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Amdocs (Israel) Ltd. v. Openet Telecom, Inc.

United States District Court, E.D. Virginia, Alexandria Division

October 24, 2014

AMDOCS (ISRAEL) LIMITED, an Israeli Corporation, Plaintiff,
v.
OPENET TELECOM, INC., a Delaware Corporation, et al., Defendants

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For Amdocs (Israel) Limited, an Israeli Corporation, Plaintiff: Brittany Blueitt Amadi, Wilmer Cutler Pickering Hale & Dorr LLP (DC), Washington, DC; Gregory Hayes Lantier, James Linwood Quarles, Wilmer Cutler Pickering Hale & Dorr LLP, Washington, DC.

For Openet Telecom, Inc., a Delaware Corporation, Defendant: Adrienne Gail Johnson, Eric Weisblatt, Joseph Shin, Brian Himanshu Pandya, Wiley Rein LLP (DC), Washington, DC.

For Openet Telecom LTD., an Irish Corporation, Defendant: Adrienne Gail Johnson, Brian Himanshu Pandya, Eric Weisblatt, Joseph Shin, Wiley Rein LLP (DC), Washington, DC.

For Openet Telecom, Inc., a Delaware Corporation, Counter Claimant: Adrienne Gail Johnson, Joseph Shin, Brian Himanshu Pandya, Wiley Rein LLP (DC), Washington, DC.

For Amdocs (Israel) Limited, an Israeli Corporation, Counter Defendant Gregory Hayes Lantier, Wilmer Cutler Pickering Hale & Dorr LLP, Washington, DC.

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MEMORANDUM OPINION

Leonie M. Brinkema, United States District Judge.

Before the Court is Defendants' Motion for Judgment on the Pleadings [Dkt. No. 293]. Having considered the pleadings as well as the oral argument of counsel, the motion will be granted for the reasons discussed below.

I. BACKGROUND

Amdocs (Israel) Limited (" plaintiff" or " Amdocs" ) and Openet Telecom LTD and Openet Telecom, Inc. (collectively, " Openet" ) compete to provide software which allows telecommunications providers to track customer usage of computer network services. On August 16, 2010 Amdocs filed this patent infringement action alleging that Openet infringed U.S. Patent Nos. 6,836,797 (" the " 191 Patent" ) and 7,631,065 (" the '065 Patent ." ). Complaint [Dkt. No. 1]. Amdocs added U.S. Patent Nos. 7,412,510 (" the '510 Patent" ) and 6,947,984 (" the '984 Patent" ) via an Amended Complaint on February 3, 2011. [Dkt. No. 50]. Openet responded with an Answer and Counterclaim, alleging invalidity and non-infringement and filed a Motion for Summary Judgment of Non-Infringement and Invalidity on May 26, 2011. The motion was granted as to non-infringement by a memorandum opinion on January 22, 2013. [Dkt. No. 259]. Amdocs appealed. [Dkt. No. 264]. The Federal Circuit affirmed two term constructions but reversed a third, and accordingly vacated the grant of summary judgment of non-infringement. Amdocs (Israel) Ltd. v. Openet Telecom, Inc., 761 F.3d 1329 (Fed. Cir. 2014). While the case was on appeal, the Supreme Court decided Alice Corp. Pty. Ltd. v. CLS Bank Int'l, which invalidated a computer

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software patent under 35 U.S.C. § 101 for being directed to an abstract idea. 134 S.Ct. 2347, 189 L.Ed.2d 296 (2014).

Upon remand, Openet filed the pending Motion for Judgment on the Pleadings, in which it argues that all of the asserted claims are invalid under 35 U.S.C. § 101 as being directed to unpatentable abstract ideas. Defendants' Memorandum In Support Of Their Motion For Judgment On The Pleadings [Dkt. No. 294] (" Openet's Br." ). Amdocs has filed an opposition, Plaintiff's Opposition To Defendants' Motion For Judgment On The Pleadings [Dkt. No. 297] (" Opp'n" ), and Openet has replied. Openet's Reply In Support Of Their Motion For Judgment On The Pleadings [Dkt. No. 298] (" Reply" ).

II. DISCUSSION

A. Standard of Review

" Section 101 patent eligibility is a question of law." In re Roslin Institute (Edinburgh), 750 F.3d 1333, 1335 (Fed. Cir. 2014). Accordingly, a court may invalidate patent claims directed to non-eligible subject matter on the pleadings. See buySAFE, Inc. v. Google, Inc., 765 F.3d 1350 (Fed. Cir. 2014).

In a motion for judgment on the pleadings, the court should " assume all facts alleged in the complaint are true and draw all reasonable factual influences in [the plaintiff]'s favor." Burbach Broadcasting Co. of Del, v. Elkins Radio Corp, 278 F.3d 401, 406 (4th Cir. 2002). " Judgment should be entered when the pleadings, construing the facts in the light most favorable to the non-moving party, fail to state any cognizable claim for relief, and the matter can, therefore, be decided as a matter of law." O'Ryan v. Dehler Mfg. Co., 99 F.Supp.2d 714, 718 (E.D. Va. 2000).

B. Patentability after Alice

To be eligible for a patent, a claimed invention must be directed to " any new and useful process, machine, manufacture, or composition of matter." 35 U.S.C. § 101 (2012). " In choosing such expansive terms . . . modified by the comprehensive 'any,' Congress plainly contemplated that the patent laws would be given wide scope," Diamond v. Chakrabarty, 447 U.S. 303, 308, 100 S.Ct. 2204, 65 L.Ed.2d 144 (1980); however, " for more than 150 years" the Supreme Court has " held that [§ 101] contains an important implicit exception: Laws of nature, natural phenomena, and abstract ideas are not patentable." Alice Corp. Pty. Ltd. v. CLS Bank Intern., 134 S.Ct. 2347, 2354, 189 L.Ed.2d 296 (2014) (quoting Ass'n for Molecular Pathology v. Myriad Genetics, Inc., 133 S.Ct. 2107, 2116, 186 L.Ed.2d 124 (2013)). Accordingly, " a new mineral discovered in the earth or a new plant found in the wild is not patentable subject matter. Likewise, Einstein could not patent his celebrated law that E=mc2; nor could Newton have patented the law of gravity." Chakrabarty, 447 U.S. at 309.

Although those examples match the Supreme Court's old description of the exceptions as " a fundamental truth; an original cause; [or] a motive," LeRoy v. Tatham, 55 U.S. 156, 175, 14 L.Ed. 367 (1852), claims which are not so purely abstract have also been invalidated under § 101. For example, in Bilski v. Kappos the Court found a claim directed to " the basic concept of hedging, or protecting against risk" to be unpatentable. 561 U.S. 593, 130 S.Ct. 3218, 3231, 177 L.Ed.2d 792 (2010). In Bilski, the Court looked past the text of the claims to the underlying concept, and viewing the claimed invention as manifesting no more than an abstract idea declared the claims patent ineligible.

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Id. This conforms with the Supreme Court's warning " against interpreting patent statutes in ways that make patent eligibility depend simply on the draftsman's art." Mayo Collab. Servs. v. Prometheus Labs. Inc., 132 S.Ct. 1289, 1294, 182 L.Ed.2d 321 (2012) (internal quotation marks omitted).

Decided on June 19, 2014,[1] Alice articulated a two-step process for determining whether a claim was directed to patent-eligible subject matter. 134 S.Ct. at 2355. " First, [a court must] determine whether the claims at issue are directed to [a] patent-ineligible concept[]." Id. " If so, [the court must] then ask, 'what else is there in the claims before us?'" Id. (internal quotation marks omitted). " To answer that question, [the court must] consider the elements of each claim ... to determine whether the additional elements transform the nature of the claim into a patent-eligible application." Id. (internal quotation marks omitted).

At step one, a court must evaluate the claims " [o]n their face" to determine to which " concept" the claims are " drawn." Id. at 2356 (" On their face, the claims before us are drawn to the concept of intermediated settlement." ); Bilski, 130 S.Ct. at 3229 (finding claims drawn to " both the concept of hedging risk and the application of that concept to energy markets" to be patent ineligible).

At step two, a court " search[es] for an inventive concept - i.e., an element or combination of elements that is sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the ineligible concept itself." Alice, 134 S.Ct. at 2355 (internal quotation marks omitted). In Alice, the Court concluded that the claimed invention was directed to an abstract idea implemented on a generic computer, and that computer implementation was not " sufficient to transform the claimed abstract idea into a patent-eligible application." Id. at 2357 (internal quotation marks omitted). For an abstract idea involving a computer to be patent-eligible, " the claim ha[s] to supply a 'new and useful' application of the idea." Id. (quoting Gottschalk v. Benson, 409 U.S. 63, 67, 93 S.Ct. 253, 34 L.Ed.2d 273 (1972)). Accordingly, " the mere recitation of a generic computer cannot transform a patent-ineligible abstract idea into a patent eligible invention." Id. at 2358. At step two, the Supreme Court looked at the invention as described by the claims, rather than the further detail given in the specification. See id. at 2359.

This framework requires considering what constitutes an abstract idea and what can raise an abstract idea to the level of a patent-eligible application. The Supreme Court explicitly refused to " delimit the precise contours of the 'abstract ideas' category." Id. at 2357. Although the Court was clear that " appending conventional steps, specified at a high level of generality" or reciting the use of a generic computer was not sufficient to make an idea patent eligible, id., neither did the Court elucidate any necessary elements for eligibility. See id. at 2358. The Court described Diamond v. Diehr, 450 U.S. 175, 101 S.Ct. 1048, 67 L.Ed.2d 155 (1981) as succeeding at step two because the claim " improved an existing technological process," id., and implied that if the claims " improve[d] the function of the computer itself" then they would be patentable. Id. at 2359. Indeed, one district judge observed that since Alice, the " two step test"

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is more like Justice Stewart's statement about obscenity: " I shall not today attempt further to define the kinds of material I understand to be embraced within that shorthand description, and perhaps I could never succeed in intelligibly doing so. But I know it when I see it." McRO, Inc. v. Activision Pub., Inc., No. CV 14-336-GW, 2014 WL 4759953, at *5 (CD. Cal. Sept. 22, 2104) (quoting Jacobellis v. State of Ohio, 378 U.S. 184, 197, 84 S.Ct. 1676, 12 L.Ed.2d 793 (1964) (Stewart, J., concurring)).

Application of the two-part test can be guided by the rationale underlying the doctrine that abstract ideas are not patentable. The § 101 exceptions prevent a patentee from preempting further research, which the Court has explained as a concern because " [l]aws of nature, natural phenomena, and abstract ideas are the basic tools of scientific and technological work . . . Monopolization of those tools through the grant of a patent might tend to impede innovation more than it would tend to promote it, thereby thwarting the primary object of the patent laws." Alice, 134 S.Ct. at 2354 (internal quotation marks omitted).

The preemption concern must also be considered in light of the field to which the patent is directed. If the claimed abstract idea " has no substantial practical application except in connection" with the particular field claimed, then allowing a claim to that idea, even if limited to a particular field, " would wholly pre-empt" the idea and " in practical effect would be a patent on the [idea] itself." Gottschalk v. Benson, 409 U.S. 63, 71-72, 93 S.Ct. 253, 34 L.Ed.2d 273 (1972). In other words, even if an idea is only useful in one particular field, " limiting" a patent claim to that particular field is not enough to transform the idea into something patent-eligible because the idea would only work in that field anyway. In Gottschalk, for example, the claim was to a method, in a digital computer, of converting a decimal representation of a number to a binary representation. Id. at 65-66. Because that formula " has no substantial practical application ...


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