Patent Eligibility and Collateral Estoppel

I previously wrote about a Middle District of Florida Court invalidating one FairWarning IP's patents at the pleading stage.  There, the Court determined the asserted patent (U.S. Patent 8,578,500) was invalid because it was directed only an abstract idea.  FairWarning has appealed that decision.

FairWarning had also sued Cynergistek for alleged infringement of the '500 Patent.  That case was reassigned to Judge Merryday (who decided the case above) as it shared common issues.  Cynergistek also moved for judgment on the pleadings based on the alleged invalidity of the '500 Patent, but also argued that FairWarning was now collaterally estopped from asserting the '500 Patent because of Judge Merryday's prior finding.

The Court explained the standard:

Blonder–Tongue Laboratories, Inc. v. University of Illinois Foundation, 402 U.S. 313, 91 S.Ct. 1434, 28 L.Ed.2d 788 (1971), holds that, if a previous action invalidated a patent after the patent-holder had a full and fair opportunity to litigate, collateral estoppel prevents the patent-holder from enforcing the patent against an unrelated party in another action.

FairWarning argued that it lacked a full and fair opportunity to present its case in the prior decision because that decision "was one of those relatively rare instances where the courts wholly failed to grasp the technical subject matter and issues in suit."  The Court was not persuaded:

A review of Iatric System confirms (1) that FairWarning responded (without requesting a hearing) to Iatric Systems's motion to dismiss, which challenged the '500 patent's validity, and (2) that the order dismissing the action both considered and rejected FairWarning's arguments.

The Court then avoided the collateral estoppel question and ruled on the merits:

Regardless of collateral estoppel, for the same reasons explained in Iatric Systems, FairWarning fails to state a claim for infringement of the ‘500 patent, which is “directed to” nothing more than a patent-ineligible abstract idea. FairWarning asserts neither a fact nor an argument that warrants a different conclusion in this action.

The Court then dismissed as moot defendant's counterclaims seeking declarations of invalidity and non-infringement.

Motion for judgment on the pleadings, granted in part.

FairWarning IP, LLC v. Cynergistek, Inc., Case No. 8:15-CV-100 (M.D. Fla. Sept. 14, 2015) (J. Merryday)

  

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)

Are Declaratory Judgment Claims of Non-infringement in Response to a Claim of Infringement Redundant and Unnecessary?

Yes.

The Alexis Brothers, acrobatic circus performers who regularly perform as a featured act of Cirque de Soleil, own a copyright registration titled "Peace and Discord" for an original choreographic work consisting of a sequences of poses and transitions for theatrical performances.  A sample of their performance is here.

The Alexis Brothers sued Cirque Italia, LLC and two acrobatic performers (the "A&A Duo") for copyright infringement.  A sample of their performance is here.

The A&A Duo asserted counterclaims seeking (among others):
1) Declaratory judgment that they did not infringe;
2) Declaratory judgment that the Alexis Brothers were engaged in copyright misuse
3) Declaratory judgment that the copyright registration was not enforceable
4) relief for unfair competition;
5) relief for defamation.


Concerning the declaratory judgment counts, such counts were merely redundant of plaintiff's claim and thus unnecessary:

The exercise of jurisdiction over a claim for declaratory relief is broadly discretionary. Knights Armament Co. v. Optical Sys. Tech.,568 F.Supp.2d 1369, 1374 (M.D.Fla.2008) (Conway, J.). This discretion permits declination of claims in which “a direct action involving the same parties and the same issues has already been filed.” Knights, 568 F.Supp.2d at 1374–75. The defendants fail to demonstrate how the issues raised by their declaratory claims differ from the issues raised by the plaintiffs' claim and the defendants' affirmative defenses.

Regarding count 2 -- Copyright misuse -- the Court also held that such a claim offers no basis for relief:

Count II requests a declaration that the plaintiffs misused their copyright. The plaintiffs move to dismiss Count II and argue that copyright misuse is not an independent claim for relief. Telecom TechnicalServs. Inc. v. Rolm Co., 388 F.3d 820, 830 (11th Cir.2004) confirms that the Eleventh Circuit “has not recognized, but has not rejected, misuse as a defense to infringement suits.” Microsoft Corp. v. Jesse's Computers & Repair, Inc., 211 F.R.D. 681, 684 (M.D.Fla.2002) (Jones, Mag. J.) observes that “while district courts in this Circuit have discussed the applicability of copyright misuse, none of these courts have expressly applied it as a valid defense.” Unrecognized by the Eleventh Circuit as a defense, copyright misuse offers no basis for a claim for relief. Cf. Shirokov v. Dunlap, Grubb & Weaver, PLLC, 2012 WL 1065578 at*32 (D.Mass. March 27, 2012) (O'Toole, J.) (finding that copyright misuse is not an independent claim for relief, “especially in light of the fact that the First Circuit has not yet recognized the doctrine even as a defense to copyright infringement claims”).

The Court also dismissed A&A Duo's claims for unfair competition and defamation for failure to plead sufficient facts to establish each of the claims' elements.

Motion to dismiss Second Amended Counterclaim Granted-in-part.
Lorador v. Vasquez, Case No. 8:14-CV-433 (M.D. Fla. Jan. 22, 2015) (J. Merryday)

Where To Litigate "Disposable Living-Grass Pet Toilets?"

Fresh Patch, LLC owns U.S. Patent 8,522,719 directed to a pet toilet continuous delivery and replacement method.  Fresh Patch ("Real Dogs Use REAL Grass") offers a subscription service where they send you a patch of grass each week for your pet to use as a toilet.  DoggieLawn ("Your Dog's Backyard In A Box") offers a competing service.  Fresh Patch sued DoggieLawn and its owner for patent infringement.  DoggieLawn moved to transfer the case from the Middle District of Florida to DoggieLawn's home in the Central District of California.  The Court addressed the typical 1404 factors:

Section 1404 factors include (1) the convenience of the witnesses; (2) the location of relevant documents and the relative ease of access to sources of proof; (3) the convenience of the parties; (4) the locus of operative facts; (5) the availability of process to compel the attendance of unwilling witnesses; (6) the relative means of the parties; (7) a forum's familiarity with the governing law; (8) the weight accorded a plaintiff's choice of forum; and (9) trial efficiency and the interests of justice, based on the totality of the circumstances.

quoting Manuel v. Convergys Corp., 430 F.3d 1132, 1135 n.1 (11th Cir. 2005).   

Concerning witness convenience, both parties identified non-party witnesses.  Plaintiff's non-party witnesses, however, were not in Florida, so keeping the dispute in Florida was of no great benefit.  Defendant identified witnesses from a number of competitors (Pooch Potty, PetaPotty, and Porch Potty), and each of those witnesses were in California.  [Ed. Note: Who knew the subscription pet toilet service industry had so many players?]

The Court next noted that the Defendant was a small startup, while Plaintiff's revenues were in excess of $1m.  The Court also appeared persuaded (to a small degree) by the fact that Plaintiff's law firm also had an office in California.  [Ed. Note: Is this really relevant?]

Generally, a plaintiff's choice of forum will be given deference.  But here, the Court appears to have not believed Plaintiff's claim that the Middle District of Florida was its home forum.  For instance, Plaintiff could not identify any employees or offices in the Middle District and did not quantify any of its business here.

Motion to transfer, granted.
Fresh Patch, LLC v. Youn, Case No. 8:13-CV-2602 (M.D. Fla. July 25, 2014) (J. Merryday)

An Indefinite Claim Term Yields An Indefinite Claim, Right?

Wrong.

Every Penny Counts sued Wells Fargo Bank for infringement of U.S. Patent 8,025,217 directed to a method and system to create and distribute excess funds from consumer spending transactions.  Generally, the '217 patent describes a system where transactions are rounded up to the next nearest dollar, with the excess amount being placed into a separate account.  Claim 1 is reproduced below:

1. A system for accumulating credits from a customer account belonging to the customer and managed by an institution and placing the credits into a provider account, comprising:

an information processor; said information processor including a data store with data identifying the customer, the rounding determinant, the managed institution, and the account;

said data store including machine readable instructions authorizing the processor to access and read the customer account;

said data store including machine readable instructions to calculate rounders after receiving a plurality of payment transactions from the read customer account and to calculate an excess based on the rounders;

said data store including machine readable instructions to withdraw the excess from the customer account;

said data store including machine readable instructions to transfer the withdrawn excess to the provider account.

The boldfaced terms above address the problem resolved by the Court recently.  The preamble introduces "a customer account" and "a provider account," but the information processor does something with "the account."  The defendant argument is that such drafting is indefinite as it does not clearly identify what is covered.

As every patent lawyer knows, each claim term must have a proper "antecedent basis," meaning before a definite article (i.e. "the") is used to describe the term, the term must have first been introduced earlier in the claim.  But the foregoing sentence is not a complete statement of the law:

The requirement of antecedent basis is a rule of patent drafting ..., [but] the failure to provide explicit antecedent basis for terms does not always render a claim indefinite.  Energizer Holdings, Inc. v. Int'l Trade Comm'n, 435 F.3d 1366, 1370 (Fed. Cir. 2006).  Instead, in "the absence of explicit antecedent basis ... [,] the scope of a claim [must] be reasonably ascertainable by those skilled in the art.  Energizer Holdings, 435 F.3d at 1370 (construing Bose Corp. v. JBL, Inc., 274 F.3d 1354, 1359 (Fed. Cir. 2001)).

The Court went on to discuss numerous typographical and other scrivenor's errors riddled throughout the '217 specification.  For example, in addressing plaintiff's argument concerning the use of singular words versus plural, the Court stated:

The patent is infested with scrivener's (and other) errors, and the prospect of a missing "s" fits comfortably within the patterns discernible in the patent. . . . These errors - which say nothing of the drafter's grammatical and syntactical incompetence and bemusing judgment - confirm that "account" lacking an "s" by mistake accords with the level of compositional adroitness and dexterity that pervades the patent.

Ouch.  (Added as a footnote to the above quotation was the Court's explanation of "bemusing judgment" noting that one of the many acronyms used in drafting the specification was "PMS".)

The Court concluded the term "the account" was indefinite.  But that does not resolve the question of whether or not Claim 1 is indefinite.  And for that, the Court said no.  Indefiniteness of a claim is a very high standard:

[A] somewhat indefinite term, depending on the centrality of the term to the claim, is not necessarily equivalent to a fatally indefinite claim.

The Court appears to be as impressed with the law on this topic as it is with the '217 patent's specification:

The sources for the resolution of ambiguity in a claim include resort to either or both of the specification (of which the claim is a part) and the prosecution history.  The familiar decisional precedent, perennially groping for a less indefinite definition of "indefinite," requires that to invalidate a claim for "indefiniteness" the district court must determine that, clearly and convincingly and contrary to the presumption of validity, the claim is "insolubly ambiguous" and "not amenable to claim construction.

And under this test, the claim must survive:

The '217 patent is a notably simple (although vexingly composed) patent that addresses a notably simple subject -- an authorized movement of money from one account to another account after a simple mathematical computation.  Although the entire patent is awkwardly drafted, the oppugned claim is simple.  The specification is simple.  The drawings are simple.  The patent as a whole, notwithstanding the deficiencies, seems understandable; the claim seems understandable.  In short, the indefiniteness of the term "the account" leaves no unmanageable gap in the information available for determining the scope of the claim.  No practical incapacity or disabling uncertainty appears as a consequence of the fact that "the account" might mean one thing or the other.  In sum, the extent of the indefiniteness in the term "the account" is inconsequential and falls far short of the "insoluble ambiguity" required to invalidate the claim.

Motion for partial summary judgment for indefiniteness, denied.  (Dennis Crouch at Patently-O has also written on this case here.)

Every Penny Counts, Inc. v. Wells Fargo Bank, N.A., Case No. 8:11-CV-2826 (M.D. Fla. Mar. 5, 2014) (J. Merryday)

Pro Se Litigants - Be Warned - Futile Demonstrations Will Not Last Long

Pearle Vision sued an individual (his wife and related corporate entitle) for unauthorized operation of a two "Pearle Vision" stores.  Pearle Vision moved for a preliminary injunction.  Defendants responded without counsel, with the following notice:

Now coming is the man george-leslie, formerly of the Haffner family, by Limited Appearance and not by general appearance, reserving all rights, by necessity, for the protection of freedom, rights, titles, and interests in this civil action. The sole purpose of this limited appearance is to honor this court and at all pertinent times by acting under Variation of Agreement, in good-fath, with clean hands, with no intention of contempt, delay, or obstruction of the due process of the law, but for the purpose of maintaining the domestic, private, and public international order. Moreover, limited appearance is made in an effort to facilitate the peaceful and immediate-settlement of any and all stated disputes or claims, charges) [sic] and to further facilitate the immediate satisfaction, closure, and discharge of GEORGE L. HAFFNER pertaining to this account . . . and any other related account(s).

Additional documents were filed with similar language.  The defendants next filed two boxes of documents with the Court.  The corporation never appeared, so Plaintiff sought (and obtained) default.  The individual defendants returned to the Court with more documents.  The Court was not entertained.  Rule 55 provides that if party fails to defend itself, default is appropriate.   While no explicit definition is provided for "otherwise defend," such actions include attacking service, moving to dismiss, and seeking summary judgment.  Nothing the defendants had done fell into this type of activity:

None of the documents filed by Haffner and Mabry reveals an intent to “defend” the suit. Indeed, the documents reveal no intent whatsoever. Failing to conform with the prescriptions of Rule 8 by either responding “to the substance of the allegation” or stating a defense in “short and plain terms,” Haffner and Mabry fail to “plead or otherwise defend.” See 10 MOORE’S FEDERAL PRACTICE § 55.02 (3d ed. 2010) (“[D]efault promotes efficient administration of justice by requiring a responding party to conform with the requirements set out in the Federal Rules in a timely fashion.”).  Haffner and Mabry have defaulted.

Default granted, with Pearle Vision invited to brief damages for the Court.

Luxottica Retail North America, Inc. v. George L. Haffner Enterprises, Inc., Case No. 8:11-cv-2433 (M.D. Fla. Dec. 16, 2011) (J. Merryday)