). Rather, the nonmoving party “must present affirmative evidence . . . from which a jury might return a verdict in his favor.” Anderson, 477 U.S. at 256.

         When ruling on a summary judgment motion, the court must view the facts and draw all reasonable inferences in the light most favorable to the non-moving party. Scott v. Harris, 550 U.S. 372, 378 (2007). The court should not weigh the evidence or make credibility determinations. See Anderson, 477 U.S. at 255. “The evidence of the non-movant is to be believed.” Id. Further, the court may consider other materials in the record not cited to by the parties, but it is not required to do so. See Fed.R.Civ.P. 56(c)(3); Simmons v. Navajo Cnty., 609 F.3d 1011, 1017 (9th Cir. 2010).

         II. Snap's Motion for Reconsideration of the Court's February 27, 2018 Summary Judgment Order

         On February 27, 2018, the Court denied Snap's motion for summary judgment that the patents-in-suit fail to claim patent-eligible subject matter and, therefore, are invalid under 35 U.S.C. § 101. (Doc. No. 117.) Snap argues that the Court should reconsider its February 27, 2018 summary judgment order in light of the Federal Circuit's subsequent decisions in Interval Licensing LLC v. AOL, Inc., 896 F.3d 1335 (Fed. Cir. 2018), and BSG Tech LLC v. Buyseasons, Inc., 899 F.3d 1281 (Fed. Cir. 2018). (Doc. No. 183-1 at 1.) In response, Vaporstream argues that Snap's motion should be denied because Interval Licensing and BSG do not present a material difference in law, and because both cases are distinguishable from the facts of this case. (Doc. No. 193 at 1-3.)

         A. Legal Standards for a Motion for Reconsideration

         A district court has inherent jurisdiction to modify, alter, or revoke a prior order. United States v. Martin, 226 F.3d 1042, 1049 (9th Cir. 2000). “Reconsideration [of a prior order] is appropriate if the district court (1) is presented with newly discovered evidence, (2) committed clear error or the initial decision was manifestly unjust, or (3) if there is an intervening change in controlling law.” School Dist. No. 1J v. ACandS, Inc., 5 F.3d 1255, 1263 (9th Cir. 1993); see C.D. Cal. Civ. L.R. 7-18.

         Reconsideration should be used conservatively, because it is an “extraordinary remedy, to be used sparingly in the interests of finality and conservation of judicial resources.” Carroll v. Nakatani, 342 F.3d 934, 945 (9th Cir. 2003); see also Marlyn Nutraceuticals, Inc. v. Mucos Pharma GmbH & Co., 571 F.3d 873, 880 (9th Cir. 2009) (“‘[A] motion for reconsideration should not be granted, absent highly unusual circumstances . . . .'”). A motion for reconsideration may not be used to relitigate old matters, or to raise arguments or present evidence for the first time that reasonably could have been raised earlier in the litigation. Exxon Shipping Co. v. Baker, 554 U.S. 471, 486 n.5 (2008); see Kona Enterprises, Inc. v. Estate of Bishop, 229 F.3d 877, 890 (9th Cir. 2000) (“A [motion for reconsideration] may not be used to raise arguments or present evidence for the first time when they could reasonably have been raised earlier in the litigation.”). “A party seeking reconsideration must show more than a disagreement with the Court's decision.” United States v. Westlands Water Dist., 134 F.Supp.2d 1111, 1131 (E.D. Cal. 2001); accord Huhmann v. FedEx Corp., No. 13-CV-00787-BAS NLS, 2015 WL 6128494, at *2 (S.D. Cal. Oct. 16, 2015); Franklin v. Madden, No. CV 17-4281 DSF(JC), 2018 WL 6038332, at *2 (C.D. Cal. July 18, 2018).

         B. Legal Standards for Patent Eligibility under § 101

         Section 101 of the Patent Act defines patent-eligible subject matter as “any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.” 35 U.S.C. § 101. The Supreme Court has “‘long held that this provision contains an important implicit exception[:] Laws of nature, natural phenomena, and abstract ideas are not patentable.'” Ass'n for Molecular Pathology v. Myriad Genetics, Inc., 133 S.Ct. 2107, 2116 (2013). “The concern underlying these judicial exclusions is that ‘patent law not inhibit further discovery by improperly tying up the future use of these building blocks of human ingenuity.'” Rapid Litig. Mgmt. Ltd. v. CellzDirect, Inc., 827 F.3d 1042, 1047 (Fed. Cir. 2016).

         “The Supreme Court has devised a two-stage framework to determine whether a claim falls outside the scope of section 101.” Affinity Labs of Texas, LLC v. DIRECTV, LLC, 838 F.3d 1253, 1257 (Fed. Cir. 2016); see Alice, 134 S.Ct. at 2355. “The prescribed approach requires a court to determine (1) whether the claim is directed to a patent-ineligible concept, i.e., a law of nature, a natural phenomenon, or an abstract idea, and if so, (2) whether the elements of the claim, considered both individually and as an ordered combination, add enough to transform the nature of the claim' into a patent-eligible application.” Affinity Labs, 838 F.3d at 1257 (internal quotation marks omitted) (citing Alice, 134 S.Ct. at 2355). “In the context of claims that are challenged as containing only abstract ideas, those two stages are typically referred to as the ‘abstract idea' step and the ‘inventive concept' step.” Id.

         “The ‘abstract idea' step of the inquiry” requires courts “to look at the ‘focus of the claimed advance over the prior art' to determine if the claim's ‘character as a whole' is directed to excluded subject matter.” Id. at 1257. “The ‘inventive concept' step requires [courts] to look with more specificity at what the claim elements add, in order to determine ‘whether they identify an “inventive concept” in the application of the ineligible subject matter' to which the claim is directed.” Id. at 1258. “This inventive concept must do more than simply recite ‘well-understood, routine, conventional activity.'” FairWarning IP, LLC v. Iatric Sys., Inc., 839 F.3d 1089, 1093 (Fed. Cir. 2016).

         “Patent eligibility under 35 U.S.C. § 101 is ultimately an issue of law.” Berkheimer v. HP Inc., 881 F.3d 1360, 1365 (Fed. Cir. 2018). But “[t]he patent eligibility inquiry may contain underlying issues of fact.” Id. “The accused infringer bears the burden of proof on both steps” of the Alice inquiry. InsideSales.com, Inc. v. SalesLoft, Inc., No. 2:16CV859DAK, 2017 WL 2559932, at *2 (D. Utah June 13, 2017); see Microsoft Corp. v. i4i Ltd. P'ship, 564 U.S. 91, 95 (2011) (“[T]he burden of establishing in-validity of a patent or any claim thereof shall rest on the party asserting such invalidity.” (quoting 35 U.S.C. § 282)). Patent ineligibility must be proven by clear and convincing evidence. See Berkheimer, 881 F.3d at 1368; Microsoft, 564 U.S. at 95.

         C. Analysis

         i. Alice Step One

         In the Court's February 27, 2018 summary judgment order, the Court held under step one of the Alice inquiry that the asserted claims are directed to an abstract idea. (Doc. No. 117 at 9; see also Doc. No. 59 at 10-11 (quoting Bascom Global, 827 F.3d at 1349).) Snap does not move for reconsideration of this part of the Court's prior order. As such, the Court turns to step two of the Alice inquiry.

         ii. Alice Step Two

         Snap argues that the asserted claims fail to recite an inventive concept under Alice step two in light of the Federal Circuit's decisions in Interval and BSG. (Doc. No. 183-1 at 2-4.) In response, Vaporstream argues that Interval and BSG do not represent a material difference in the law warranting reconsideration. (Doc. No. 193 at 1.) Vaporstream further argues that even if Interval and BSG represent a material change in the law, the two decisions do not alter the Court's prior conclusion that Snap failed to conduct a proper ordered combination analysis. (Id. at 2.)

         At Alice step two, the Court “consider[s] the elements of each claim both individually and as an ordered combination to determine whether the additional elements transform the nature of the claim into a patent-eligible application.” Berkheimer, 881 F.3d at 1366 (internal quotation marks omitted) (quoting Alice, 134 S.Ct. at 2355); accord Interval, 896 F.3d at 1342; BSG, 899 F.3d at 1289. “The second step of the Alice test is satisfied when the claim limitations ‘involve more than performance of “well-understood, routine, [and] conventional activities previously known to the industry.”'” Berkheimer, 881 F.3d at 1367 (quoting Content Extraction & Transmission LLC v. Wells Fargo Bank, Nat. Ass'n, 776 F.3d 1343, 1347-48 (Fed. Cir. 2014)); see Aatrix Software, Inc. v. Green Shades Software, Inc., 882 F.3d 1121, 1128 (Fed. Cir. 2018) (“If the elements involve ‘well-understood, routine, [and] conventional activity previously engaged in by researchers in the field,' they do not constitute an ‘inventive concept.' ...


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