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Learn more about what you receive with purchase of this case. Inc. v. Ipdatatel, LLC

United States District Court, S.D. Texas, Houston Division

June 5, 2019

IPDATATEL, LLC, Defendant.



         When a system is changed and improved using computer technology that already exists, is that improvement patentable? This case raises that question. To decide whether ipDatatel, LLC infringed Incorporated's patents for home-security technology, the court must determine if the technology was patentable in the first place.

         ipDatatel denies infringement, arguing that the asserted claims cannot be patented under 35 U.S.C. § 101, and moves to dismiss's second amended complaint on that basis. responded, ipDatatel replied, the parties submitted supplemental briefing, and the court heard arguments of counsel. Based on the second amended complaint; the motion, response, reply, and supplemental briefing; the record; counsels' arguments; and the applicable law, the court denies the motion to dismiss. (Docket Entry No. 118). The parties must jointly submit a proposed amended scheduling and docket control order by June 28, 2019, setting out reasonable, efficient, fair, and cost-effective steps for discovery, dispositive motions, and trial, with deadlines for each.

         The reasons for this ruling are explained in detail below.

         I. Background [1]
 was incorporated in Delaware in 2000 and introduced its first wireless home-security system in 2003. (Docket Entry No. 46 at ¶¶ 2, 15).'s technology integrates a home-alarm system with different “smart” devices, connecting such devices as a tablet computer or a smartphone, into the system, controlled by an application, or “app, ” that uses an online platform. (Id. at ¶ 14). operates in North and South America and Australia. (Id. at ¶ 16). Its wholly owned subsidiary and coplaintiff ICN Acquisition, LLC owns many of the patents-in-suit. (Id. at ¶ 17).

         ipDatatel was incorporated in Texas in 2007. (Id. at ¶ 18). It too manufactures home-security systems and operates data centers for smart-device applications, offering systems with “interactive security capabilities” similar to's home-security systems. (Id. at ¶¶ 19- 20). ipDatatel markets its products throughout the United States. (Id. at ¶ 22).

         The complaint alleges that the companies compete in the “home security or home automation market, ” and that the “patents-in-suit . . . give a competitive edge.” (Docket Entry No. 102 at 9:14-15). alleges that ipDatatel infringes U.S. Patent Nos. 7, 113, 090; 7, 633, 385; 7, 956, 736; 8, 478, 871; and 9, 141, 276. (Docket Entry No. 46 at ¶ 12).

         A. The '090 Patent

         The '090 patent, “System and Method for Connecting Security Systems to a Wireless Device, ” issued in September 2006. (Id. at ¶ 24). Before this patent, home-security systems typically consisted of a security panel, sensors, and a keypad inside a home. (Id. at ¶ 25). The keypad controlled the system through a central monitor which, when armed, would detect “state changes” from the sensors. (Id. at ¶ 26). The '090 patent inventors recognized that this system did not relay “normal” activity, for example, the opening or closing of a door or window. This capability could provide homeowners useful information when the system was not armed, turning a home-security system into a kind of ever-alert “nanny cam.” (Id. at ¶ 27). The patented technology allows both an unarmed and armed system to transmit these and similar events to a database through a modem. (Id. at ¶ 28). A homeowner could monitor not only break-ins, but also such events as when adolescent children returned from a night out, or when a housekeeper arrived or left.

         The second amended complaint alleges that by transmitting both “alarm” events and “normal” activity, the '090 patent “extract[s] useful information” from “conventional security panels and sensors, ” improving “the operation of those security sensors and panels in an unconventional manner.” (Id. at ¶ 29). According to the second amended complaint, the prior art “neither taught using normal activity nor expressed any appreciation for the substantial advantages associated with utilizing this data in combination with alarm events.” (Id. at ¶ 30). The second amended complaint alleges that the '090 patent addresses “the problems associated with processing and retaining substantial volumes of activity associated with both normal activity and alarm events, ” because the new system “effectively process[es]” the data “without being overwhelmed.” (Id. at ¶¶ 31, 33). The ability to process that information, according to, was “not well-understood, routine, or conventional.” (Id. at ¶ 33).

         The '090 patent also allows users to create notification preferences. (Id. at ¶ 34). Older systems called the homeowner's landline telephone and, if no one answered, alerted the local police, resulting “in a high occurrence of false alarms” that “deplete[d] police resources and undermine[d] the credibility” of home-security systems. (Id. at ¶¶ 36-38; '090 Patent at 1:39-41). The '090 patent allows homeowners to choose the types of events they want to be notified about, and how and whether to respond-through text message, email, or phone call-before the system contacts law enforcement. (Docket Entry No. 46 at ¶¶ 41-43). The second amended complaint alleges that this notification system was “not well-understood, routine, or conventional in light of the prior art systems.” (Id. at ¶¶ 42, 46).

         B. The '385 and '736 Patents

         These patents, both entitled “Method and System for Communicating With and Controlling an Alarm System From a Remote Server, ” issued in December 2009 and June 2011. (Id. at ¶¶ 47- 48). The '736 patent, a continuation of the '385 patent, shares its specification. (Id. at ¶ 48). Both “provide an upgrade unit that allows a user to keep an existing legacy alarm system rather than replacing that system.” (Id. at ¶ 49).

         Before these patents, homeowners had to remove and replace home-security systems to modify or upgrade them. (Id. at ¶ 50). A legacy alarm system usually had a controller connected to sensors throughout the house. (Id. at ¶ 52). Homeowners controlled the system using a keypad connected to the alarm controller through a “keypad bus.” (Id. at ¶¶ 53-54). This system communicated with the external monitoring service-a security company-through a public telephone line. (Id. at ¶¶ 55, 61). The second amended complaint refers to the telephone line as a “single point of failure” that, if cut, could “prevent[] notification of authorities in the event of a break-in.” (Id. at ¶ 62). The second amended complaint alleges that legacy systems could send information out to the external monitoring service but could not be remotely controlled or upgraded. (Id. at ¶¶ 63-64). Newer systems that provide two-way communication between the system and a central monitoring service required removing and replacing the entire existing system. (Id. at ¶¶ 65-66).

         The '385 and '736 patents address those shortcomings by allowing homeowners to upgrade legacy systems by “coupling” a new communications unit with the existing keypad bus. (Id. at ¶ 69). The communications unit transmits and receives information through the existing security panel, using the keypad bus in an “unconventional way to achieve unexpected and useful results.” (Id.). The communications unit also connects with a remote server, allowing homeowners to control the system from outside the house. (Id. at ¶ 72). According to's second amended complaint, remote access and control of the system were “not well-understood, routine, or conventional.” (Id.).

         C. The '871 Patent

         The “Gateway Registry Methods and Systems” patent issued in July 2013 and assigns unique serial numbers to “gateways, ” devices that connect two networks. (Id. at ¶¶ 75, 78). This allows streamlined identification by “gateway registries.” (Id. at ¶ 80). The second amended complaint alleges that this identification method was unconventional and reduces gateway registries' computing load. (Id.).

         D. The '276 Patent

         The “Integrated Interface for a Mobile Device” patent issued in September 2015 and relates to improving how homeowners remotely control their home-security system. (Id. at ¶¶ 83, 84). Before the patent, homeowners could control their security system with only “a dedicated device designed specifically, and exclusively, for the . . . system.” (Id. at ¶ 84). The '276 patent claims software that allows homeowners to control and monitor their system through a smart-device application that synchronizes the smart device to the system. (Id. at ¶ 86). The second amended complaint alleges that “the '276 patent improved the preexisting home security technology . . . to permit a mobile device running an app[lication] to perform the same functions previously accomplished through a dedicated device.” (Id. at ¶ 87). According to the second amended complaint, having different companies monitor the security system and supply the control device were not well-understood, routine, or conventional, and neither was the software enabling the synchronization between the homeowner's smart device and their security system. (Id. at ¶ 88).

         E. Procedural History

         This case was transferred from the Eastern District of Texas with ipDatatel's motion to dismiss pending. (Docket Entry Nos. 48, 67). This court denied the motion without prejudice and ruled first on the parties' claim-construction disputes. (Docket Entry No. 91). The parties presented oral argument on their proposed constructions, the court issued its claim-construction Memorandum and Opinion, and ipDatatel reurged the motion to dismiss. (Docket Entry Nos. 117, 118, 122). The court ordered the parties to explain the relationship between the claim construction and ipDatatel's motion. (Docket Entry Nos. 126, 127, 132, 140, 143). Both parties' briefs and arguments, which have consistently been thorough and helpful, are set out below.

         II. The Legal Standards

         A. Rules 12(b)(6) and 12(c) [2]

         The Rule 12(b)(6) and Rule 12(c)[3] standards are the same. Gentilello v. Rege, 627 F.3d 540, 543-44 (5th Cir. 2010). Rule 12(b)(6) allows dismissal if a plaintiff fails “to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). A complaint must contain “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Rule 8 “does not require ‘detailed factual allegations,' but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 555). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). “The plausibility standard is not akin to a ‘probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. (quoting Twombly, 550 U.S. at 556).

         “To withstand a Rule 12(b)(6) motion, [a] complaint must allege ‘more than labels and conclusions, '” and “a formulaic recitation of the elements of a cause of action will not do.” Norris v. Hearst Tr., 500 F.3d 454, 464 (5th Cir. 2007) (quoting Twombly, 550 U.S. at 555). “Nor does a complaint suffice if it tenders ‘naked assertion[s]' devoid of ‘further factual enhancement.'” Iqbal, 556 U.S. at 678 (alteration in original) (quoting Twombly, 550 U.S. at 557). A “complaint ‘does not need detailed factual allegations,' but must provide the plaintiff's grounds for entitlement to relief-including factual allegations that when assumed to be true ‘raise a right to relief above the speculative level.'” Cuvillier v. Taylor, 503 F.3d 397, 401 (5th Cir. 2007) (quoting Twombly, 550 U.S. at 555). “Conversely, when the allegations in a complaint, however true, could not raise a claim of entitlement to relief, this basic deficiency should be exposed at the point of minimum expenditure of time and money by the parties and the court.” Id. (quotation and alteration omitted).

         The court should generally give the plaintiff a chance to amend under Rule 15(a) before dismissing the action with prejudice, unless to do so would be futile. See Carroll v. Fort James Corp., 470 F.3d 1171, 1175 (5th Cir. 2006); Great Plains, 313 F.3d at 329 (“[D]istrict courts often afford plaintiffs at least one opportunity to cure pleading deficiencies before dismissing a case, unless it is clear that the defects are incurable or the plaintiffs advise the court that they are unwilling or unable to amend in a manner that will avoid dismissal.”). A court has discretion to deny a motion to amend for futility if the amended complaint would fail to state a plausible claim. Villarreal v. Wells Fargo Bank, N.A., 814 F.3d 763, 766 (5th Cir. 2016).

         B. Section 101 of the Patent Act

         “Section 101 of the Patent Act defines the subject matter eligible for patent protection.” Alice Corp. Pty. Ltd. v. CLS Bank Int'l, 573 U.S. 208, 216 (2014). Section 101 provides that “[w]hoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.” 35 U.S.C. § 101. “An invention may be patented only if it fits within one of the statutory classes of subject matter.” 1 Chisum on Patents § 1.01 (2018) (citing Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 483 (1974)). “The general purpose of the statut[e] is to limit patent protection to the field of applied technology, what the United States [C]onstitution calls ‘the useful arts.'” Id. (citing U.S. Const. art. 1, § 8 cl. 8)).

         “[T]he language of § 101 is extremely broad.” J.E.M. AG. Supply, Inc. v. Pioneer Hi-Bred Int'l, Inc., 534 U.S. 124, 130 (2001). Even so, § 101 excludes abstract ideas from patentable subject matter. See Alice, 573 U.S. at 216 (“We have long held that this provision contains an important implicit exception: Laws of nature, natural phenomena, and abstract ideas are not patentable.” (quoting Ass'n for Molecular Pathology v. Myriad Genetics, Inc., 569 U.S. 576, 589 (2013))). “At the same time, [the Court] tread[s] carefully in construing this exclusionary principle lest it swallow all of patent law.” Id. at 217 (citing Mayo Collaborative Servs. v. Prometheus Labs., 566 U.S. 66, 71 (2012)). “At some level, all inventions . . . embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas. Thus, an invention is not rendered ineligible for patent simply because it involves an abstract concept.” Id. (quotation and citation omitted) (alteration in original). “Accordingly, in applying the § 101 exception, [courts] must distinguish between patents that claim the ‘buildin[g] block[s]' of human ingenuity and those that integrate the building blocks into something more, thereby transform[ing] them into a patent-eligible invention.” Id. (citations omitted) (alterations in original).

         “Patent eligibility . . . is a question of law that may contain underlying issues of fact.” In re Marco Guldenaar Holding B.V., 911 F.3d 1157, 1159 (Fed. Cir. 2018); see Mortg. Grader, Inc. v. First Choice Loan Servs. Inc., 811 F.3d 1314, 1325 (Fed. Cir. 2016). “Like other legal questions based on underlying facts, this question may be, and frequently has been, resolved on a Rule 12(b)(6) or (c) motion where the undisputed facts, considered under the standards required by that Rule, require a holding of ineligibility under the substantive standards of law.” SAP Am., Inc. v. Investpic, LLC, 898 F.3d 1161, 1166 (Fed. Cir. 2018); see Data Engine Techs. LLC v. Google LLC, 906 F.3d 999, 1007 (Fed. Cir. 2018). But “plausible factual allegations may preclude dismissing a case under § 101 where, for example, ‘nothing on th[e] record . . . refutes those allegations as a matter of law or justifies dismissal under Rule 12(b)(6).'” Aatrix Software, Inc. v. Green Shades Software, Inc., 882 F.3d 1121, 1125 (Fed. Cir. 2018) (quoting FairWarning IP, LLC v. Iatric Sys., Inc., 839 F.3d 1089, 1097 (Fed. Cir. 2016)) (alterations in original). The Federal Circuit reviews eligibility conclusions de novo and any underlying factual findings for clear error. See, e.g., Alcon Research Ltd. v. Barr Labs., Inc., 745 F.3d 1180, 1188 (Fed. Cir. 2014).

         III. Analysis

         A. The Alice Framework

         Alice set out a two-step test for evaluating eligibility under § 101. At step one, the court “determine[s] whether a claim ‘is directed to a patent-ineligible concept,' such as an abstract idea.” Univ. of Fla. Research Found., 916 F.3d at 1366 (quoting Alice, 573 U.S. at 218). If the claim is directed to a patent-ineligible concept, the court “determine[s] at step two whether the claim ‘contains an inventive concept' sufficient to ‘transform' the claimed abstract idea into a patent-eligible application.” Id. (quoting Alice, 573 U.S. at 221).

         To evaluate whether asserted claims “are directed to a patent-eligible concept, ” Alice, 573 U.S. at 218, the court examines “‘the focus of the claimed advance over the prior art' to determine if the character of the claim as a whole, considered in light of the specification, is directed to excluded subject matter, ” Trading Techs. Int'l, Inc. v. IBG LLC, 921 F.3d 1084, 1092 (Fed. Cir. 2019) (quoting Intellectual Ventures I LLC v. Capital One Fin. Corp., 850 F.3d 1332, 1338 (Fed. Cir. 2017)). “[F]undamental . . . practice[s] long prevalent in our system of commerce” are abstract ideas. Alice, 573 U.S. at 219. So, too, are “methods of organizing human activity.” In re TLI Communc'ns LLC Patent Litig., 823 F.3d 607, 613 (Fed. Cir. 2016). In the computer-software context, “collecting information, analyzing it, and displaying certain results of the collection and analysis” are abstract concepts. Elec. Power Grp., LLC v. Alstom S.A., 830 F.3d 1350, 1353 (Fed. Cir. 2016). “[M]erely presenting the results of abstract processes of collecting and analyzing information, without more (such as identifying a particular tool for presentation), is abstract.” SAP, 898 F.3d at 1167 (quoting Elec. Power, 830 F.3d at 1354).

         In “cases involving computer-related claims, ” the step-one analysis may be complicated by “close calls about how to characterize what the claims are directed to.” BASCOM Glob. Internet Servs., Inc. v. AT&T Mobility LLC, 827 F.3d 1341, 1348 (Fed. Cir. 2016) (quoting Enfish, LLC v. Microsoft Corp., 822 F.3d 1327, 1339 (Fed. Cir. 2016)). The court may defer determining whether the claims are drawn to abstract ideas, because “an analysis of whether there are arguably concrete improvements in the recited computer technology [can] take place under step two.” Id. (quoting Enfish, 822 F.3d at 1339). If it is “clear that the specific improvements in the recited computer technology go beyond ‘well-understood, routine, conventional activit[ies], '” the court may bypass step one and find that the patent satisfies § 101. Id. (alteration in original); see DDR Holdings, LLC v., L.P., 773 F.3d 1245, 1257-59 (Fed. Cir. 2014); see also Ancora Techs., Inc. v. HTC Am., Inc., 908 F.3d 1343, 1348-49 (Fed. Cir. 2018).

         To evaluate whether asserted claims satisfy Alice's second step of “search[ing] for an ‘inventive concept, '” Alice, 573 U.S. at 217, the court considers “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, ” BSG Tech LLC v. BuySeasons, Inc., 899 F.3d 1281, 1289 (Fed. Cir. 2018) (quotation omitted). A claim directed to an abstract idea “must include ‘additional features' to ensure that the claim is more than a drafting effort designed to monopolize the abstract idea.” ChargePoint, Inc. v. SemaConnect, Inc., 920 F.3d 759, 773 (Fed. Cir. 2019) (quotations and alterations omitted); see also Trading Techs., 921 F.3d at 1093 (“Step two ‘looks more precisely at what the claim elements add' to determine if ‘they identify an inventive concept in the application of the ineligible matter to which . . . the claim is directed.” (quoting SAP, 898 F.3d at 1167) (alteration in original)). “These additional features cannot simply be well-understood, routine, conventional activities previously known to the industry.” ChargePoint, 920 F.3d at 773 (quotation and alteration omitted); see Berkheimer v. HP Inc., 881 F.3d 1360, 1367 (Fed. Cir. 2018) (“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.” (quotation and alteration omitted)).

         B. Resolving Eligibility on a Motion to Dismiss

         Citing Aatrix Software, Inc. v. Green Shades Software, Inc., 882 F.3d 1121 (Fed. Cir. 2018), argues that an Alice step-two analysis at the pleading stage is premature, because there are disputed factual allegations as to whether the asserted claims are inventive. Aatrix involved two patents “directed to systems and methods for designing, creating, and importing data into a viewable form on a computer so that a user can manipulate the form data and create viewable forms and reports.” 882 F.3d at 1123. The district court granted the defendant's motion to dismiss the amended complaint based on ineligibility because the claim elements were directed to abstract ideas and failed to present inventive concepts, and denied the plaintiff's motion for leave to file a second amended complaint. Id. at 1124-1126.

         The Federal Circuit reversed. Id. at 1130. The appellate court explained that “patent eligibility can be determined at the Rule 12(b)(6) stage, ” but “only when there are no factual allegations that, taken as true, prevent resolving the eligibility question as a matter of law.” Id. at 1125. Under Alice step two, if the asserted claim elements “involve well-understood, routine, [and] conventional activity previously engaged in by researchers in the field, they do not constitute an inventive concept, ” but “[w]hether the claim elements or the claimed combination are well-understood, routine, [and] conventional is a question of fact.” Id. at 1128 (quotation and citation omitted); see also ChargePoint, 920 F.3d at 773 (this issue “is a question of fact that must be proven by clear and convincing evidence” (quotation omitted)); Aatrix Software, Inc. v. Green Shades Software, Inc., 890 F.3d 1354, 1355 (Fed. Cir. 2018) (per curiam) (“Whether a claim element or combination of elements would have been well-understood, routine, and conventional to a skilled artisan in the relevant field at a particular point in time may require weighing evidence, making credibility judgments, and addressing narrow facts that utterly resist generalization.” (quotations and alterations omitted)).

         The Federal Circuit found that the proposed second amended complaint “supplie[d] numerous allegations related to the inventive concepts present in the claimed form file technology.” Id. at 1127. The proposed complaint “describe[d] the development of the patented invention, including the problems present in prior art computerized form file creation, ” and “present[ed] specific allegations directed to improvements and problems solved by the . . . patented inventions.” Id. There were also “concrete allegations . . . that individual elements and the claimed combination are not well-understood, routine, or conventional activity, ” and that “the claimed combination[] improve[d] the functioning of the computer.” Id. The district court abused its discretion in denying the plaintiff's motion for leave to amend, because the proposed complaint raised factual questions that could not then “be answered adversely to the patentee.” Id.; see also Interval Licensing LLC v. AOL, Inc., 896 F.3d 1335, 1342 n.4 (Fed. Cir. 2018) (“[R]esolution at the 12(b)(6) or Rule 12(c) stage is . . . inappropriate where claim elements are adequately alleged to be more than well-understood, routine, or conventional.”); Berkheimer, 881 F.3d at 1370 (reversing a summary judgment based on patent-eligibility because the claim limitations were “directed to the arguably unconventional inventive concept described in the specification”).

         That said, Aatrix does “not stand for the proposition that a plaintiff can avoid dismissal simply by reciting in the complaint that the invention at issue is novel and nonconventional.” British Telecomm. plc v. IAC/InterActiveCorp, No. 18-366-WCB, 2019 WL 438335, at *20 (D. Del. Feb. 4, 2019); cf. Geter v. Fortenberry, 849 F.2d 1550, 1553 (5th Cir. 1988) (“[C]omplaints containing conclusory allegations, absent reference to material facts, will not survive motions to dismiss.”). To survive Alice scrutiny, the pleading must allege facts, captured in the asserted claims, showing that the claim elements, alone or in an ordered combination, were “not well-understood, routine, or conventional activity.” Aatrix, 882 F.3d at 1128. The patents at issue and's second amended complaint must do more than “simply recite[] the use of generic features . . . as well as routine functions . . . to implement the underlying idea[s].” Affinity Labs of Tex., LLC v. DIRECTV, LLC, 838 F.3d 1253, 1262 (Fed. Cir. 2016); see also Athena Diagnostics, Inc. v. Mayo Collaborative Servs., LLC, 915 F.3d 743, 755 (Fed. Cir. 2019) (affirming dismissal of a second amended complaint because the patentee failed to direct the court to complaint allegations that the invention was “anything other than standard and known per se in the art” (quotation omitted)); SAP, 898 F.3d at 1168-69 (“Here, all of the claim details identified by [the patentee] fall into one or both of two categories: they are themselves abstract; or there are no factual allegations from which one could plausibly infer that they are inventive.”).

         Upaid Systems, Ltd. v. Card Concepts, Inc., 17-C-8150, 2019 WL 1331832 (N.D. Ill. Mar. 25, 2019), is instructive. Upaid sued Card Concepts for alleged infringement, and Card Concepts moved for judgment on the pleadings on the ground that the claims were ineligible for patenting under § 101. Id. at *1. Focusing on Alice's second step, the court found that the complaint allegations and the patent specification “describe[d] the development of the patent invention, including the problems present in the prior art.” Id. at *3 (quotation omitted). Upaid's complaint alleged “how the inventions disclosed in the . . . [p]atent [were] improvements over the prior art and enable the operation of advanced communications services regardless of equipment or network hardware limitations.” Id. (quotation and alteration omitted). According to the complaint:

The invention(s) disclosed in the . . . patent enable advanced communication services, which are normally dependent on the carriers' (e.g., network) equipment and thus restricted by the carriers' equipment, to operate over the carriers' equipment which the advanced communication services cannot normally operate. The ability to utilize advanced communication services, regardless of the user's location, is highly desirable. For example, a user may have access depending on the city or country [where] they are located, or may have access at their place of business, but not their residence. At the time of the invention, the industry solution to this problem was to upgrade operating systems, software and hardware that can facilitate the operation of the advanced communication services. The industry solution was time consuming, took substantial effort and was very expensive. However, instead of upgrading and replacing the operating systems, hardware and software, the '947 patent improved the operation of the carriers' equipment and networks by enabling the advanced communication services to operate on the carrier's equipment and networks via Upaid's enhanced platform.


         Card Concepts argued that the court should resolve eligibility on the pleadings because Upaid had admitted that the invention was implemented on a network using generic computer components, failing Alice's second step. Id. The court rejected that argument, concluding that the complaint sufficiently alleged how the invention “was ‘directed to the improvement in the functioning of' an existing technology.” Id. (quoting Enfish, 822 F.3d at 1338). The court also concluded that Card Concepts had failed “to identify a clear statement in the specification, complaint, or other material properly [considered on a motion for judgment on the pleadings] that undermine[d] Upaid's allegations that its invention was not well understood, routine, and conventional.” Id. at *4 (quotation and alteration omitted).

         These principles are analyzed below against the record, the statute, and the case law.

         C. The Patents at Issue

         i. The '090 Patent

         ipDatatel focuses on claim 40, which describes:

A computer implemented method for automatic notification of security information to subscribed users based on user specified information wherein the security information is communicated from security devices associated with the subscription, the method comprising the steps of:
storing user profile information based on a user subscription wherein profile information comprises notification preferences;
receiving communications that include security device information associated with one or more remote security devices associated with a subscribed user;
processing the security device information from the one or more remote security devices;
displaying the processed information wherein the processed information comprises a combination of normal activity ...

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