United States District Court, N.D. Texas, Dallas Division
MEMORANDUM OPINION AND ORDER
KINKEADE UNITED STATES DISTRICT JUDGE.
the Court is SAP America, Inc.'s Motion for Judgment on
the Pleadings (Doc. No. 57). After careful consideration of
the motion, the response, the reply, the notice of
supplemental authority, the supporting appendices, the
applicable law, and any relevant portions of the record, the
Court GRANTS Plaintiff's motion.
SAP, America, Inc. ("SAP") filed this suit against
Defendant Investpic, LLC ("Investpic"). In its
complaint, SAP seeks a declaratory judgment from the Court
that its products do not infringe the claims of a patent
owned by Investpic and that the claims of that patent are
invalid. On October, 18, 2016, Investpic answered and
asserted patent infringement counterclaims against SAP. On
November 8, 2016, SAP answered the factual allegations of
Investpic's counterclaims and then subsequently amended
its answer regarding these factual allegations on November
29, 2016. SAP filed the instant motion on February 23, 2017.
SAP then filed a second amended answer to Investpic's
counterclaims on February 28, 2017.
motion, SAP argues that all of the claims of the
patent-in-suit are invalid because the claims address subject
matter that is not eligible for patent protection under 35
U.S.C. § 101 and Alice Corp. Pty v. CLS Bank
Int'l, 134 S.Ct. 2347 (2014) and Mayo
Collaborative Servs. V. Prometheus Labs, Inc., 132 S.Ct.
1289 (2012) because the claims are directed toward abstract
ideas. Investpic responds that the claims are valid because
they are not directed toward abstract ideas and, even if they
are, the claims incorporate inventive concepts beyond the
abstract ideas that result in the claims addressing
patentable subject matter.
Judgment on the Pleadings
motion for judgment on the pleadings under Federal Rule of
Civil Procedure 12(c) should be granted if the complaint
lacks a cognizable legal theory. Doe v. MySpace,
Inc., 528 F.3d 413, 418 (5th Cir. 2008). The central
issue in a motion for judgment on the pleadings under Rule
12(c) is “whether, in the light most favorable to the
plaintiff, the complaint states a valid claim for
relief.” Id. Judgment on the pleadings is
appropriate only if there are no disputed issues of facts and
only questions of law remain. Hughes v. Tobacco Inst.,
Inc., 278 F.3d 417, 420 (5th Cir. 2001).
subject-matter eligibility under 35 U.S.C. § 101 is a
question of law particularly suitable for resolution at the
pleading stage of a patent litigation matter. See Content
Extraction and Transmission LLC v. Wells Fargo Bank, NA,
776 F.3d 1343, 1349 (Fed. Cir. 2014). The focus of a 35
U.S.C. § 101 inquiry, even at the pleading stage, is on
the claims. Dealertrack Inc. v. Huber, 674 F.3d
1315, 1334 (Fed. Cir. 2012). Claim construction is not
required to conduct a 35 U.S.C. § 101 analysis.
Content Extraction, 776 F.3d at 1349. Since the
focus in a 35 U.S.C. § 101 inquiry is
on the claims and claim construction is not necessary for the
analysis, subject matter eligibility analysis of the claims
may be done at the pleading stage. Id.
Subject Matter Eligibility Under 35 U.S.C. §
patent may be obtained for a “new and useful process,
machine, manufacture, or composition of matter, or any new
and useful improvement thereof, …” 35 U.S.C.
§ 101. So generally, processes,
machines, manufactures, and compositions of matter are
eligible subject matter for patent protection.
Alice, 134 S.Ct. at 2354.
this subject matter eligibility is subject to three
judicially created exceptions that prevent patents on pure
concepts. Id.; Ass'n for Molecular Pathology v.
Myriad Genetics, Inc. 133 S.Ct. 2107, 2116 (2013). The
three judicially created exceptions to patent subject matter
eligibility are laws of nature, natural phenomena, and
abstract ideas. Id. A patent claim may not be
obtained for an invention that claims a law of nature,
natural phenomena, or an abstract idea, even if the claim
satisfies the literal requirements of 35 U.S.C.
§ 101. Id. The judicial
exceptions are not patentable because they are “the
basic tools of scientific and technological work” and
without the exceptions “there would be considerable
danger that the grant of patents would tie up the use of such
tools and thereby inhibit future innovation.”
Supreme Court has set down a two part test to determine if a
patent claim is unpatentable due to one of the three judicial
exceptions. Alice, 134 S.Ct. at 2355.
First, a court must determine if the claim is directed to a
law of nature, natural phenomenon, or abstract idea.
Id. If the claim is not directed to one of these
three exceptions, then the claim is not subject to a judicial
exception and is patentable subject matter, so long as it
meets the requirements of 35 U.S.C. §
101. Id. If the claim is directed to a judicial
exception, then a court must consider the second part of the
test. Id. In the second part of the test, a court
must determine if the claim contains something else, besides
the judicially created exception. This must be something else
that adds to the claim so that it does not assert a claim
over the law of nature, natural phenomena, or abstract idea.
Id. The requirement for something else ensures that
the inventor does not obtain a patent claim over a law of
nature, natural phenomena, or abstract idea, which would
suppress innovation. Id. The “something
else” required is an “inventive concept” or
an element or combination of elements that is sufficient to
ensure the claim amounts to significantly more than a claim
upon the ineligible concept itself. Id.
Application of Law to Claims of Patent-In-Suit
motion, SAP moves the Court to grant judgment on the
pleadings and argues that all claims of the patent-in-suit in
this matter are invalid because the claims do not address
subject matter that is eligible for patent protection under
35 U.S.C. § 101.
patent-in-suit is U.S. Patent 6, 349, 291 (the ‘291
Patent”), which was issued on February 19, 2002, and is
titled “Method and System for Analysis, Display and
Dissemination of Financial Information Using Resampled
Statistical Methods.” Investpic is the current owner of
all right, title, and interest in the ‘291 Patent.
‘291 Patent discloses the invention of a method and
system for statistical analysis, display, and dissemination
of financial data over a network. ‘291 Patent at
Abstract. The patent discloses, what it asserts, is a novel
method to analyze financial markets. Id. at
1:60-2:4. Among other functions, the invention can be used
for predicting financial market trends. Id. The
patent asserts that older methods of doing this are not as
useful as the method of this invention because older methods
rely on assumptions that do not accurately reflect the way
financial markets behave. Id. The invention
addresses this problem by using a resampled statistical
method, which, according to the patent, more accurately
reflects financial markets. Id. The invention also
includes the features of performing the resampled statistical
method over a network and with parallel processors.
Id. at 2:4-37.
prediction uses a probability distribution function to model
the possible outcomes of a particular situation. Id.
at 1:15-69. According to the patent, the prior art uses a
Gaussian distribution as the probability distribution
function. Id. A Gaussian distribution is a normal
probability distribution function, with a peak at the most
common occurrence in a data set and symmetrical tails on each
side of the peak representing less likely occurrences.
Id. The further away a point is from the center of a
normal distribution, the less likely it is that that
occurrence will happen. Id. So, the tail portions of
a normal distribution are much less likely to occur than the
center peak. Id.
to the patent, the use of a Gaussian distribution as a
probability distribution function fails to account for the
reality of financial markets because financial markets are
more prone to experience extreme occurrences than is
reflected in a normal distribution. Id. In a normal
distribution, the probability of these extreme occurrences is
represented by the tails of the distribution, where it is
unlikely that the occurrences will actually happen.
Id. According to the inventor, this does not reflect
the true nature of financial markets. Id. The
inventor claims that relying on the underlying assumptions of
Gaussian distribution results in poor prediction of financial
inventor claims that the invention of the patent solved this
problem by using a different method to generate a probability
distribution function, instead of applying a Gaussian curve
to the original data set used for the modeling, the invention
uses resampling to generate the sample set for the
statistical analysis. Id. at 1:60-3:29. In general,
resampling involves generating a data subset from the source
data. Id. at 15:34-16:21. The resampled data set can
be generated in a number of manners including random
selection of the subset or a biased selection the subset.
Id. The ‘291 Patent claims methods and systems
that create resampled data sets using a bias parameter.
Id. at 16:34-18:65. The bias parameter is used to
insert bias into the resampled data set, so that the
resampled data set can be used in statistical analysis to
mimic certain financial market conditions, such as a bias
toward a strong or weak market. Id. at 15:34-16:21.
The Independent Method Claims of the ‘291
‘291 Patent has two independent claim methods, Claim 1
and Claim 11. Claim 1 reads as follows:
method for calculating, analyzing and displaying investment
data comprising the steps of:
(a) selecting a sample space, wherein the sample space
includes at least one investment data sample;
(b) generating a distribution function using a re-sampled
statistical method and a bias parameter, wherein the bias
parameter determines a degree of ...