Sunday, June 28, 2015

Fraud Detection in Patient Records Patent -- Is it Patent-Eligible?

"In other words, Claim 1 comprises..." Perhaps the most dangerous words in a court opinion directed to the patent eligibility of a challenged patent. I say dangerous because essentially any patent claim can be presented "in other words" in order to describe them broadly directed to some abstract idea and doing so avoids careful analysis of the particular meaning of all words in a challenged claim. 

Fairwarning IP, LLC sued Iatric Systems for infringement of U.S. Patent 8,578,500 directed to a method and system for detecting fraud and misuse in connection with electronic patient data.  The defendant asked the Court to dismiss the claim, arguing the patent was directed to an ineligible abstract idea.

The Court went through the basic framework for making such a determination: (1) Is the claim directed to an abstract idea; and (2) if so, look at the claims to determine whether the elements of the claim transform the nature of the claim into patent-eligible subject matter.  See Alice Corp. v. CLS Bank International, 134 S. Ct. 2347, 2355 (2014).

The Federal Circuit has sought to clarify this test, particularly in connection with computer inventions.  See DDR Holdings LLC. v. Hotels.com, L.P., 773 F.3d 1245, 1247 (Fed. Cir. 2014) (upholding claims which are "necessarily rooted in computer technology in order to overcome a problem specifically arising in the realm of computer networks.")

Claim 1 of the '500 patent requires the following elements:
1. A method of detecting improper access of a patient’s protected health information (PHI) in a computer environment, the method comprising: 
generating a rule for monitoring audit log data representing at least one of [the] transactions or activities that are executed in the computer environment, which are associated with the patient’s PHI, the rule comprising at least one criterion related to accesses in excess of a specific volume, accesses during a pre-determined time interval, accesses by a specific user, that is indicative of improper access of the patient’s PHI by an authorized user wherein the improper access is an indication of potential snooping or identity theft of the patient’s PHI, the authorized user having a pre-defined role comprising authorized computer access to the patient’s PHI;  
applying the rule to the audit log data to determine if an event has occurred, the event occurring if the at least one criterion has been met;  
storing, in a memory, a hit if the event has occurred; and providing notification if the event has occurred. 

Here, the defendant argued the claims were directed to the abstract idea of "analyzing records of human activity to detect suspicious behavior."  The Court agreed:

[T]he ’500 patent is “directed to” or “drawn to” the concept of “analyzing records of human activity to detect suspicious behavior.” (Doc. 50 at 2) Reviewing activity to detect suspicious behavior is not unique to the context of private health information, and binding precedent has invalidated patents “directed to” similar concepts. E.g., CyberSource Corp. v. Retail Decisions, Inc., 654 F.3d 1366, 1367 (Fed. Cir. 2011) (invalidating a patent that claimed a “method and system for detecting fraud in a credit card transaction between [a] consumer and a merchant over the Internet”); accord Intellectual Ventures II LLC v. JP Morgan Chase & Co., 2015 WL 1941331, *3 (S.D.N.Y. April 28, 2015) (Hellerstein, J.) (invalidating a patent that claimed a “method for monitoring multiple computer hosts within a network for anomalies, and alerting the various hosts of possible intrusion”); Wireless Media Innovations, LLC v. Maher Terminals, LLC, 2015 WL 1810378, *8 (D.N.J. April 20, 2015) (Linares, J.) (invalidating patents “directed to the . . . abstract idea[ of] monitoring locations, movement, and load status of shipping containers within a container-receiving yard, and storing, reporting and communicating this information in various forms through generic computer functions”). Reviewing activity to detect suspicious behavior is a basic and well-established abstract idea 
[EDITOR'S NOTE: The Court referred to "binding precedent," yet only cited a 2011 (i.e. pre-Alice and pre-DDR) decision.]

FairWarning argued the claims were necessarily rooted in computer technology (per DDR Holdings) because the claims "provide[] a solution to a technological problem, namely identifying potential snooping and identify theft by authorized users."  The Court was not persuaded.

Finding the patent directed to an abstract idea, the Court turned to the second step -- do the claim elements transform the patent into something more.  The Court begins the discussion as follows:

In other words, Claim 1 comprises (1) generating a rule “related to” the number of accesses, the timing of accesses, and the specific users in order to review “transactions or activities that are executed in a computer environment”; (2) applying the rule; (3) storing the result; and (4) announcing the result.
[EDITOR'S NOTE: The Court looked at the individual elements of the claim, but then merely paraphrased what those elements might be.  And the Court did so without considering what one of skill in the art would understand the terms to mean.]

The Court conducted the analysis as follows:

None of the steps in Claim 1’s method transforms the abstract idea into a patentable concept. Although the first step of the method requires “generating a rule for monitoring audit log data,” Claim 1 neither states a rule nor instructs a computer to generate a rule. Instead, in at least one embodiment of the invention, “the rule is created by the user and/or a third party, such as a consultant with particular knowledge as to fraud or misuse of the particular type of data.” ’500 patent, col. 13, ll. 11–13. Also, the function performed by the computer in each remaining step of Claim 1’s method is “purely conventional.” Alice, 134 S. Ct. at 2358 
[EDITOR'S NOTE:  The Court appears to have limited its analysis to a single embodiment disclosed in the specification.  And it's not clear the Court addressed Claim 1's limitation that the rule at issue must be "indicative of improper access of the patient's PHI by an authorized user wherein the improper access is an indication of potential snooping or identify theft of the patient's PHI, the authorized user having a pre-defined role comprising authorized computer access to the patient's PHI"]

The Court went on to find the patent directed to ineligible subject matter, and to dismiss plaintiff's complaint without prejudice, allowing "FairWarning [to] amend the complaint to assert a claim that is independent of the '500 patent's validity."

Motion to dismiss, granted.

FairWarning IP, LLC v. Iatric Systems, Inc., Case No. 8:14-CV-2685 (M.D. Fla. June 24, 2015) (J. Merryday)

Monday, May 11, 2015

Are the Kardashians' European Activities Beyond The Reach of a U.S. Court?

Nope.

Lee Tillett owns U.S. Trademark No. 4079066 for KROMA in connection with cosmetics.  Tillett exclusively licensed the mark to Kroma Makeup EU, LLC ("Kroma EU") granting Kroma EU the right to import, distribute, and sell products using the mark in Europe.  Kroma EU's business thrived selling cosmetics under this mark.

Separately, Kim, Kourtney, and Khloe Kardashian set out to create a Kardashian-themed makeup line.  They engaged Boldface Licensing + Branding ("Boldface") to assist in this venture.  Boldface conducted a preliminary trademark search for terms like "Khroma" and "Kardashian Khroma."  Those searches revealed Tillet's trademark.  The Kardashians inquired of Boldface the propriety of using the "Khroma" mark in light of Tillet's registration.  Notwithstanding, the Kardashians eventually selected and went to market with the "Khroma" mark.

Tillett sent the Kardashian's a couple of cease and desist letters which failed to prevent the accused activity.  Instead, Boldface sued Tillett for a declaratory judgment that its actions did not infringe.  Tillett countersued for infringement (and brought the Kardashians into that dispute under a vicarious trademark infringement theory).  Tillett ultimately was awarded a preliminary injunction.  Thereafter, the case settled.  Notably, Kroma EU was not a party to that lawsuit and Tillett does not appear to have pursued a claim for damages on behalf of Kroma EU.

Kroma EU sued Tillett, the Kardashians, and Boldface in Florida for trademark infringement (direct and vicarious).  Kroma EU also sued Tillett under a promissory estoppel theory for Tillett's failure to recover Kroma EU's damages in the prior litigation.  Boldface defaulted.  The remaining defendants sought dismissal, which presented the court with four issues to resolve:

  1. Does Kroma EU have standing to bring its claim for trademark infringement?
  2. Are Kroma EU's claims barred by res judicata?
  3. Does the Lanham Act reach the Kardashian's infringing activities occuring outside the U.S?
  4. Does Kroma EU's promissory estoppel claim survive?

The court resolved these issues on the pleading stage as follows:

Standing

The Kardashian's argument was essentially that "because Tillett is the registrant and owner of the 'Kroma' mark in the United States, Tillett is the only one who can prosecute claims on the mark's behalf."  The court was not persuaded:
[S]imply because the licensor remains the owner of the trademark does not mean that he is the only person with rights in the mark to enforce. Although § 32(1) of the Lanham Act speaks of the "registrant" who may bring an action for trademark infringement, see 15 U.S.C. § 1114(1), section 43(a)—the provision through which Kroma EU asserts its infringement claims—is not so limited in scope. Specifically, § 43(a) permits "any person who believes that he or she is or is likely to be damaged" to bring a claim for infringement resulting from false association or false advertising. 15 U.S.C. § 1125(a)(1). Section 43(a) therefore affords relief to any plaintiff who shows the requisite injury from the defendant's infringing conduct, without regard to any ownership interest the plaintiff may have in the trademark. Murphy v. Provident Mut. Life Ins. Co. of Phila., 756 F. Supp. 83, 86 (D. Conn. 1990) ("[T]he question of ownership is immaterial to standing under § 43(a) . . . ."), aff'd 923 F.2d 923 (2d Cir. 1990), cert. denied 502 U.S. 814 (1991). Indeed, courts frequently find non-owners—such as manufacturers, competitors, distributors, and others—to have standing under § 43(a). See, e.g., Scotch Whisky Ass'n v. Majestic Distilling Co., Inc., 958 F.2d 594 (4th Cir. 1992) (trade association has standing), cert. denied 506 U.S. 862 (1992)Quabaug Rubber Co. v. Fabiano Shoe Co., Inc., 567 F.2d 154, 160 (1st Cir. 1977) (non-exclusive distributor has standing).
The court went on to explain the Supreme Court's recent pronouncement resolving the question of non-owner standing.  See Lexmark International, Inc. v. Static Control Components, Inc., 134 S. Ct. 1377 (2014).  There, the Court formulated a two-prong test to analyze for "statutory standing".

First, the plaintiff must fall within the "zone of interests" of the statute at issue.  Second, the plaintiff must show its injuries are proximately caused by the defendant's conduct.  Here, the court quickly found Kroma EU's claim satisfied this standard because Kroma EU had an exclusive license to the mark in Europe and Kroma EU had engaged in actual commercial conduct to promote the brand abroad.  Additionally, it was clear that Kroma EU pleaded injuries proximately caused by the defendants activities.  As such, standing was proper.

Res Judicata

The court did not require much time to deal with this issue, as res judicata requires identical parties in the respective disputes and Kroma EU was not a party to the prior litigation.

Extraterritorial Reach of the Lanham Act

The Kardashians sought dismissal of the claim for failing to state sufficient conduct to hold the Kardashian's liable for vicarious trademark infringement because the claim was based on activities outside the U.S.  The court explained the law as follows:
Where trademark infringement occurs primarily in a foreign nation, the extraterritorial reach of the Lanham Act becomes a concern, as it is presumed that Congress intends to legislate "with respect to domestic, not foreign matters." Morrison, 561 U.S. at 255. Only Congress' clear, affirmative expression of its intent to give a federal statute extraterritorial consequence can rebut this presumption. Id.
The United States Supreme Court found such an intent in the Lanham Act inSteele v. Bulova Watch Co., 344 U.S. 280 (1952). In Bulova Watch, the Supreme Court recognized Congress' undeniable ability to "project the impact of its laws beyond the territorial boundaries of the United States." Id. at 282. Upon reviewing the Lanham Act's purpose and statement of broad jurisdictional scope, the Supreme Court deduced that the Lanham Act regulates not only domestic conduct, but also foreign conduct of U.S. citizens where the conduct involves U.S. commerce and does not otherwise interfere with the rights of foreign nationals in their own countries. Id. at 285-86.
The Eleventh Circuit has formulated a three factor test in resolving such issues:

  1. is the defendant a U.S. citizen?
  2. does the foreign conduct have a substantial effect on U.S. commerce?
  3. does adjudicating the claim interfere with another nation's sovereignty?

See Int'l Café, S.A.L. v. Hard Rock Café Int'l (U.S.A.), Inc., 252 F.3d 1274, 1278 (11th Cir. 2001) (per curiam) accord Vanity Fair Mills, Inc. v. T. Eaton Co., 234 F.2d 633, 642-43 (2d Cir. 1956), cert. denied 352 U.S. 871 (1956).  There was no question on the first and third factors.  As to the second, the court wrote:
the Court finds that the Kardashian Defendant's conduct has had a substantial effect on U.S. commerce.  ... When Khroma was released in Europe, the retailer backed out, stating that it did not want to be associated with the Kardashian Defendants or to be perceived as selling discount or inferior-quality products.  Other potential clients also expressed their confusion as to why Kroma was partnering with the Kardashian Defendants.
Thus, Kroma EU could proceed on its claim in the U.S.

Promissory Estoppel

Here, while Tillett may have been technically correct that Kroma EU could not proceed on a promissory estoppel theory in light of the written agreement between the parties (i.e. the license agreement), Kroma EU's claim could still proceed under a breach of contract theory.  The court is not obligated to adhere to the labels parties apply to their claims and Kroma EU will be given an opportunity to amend its claim upon a proper motion.  

Motion to dismiss, denied.

Kroma Makeup EU, Ltd. v. Boldface Licensing + Branding, Inc., Case No. 6:14-CV-1551 (M.D. Fla. Apr. 15, 2015) (J. Byron)

Monday, April 6, 2015

Staying Litigation Because of Request for Inter Partes Review?

Not yet.  The request is premature until the Patent Office determines whether or not to institute the Inter Partes Review ("IPR").

TAS Energy, Inc. sued Stellar Energy Americas, Inc. for patent infringement concerning U.S. RE 44,815.  TAS and Stellar are competing engineering firms that each sought to design and construct a gas turbine inlet air cooling and thermal energy storage system for Duke Energy.  TAS additionally sought a preliminary injunction to enjoin Stellar's activities, but that motion was denied.  Stellar next petitioned the U.S. Patent and Trademark Office for IPR, seeking to invalidate claims of the '815 patent.

As has become common practice, Stellar also asked the district court to stay the litigation based on Stellar's request for review.  TAS responded that the request for a stay was premature because the Patent Office had not yet decided whether or not to grant the petition.

The Court resolved the issue quickly:
Stellar argues that there is a substantial likelihood that the PTO will institute review of the patent-in suit because it already instituted review of the parents of the patent-in-suit in prior inter partes review proceedings. Stellar also argues that TAS Energy will not be unduly prejudiced because its motion for preliminary injunction was denied, which Stellar argues raises a substantial question as to the validity of the patent-in-suit. Stellar further argues that the PTO grants a majority of the petitions filed and it is likely to resolve the question regarding the validity of the patent-in-suit, which would minimize duplicative efforts and may streamline the district court’s litigation. It further argues that the stay would be “brief.”
TAS Energy opposes Stellar’s Motion and argues that this Court should deny the motion for three reasons: Stellar’s motion is premature; Stellar exaggerates the possibility that its IPR petitions—if instituted at all—will simplify this litigation; and Stellar ignores the prejudice that TAS Energy will suffer as a result of a stay. It argues that the majority of the courts in the Middle District of Florida deny motions for stay when the PTO has not yet granted a movant’s petition for inter partes review and no circumstances in this case justify a departure from that trend. Further, TAS Energy states that Stellar’s petitions challenge different claims of the ‘815 patent, and each petition challenged less than half of the ‘815 patent’s claim; therefore, the review would not simplify the issues in this case because it will not finally resolve all issues in the litigation. It further argues that when the parties are direct competitors the risk of prejudice in delaying a patent infringement suit is high, which courts in this district recognize as a basis to deny a stay.
The Court concludes that granting a stay at this stage of the inter partes review process is premature. Therefore, the Court denies the Motion without prejudice to Stellar to raise the issue if and when the PTO grants its petitions. Accord CANVS Corp. v. FLIR Sys., Inc.,2:14-CV-180-FTM-38CM, 2014 WL 6883127, at *1 (M.D. Fla. Dec. 5, 2014) (referencing defendant’s previous motion for stay which the court denied as premature without prejudice to re-file if and when the PTO granted inter partes review). See also Automatic Mfg. Sys., Inc. v. Primera Tech., Inc., No. 6:12-cv-1727-Orl-37DAB,2013 WL 1969247, at *3 (M.D. Fla. May 13, 2013) (“it seems clear that a stay of a patent infringement action is not warranted when based on nothing more than the fact that a petition for inter partes review was filed in the USPTO.”); U.S. Nutraceuticals, LLC [v. Cyanotech Corp.], 2013 WL 6050744, at *3 (explaining since it remained uncertain as to whether the petition for inter partes review would be granted, a stay would prejudice the plaintiff’s ability to prosecute its claims and present a clear tactical advantage to the defendants).

[EDITOR'S NOTE: This is a very disturbing and troubling trend to me, and it appears to me that the Middle District of Florida is handling it correctly.  Issued patents are presumed valid, and the owner of the patent is charged with policing his or her rights.  That policing is in the form of a patent infringement litigation to stop the alleged infringer from violating the patent owner's presumed-valid rights.   Congress, perceiving there is a larger problem with patent infringement activity than actually exists, created a framework for attacking the validity of patents at the Patent Office.  Under this framework, if the Patent Office agrees to analyze the validity of the patent, a Court should stay the litigation under most circumstances.  But numerous (hundreds?  more?) defendants have asked district courts to stay litigations on the basis of their requests for review alone.  These defendants usually combine their requests for a stay with outright refusals to cooperate in the litigation, forcing the plaintiff to engage in additional motion practice to compel compliance with the rules of civil procedure.  In essence, the presumption of validity has disappeared and the already daunting task of enforcing Constitutionally created property rights is even harder.  It's worthwhile to remember we are an innovation economy and patents have historically been a strong vessel for protecting and valuing that innovation.  Time will tell whether balance will return to the patent system or not.]

Motion to stay, denied as premature.
TAS Energy, Inc. v. Stellar Energy Americas, Inc., Case No. 8:14-CV-3145 (M.D. Fla. Apr. 2, 2015) (J. Moody)

Tuesday, March 17, 2015

Request for Directed Verdict -- Is "Pods" Generic?

No.

A jury agreed with PODS that U-Haul infringed the "pods" trademark and that U-Haul was unable to prove that the mark was generic.  U-Haul asked for a directed verdict notwithstanding the jury's conclusion and separately asked for a new trial.

The Court noted the narrow lens through which a Rule 50 directed verdict motion is viewed:
A Rule 50 motion should be granted only if the evidence is so overwhelmingly in favor of the moving party that a reasonable jury could not arrive at a contrary result.
(quote omitted).  U-Haul argued that it had presented significant evidence including expert testimony, dictionary definitions, patents, media usage, military usage, industry usage, and PODS' own usage to show that the term "pods" was generic at the time of its trademark registration.  The Court first laid out the test for genericness:
The Lanham Act has codified the test for genericness: the primary significance of the mark to the relevant public.15 U.S.C. § 1064(3); Miller's Ale House, Inc. v. Boynton Carolina Ale House, LLC, 702 F.3d 1312, 1320 (11th Cir. 2012).  The term is generic if the primary significance of the mark is "the term by which the product or service itself is commonly known," a depiction of the product as a whole, rather than a particular feature of the product, or the name of a class of products rather than an individual brand.  Welding Servs., Inc. v. Forman, 509 F.3d 1351, 1358 (11th Cir. 2007) (citations omitted).  The First Circuit has explained: "Rather than answering the question "where do you come from?", a generic term merely explains "what are you?" Boston Duck Tours, LP v. Super Duck Tours, LLC, 531 F.3d 1, 14 (1st Cir. 2008) (citations omitted).  Genericness is based on the use of a word in its relevant context, not the word itself.  "'[I]vory' is generic of elephant tusks but arbitrary as applied to soap."  Soweco, Inc. v. Shell Oil Co., 617 F.2d 1178, 1183, 1186 (5th Cir. 1980).
The Court then turned to U-Haul's evidence.  The bulk of U-Haul's evidence appeared related to the use of the term "pod" in the aerospace industry (i.e. NASA definitions defining pod as a "streamlined compartment under the wings or fuselage of an airplane used as a container (as for fuel).")  While noting that U-Haul presented a significant amount of evidence, the Court recognized that the jury was entitled to give that evidence whatever weight the jury found appropriate:
The Court's inquiry on a Rule 50 motion based on the sufficiency of evidence is limited to determining "if the evidence is so overwhelmingly in favor of the moving party tht a reasonable jury could not arrive at a contrary verdict." Middlebrooks v. Hillcrest Foods, Inc., 256 F.3d 1241, 1246 (11th Cir. 2007).   It is the jury's role, not the court's, to make credibility determinations and weigh the evidence. Reeves v. Sanderson Plumbing Prods., 530 U.S. 133, 150–151 (2000). As outlined above, U–Haul presented a significant amount of evidence relevant to its affirmative defense of genericness. However, a careful review of the evidence, in light of the relevant legal standards and the jury's role as finder of fact and appraiser of credibility, leads to the conclusion that there is sufficient evidence to support the jury's verdict. See Chambless v.. Louisiana–Pac. Corp.,481 F.3d 1345, 1348 (11th Cir.2007) (denying Rule 50 motion brought by party who bore the burden of proof, where the movant made a prima facie case but there was sufficient evidence to support the jury's verdict); Collado v. UnitedParcel Service, Co., 419 F.3d 1143, 1154 (11th Cir.2005). U– Haul's remaining arguments for overturning the jury's verdict are similarly unavailing.
U-Haul's motion for a new trial failed for the same reasons.

Motion for directed verdict, or alternatively for a new trial, denied.
Pods Enterprises, Inc. v. U-Haul Intern., Inc., Case No. 8:12-cv-1479 (M.D. Fla. Mar. 11, 2015) (J. Whittemore)

Monday, March 2, 2015

The Infringer Sourced The Infringing Goods in China, So Infringement Was Willful, Right?

No.

Washington Shoe Company ("WSC") has sold certain shoes in Target.  (There is debate through the opinion discussed below whether WSC sold its shoes through Target "for years," but I will not get into that factual dispute.)  WSC sent an initial demand letter to Olem Shoe Corp. concerning the below boots:



Olem responded that it was investigating the claim, but WSC had not identified any copyright registrations.  WSC responded with registration information, but the Copyright Office was unable to locate the deposit copies corresponding to the boots.  WSC then filed supplementary registrations to address certain issues.

WSC obtained summary judgment that Olem had infringed, but the district court refused to find the infringement willful.  WSC appealed.  Olem cross-appealed the infringement finding.

Willfulness

Concerning willfulness, WSC argued that it was entitled to a jury determination as to whether or not Olem's infringement was willful.  WSC argued the following facts inferred willfulness:

  • Cease and desist letters;
  • "Striking similarity" of the infringing boots
  • Olem's sourcing of the boots from China because "it is ... well known that China is a source of infringing goods"
  • Olem's inability to point to any other works on which its shoes were based

Neither the district court nor the Eleventh Circuit were convinced.  As to the letters, the Court noted that Olem undertook a serious investigation, and identified issues with WSC's copyright registrations, which required WSC to file supplementary registrations.  As to the similarity of the boots, the court noted that "striking similarity" is a standard for finding infringement, but that did not mean Olem had the necessary state of mind to support a finding of willfulness:
[WSC]'s asserting that the similarity of Olem's boot designs to those of [WSC] "makes it more likely that the work was copied" is, of course true.  [WSC] has indicated no authority, however, that supports its argument that the similarity of the designs is evidence that the copying was willful.  Generally, establishing a reckless state of mind in a copyright case requires a showing that the infringer possessed particular knowledge from which willfulness could be inferred, such as evidence demonstrating that the infringer was given samples of the copyrighted work prior to producing the infringing work.  See Yurman Design, Inc. v. PAJ, Inc., 262 F.3d 101, 112, 113 (2d Cir. 2001) [parenthetical omitted]
As to sourcing the infringing boots in China, the Eleventh Circuit appeared hesitant to follow such an approach:
Although [WSC] notes that Olem did not design its boots and purchased them from China, it does not point to any record evidence to substantiate its claim that these facts "increase[] the probability of infringement" such that a jury could infer that Olem acted recklessly.  This argument, if effective, would impute reckless disregard to any company purchasing and selling products from China that it did not design itself that turned out to be copyrighted by another.  Thus, it is unpersuasive.
The Court was also not persuaded by WSC's argument attempting to attribute a reckless state of mind to Olem for its inability to point to other works on which the boots were based.

Cross-Appeal - Finding of Infringement

Olem's cross appeal attempted to negate the infringement finding based in part on challenging WSC's evidence suggesting broader access to WSC's boots based on purported misrepresentations.  The Court analyzed the WSC boots and Olem boots and concluded the Olem boots were "strikingly similar" to WSC's.  As such, the infringement finding stands.

Olem Shoe Corp. v. Washington Shoe Corp., Case Nos. 12-11227, 12-11356 (11th Cir. Jan. 12, 2015)

Wednesday, February 11, 2015

Patent Eligibility Attack On the Pleadings?

Not where you need to rely on evidence outside the pleadings...

Stoneeagle Services has sued Pay-Plus Solutions and Premier Healthcare Exchange for infringement of U.S. Patent RE 43,904 and RE 44,748 relating to healthcare provider reimbursement systems and methods.  Defendants, as has become all too common, moved for judgment on the pleadings early in the case, arguing that the patents are not patent eligible.  They challenged "representative" claim 2:
2. A method of facilitating payment of adjudicated health care benefits to a health care provider comprising:
identifying the health care provider that renders medical services in anticipation of payment;
identifying a payer that has agreed to pay the health care provider on behalf of a patient subject to preselected conditions;
identifying an administrator that determines whether the medical services conducted by the service provider meet the preselected conditions by the payer, generates an explanation of benefits, and authorizes payment of the service provider for an authorized amount;
intercepting the explanation of benefits and payment information transmitted from the administrator to the health care provider;
acquiring a single-use, stored-value card account number and loading it with funds equal to the authorized amount;
merging the stored-value card account number, the authorized amount, a card verification value code, and an expiration date with the explanation of benefits into a computer-generated image file; and
transmitting the image file to the health care provider via a computer-implemented transmission.
Defendants argued that the claim was directed to the abstract idea of "paying a service provider by transmitting a payment combined with an explanation of the payment."  Plaintiff disagreed, arguing that the claim was narrowly directed at "(1) the use of stored-value cards; (2) by third-party payors; (3) to pay healthcare benefits; (4) via a computer-generated file, which couples the payment with an explanation of benefits."  Plaintiff also offered expert testimony in support of its position.

The Court recognized the logistical issue with entertaining such a motion at such an early stage in the proceedings.  Specifically, regardless of the parties' arguments, the Court must analyze whether the claims (not just a "representative" claim) are directed to an "abstract idea" and if so, whether the elements of the claims (considered individually and in combination) contain an "inventive step." How a Court can properly do this without looking beyond a patent and its specification is not clear.
Upon careful consideration of the parties' filings, Defendant's Motion for Judgment on the Pleadings is denied, as premature.  As an initial matter, both Defendants and Plaintiff cite to matters outside of the pleadings, in support of their respective positions, including the prosecution history of a "parent" patent, an expert report prepared by Robert Allen (Plaintiff's Chairman and CEO), and a declaration submitted by Mr. Allen.  However, discovery is still ongoing, and the record is thus not "fully developed."  Jozwiak [v. Stryker], 2010 WL 743834 at *4.  Due to the deficiency of the available record, the Court declines to convert Defendant's Rule 12(c) motion into a motion for summary judgment.
* * *
In this case, the parties dispute the basic character of the claimed subject matter. ... At the very least, proper construction of the term "stored-value card" is necessary prior to an assessment of whether the claims implicate a fundamental economic practice, and whether the claims comprise a sufficiently inventive process.
The Court was not also inclined to address claims as "representative" without a stipulation:
Finally, Defendant's Motion unilaterally designates certain claims as "representative." ...
"[A] party challenging the validity of a claim, absent a pretrial agreement or stipulation, must submit evidence supporting a conclusion of invalidity of each claim the challenger seeks to destroy."  Shelcore, Inc. v. Durham Indus., Inc., 745 F.2d 621, 625 (Fed. Cir. 1984) (underlined emphasis added); see, e.g., Alice Corp. Pty. Ltd., 134 S. Ct. at 2352 (noting that the parties agreed on representative claims); cf. Content Extraction & Transmission LLC v. Wells Fargo Bank, Nat'l Ass'n, Nos 2013-1588, et al., ___ F.3d ___, 2014 WL 7272219 at *4 (Fed. Cir. Dec. 23, 2014) (affirming district court's designation of claims as representative where patentee did not object).
Defendants' Motion fails to meaningfully address the claims not designated as "representative."  In order to narrow the issues, and to conserve both the Court's and the parties' resources, the parties are encouraged to stipulate to representative claims.  Absent a stipulation, Defendants will be required to address the challenged claims individually in any subsequent motion.
(emphasis provided by Court).  

Motion for judgment on the pleadings, denied as premature.
Stoneeagle Services, Inc. v. Pay-Plus Solutions, Inc., Case No. 8:13-CV-2240 (M.D. Fla. Feb. 9, 20150) (J. Covington)