United States District Court, S.D. Texas, Houston Division
MEMORANDUM OPINION AND ORDER
ROSENTHAL, CHIEF UNITED STATES DISTRICT JUDGE
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 Alarm.com Incorporated's patents for
home-security technology, the court must determine if the
technology was patentable in the first place.
denies infringement, arguing that the asserted claims cannot
be patented under 35 U.S.C. § 101, and moves to dismiss
Alarm.com's second amended complaint on that basis.
Alarm.com 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.
reasons for this ruling are explained in detail below.
was incorporated in Delaware in 2000 and introduced its first
wireless home-security system in 2003. (Docket Entry No. 46
at ¶¶ 2, 15). Alarm.com'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). Alarm.com 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 ¶
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 Alarm.com's home-security systems. (Id. at
¶¶ 19- 20). ipDatatel markets its products
throughout the United States. (Id. at ¶ 22).
complaint alleges that the companies compete in the
“home security or home automation market, ” and
that the “patents-in-suit . . . give Alarm.com a
competitive edge.” (Docket Entry No. 102 at 9:14-15).
Alarm.com 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).
The '090 Patent
'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.
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
Alarm.com, was “not well-understood, routine, or
conventional.” (Id. at ¶ 33).
'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).
The '385 and '736 Patents
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).
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).
'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 Alarm.com's second amended complaint,
remote access and control of the system were “not
well-understood, routine, or conventional.”
The '871 Patent
“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
The '276 Patent
“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).
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.
The Legal Standards
Rules 12(b)(6) and 12(c) 
Rule 12(b)(6) and Rule 12(c) 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,
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).
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
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).
Section 101 of the Patent Act
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)).
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).
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).
The Alice Framework
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).
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
“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. Hotels.com, 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).
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)).
Resolving Eligibility on a Motion to Dismiss
Aatrix Software, Inc. v. Green Shades Software,
Inc., 882 F.3d 1121 (Fed. Cir. 2018), Alarm.com 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.
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)).
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”).
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 Alarm.com'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
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.
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).
principles are analyzed below against the record, the
statute, and the case law.
The Patents at Issue
The '090 Patent
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
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 ...