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Ubiquitous Connectivity, LP v. City of San Antonio

United States District Court, W.D. Texas, San Antonio Division

September 26, 2019

UBIQUITOUS CONNECTIVITY, LP, Plaintiff,
v.
CITY OF SAN ANTONIO d/b/a CPS ENERGY, Defendant.

          ORDER

          XAVIER RODRIGUEZ UNITED STATES DISTRICT JUDGE

         On this date, the Court considered the motion to dismiss under Rule 12(b)(6) filed by Defendant City of San Antonio (referred to herein as CPS Energy) in this patent infringement case, as well as the City’s motion to strike Plaintiff’s expert affidavit, and Plaintiff’s motion for leave to file an amended complaint. After careful consideration, the Court grants the motion to strike the expert affidavit (docket no. 29), grants Plaintiff’s motion for leave to amend (docket no. 32), and denies the motion to dismiss under Rule 12(b)(6) (docket no. 17).

         Background

         Plaintiff Ubiquitous Connectivity filed this patent infringement action to stop the alleged infringement of Plaintiff’s Patents Nos. 8, 064, 935 (“the ’935 patent”) and 9, 602, 655 (“the ’655 patent”). The ’935 and ’655 patents are each entitled “Ubiquitous Connectivity and Control System for Remote Locations.” The Abstract for both patents describes “[a] thermostat control system for monitoring and controlling environmental characteristics of a building includes [sic] a base station unit and a remote access unit continuously interfacing through instant wireless private direct connectivity. The system also includes a plurality of sensors that measure the environmental characteristics and provide the thermostat unit with the measurements.”

         Plaintiff alleges that Defendant ships, distributes, makes, uses, offers for sale, sells, and/or advertises infringing products under the “Total Connect Comfort” and “Home Manager” branded systems, and that these violate its patents for a “ubiquitous connectivity and control system.” Specifically, Ubiquitous alleges that CPS Energy operates a website and offers its customers the ability to download the Total Connect Comfort app, which allows users to control their Honeywell devices remotely from a mobile device such as, but not limited to, an iPhone, iPad, or Android device. CPS Energy advertises the app as allowing “users to remotely monitor and manage their heating and cooling system – at any time, from anywhere.” Plaintiff further alleges that “CPS Energy offers its customers the ability to download CPS Energy’s Home Manager app, which allows users to control their Radio thermostat devices (Model CT32 and Model CT80) remotely from a mobile device such as, but not limited to, an iPhone, iPad, or Android device.” The description of the app states that customers “will be able to remotely control your HVAC, water heater, and pool pump, and monitor your usage in real time.”

         Plaintiff alleges upon information and belief that the Home Manager and Total Connect Comfort apps: (1) allow users to change the settings of their smart thermostats from their mobile devices; (2) allow users to set heating and cooling schedules for the smart thermostats from their mobile devices; (3) provide users with usage data related to the smart thermostat system; and (4) allow users to utilize geoservices to operate the system based on location. Plaintiff further alleges on information and belief that the apps “also include a feature known as geo-fencing, which uses the GPS location on a user’s mobile to set location based triggered events” and “the Honeywell Lyric T5 and Radio thermostat devices may also receive current room temperature readings from a thermostat and send control instructions, i.e. increasing or decreasing room temperature, to the user’s HVAC system.”

         Plaintiff alleges that Defendant has infringed and continues to infringe one or more claims of the ’935 Patent, including Claim 19, because it ships distributes, makes, uses, imports, offers for sale, sells, and/or advertises devices, including at least the Accused Products and Services, that form a wirelessly controllable smart thermostat system that incorporates a base unit (Honeywell and Radio smart thermostats) interfaced with an environmental device (thermostat). Plaintiff alleges that Defendant has infringed and continues to infringe one or more claims of the ’655 Patent, including at least Claim 1, because it ships distributes, makes, uses, imports, offers for sale, sells, and/or advertises devices, including at least the Accused Products and Services, that form a remotely controllable smart thermostat system. Ubiquitous seeks injunctive relief and monetary damages.

         CPS Energy responded to the Complaint by filing a motion to dismiss for failure to state a claim (docket no. 17), as well as an answer and counterclaim (docket no. 18). The motion to dismiss raises an Alice/Mayo patent eligibility issue, arguing that the patents are invalid under 35 U.S.C. § 101 as being directed to ineligible subject matter. Section 101 specifies four independent categories of inventions or discoveries that are eligible for protection: processes, machines, manufactures, and compositions of matter, as well as “any new and useful improvement thereof.” 35 U.S.C. § 101. Plaintiff Ubiquitous asserts that the elements of the claims of the patents-in-suit describe a patent-eligible “machine.” Docket no. 26 at 16. The Supreme Court’s precedents provide three specific exceptions to § 101’s broad patent-eligibility principles: “laws of nature, physical phenomena, and abstract ideas.” Bilski v. Kappos, 561 U.S. 593, 601 (2010). Defendant CPS contends that the Patents-in-Suit impermissibly attempt to patent abstract ideas – monitoring and controlling devices – and are therefore ineligible.[1] Plaintiff contends that the Patents-in-Suit are not directed to an abstract idea, and that they, even if they are directed to abstract ideas, involve inventive concepts making them patent eligible.

         In its response to the City’s motion to dismiss, Plaintiff provided evidence outside the pleadings, including the lengthy Declaration of Ivan Zatkovich (an expert). The City then moved to strike the expert Declaration of Zatkovich as extraneous material outside the proper scope of a Rule 12(b)(6) motion. The Court agrees that the Declaration should be stricken as outside the scope of a Rule 12(b)(6) motion, as the Court is not converting the motion to a motion for summary judgment. See Inclusive Cmtys. Project Inc. v. Lincoln Prop. Co., 920 F.3d 890, 900 (5th Cir. 2019) (when evaluating a 12(b)(6) motion a court is limited to the “facts set forth in the complaint, documents attached to the complaint” and documents attached by the defendant to its motion to dismiss that are referenced in the plaintiff’s complaint).

         However, Ubiquitous also filed a motion seeking leave to amend its complaint if the motion to dismiss is granted. Ubiquitous contends that the disputed issue of patentability is a question of law that has factual underpinnings related to whether the technologies employed in the Patents-in-Suit were conventional, routine, and well-known, and it has refuted CPS’s position via arguments and the Zatkovich Declaration. Ubiquitous asks that, if the Court finds that the Declaration must be excluded, it be permitted to file an Amended Complaint that incorporates the Declaration and specific pleadings related to the technological area to which the Patents-in-Suit are directed, the technological problems solved by the patents, the technological solutions presented by the Patents-in Suit, the inventive concepts disclosed in the claims of the Patents-in-Suit, including the technologies used and the unconventional, unusual, and obscure nature of their uses. As discussed below, the Court finds that leave should be granted, and thus will consider the allegations in the Amended Complaint in deciding the motion to dismiss.

         Analysis

         A. Legal Standard

         In considering a Rule 12(b)(6) motion, the Court must accept the factual allegations in the Complaint and take them in the light most favorable to the non-moving party. See Erickson v. Pardus, 551 U.S. 89, 94 (2007). The Court examines the well pled factual allegations to determine whether they plausibly give rise to an entitlement to relief. Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). Further, as noted, the Court is limited to an examination of the “facts set forth in the complaint, documents attached to the complaint” and documents attached by the defendant to its motion to dismiss that are referenced in the plaintiff’s complaint. Inclusive Cmtys. Project, 920 F.3d at 900. Plaintiff included copies of the two patents as exhibits to the Complaint.

         Patentability under § 101 is a threshold legal issue. Bilski v. Kappos, 561 U.S. 593, 602 (2010). Determining whether a patent claim is impermissibly directed to an abstract idea involves two steps. First, the court determines “whether the claims at issue are directed to a patent-ineligible concept.” Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 573 U.S. 208 (2014). Second, if the claim contains an abstract idea, the court evaluates whether there is “an ‘inventive concept’-i.e., an element or combination of elements that is sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the ineligible concept itself.” Id.

         Patent eligibility can sometimes be determined at the Rule 12(b)(6) stage. Aatrix Software, Inc. v. Green Shades Software, Inc., 882 F.3d 1121, 1125 (Fed. Cir. 2018). But this is true only when there are no factual allegations that, taken as true, prevent resolving the eligibility question as a matter of law. Id. Indeed, “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).’” Id. (quoting BASCOM Glob. Internet Servs., Inc. v. AT&T Mobility LLC, 827 F.3d 1341, 1352 (Fed. Cir. 2016)). While the ultimate determination of eligibility under § 101 is a question of law, underlying determinations such as whether the claim elements or the claimed combination are well-understood, routine, and conventional is a question of fact. Id. at 1128. The Federal Circuit has held that patentees who adequately allege their claims contain inventive concepts sufficient to “transform” the claimed abstract idea into a patent-eligible application survive a § 101 eligibility analysis under Rule 12(b)(6). Aatrix Software, 882 F.3d 12 1126-27.

         If there are claim construction disputes at the Rule 12(b)(6) stage, the court must proceed either by adopting the non-moving party’s constructions, or by resolving the disputes to whatever extent is needed to conduct the § 101 analysis, which may well be less than a full, formal claim construction. Aatrix Software, 882 F.3d at 1125. Ubiquitous contends that there are claim construction disputes that preclude resolution of the 12(b)(6) motion. Docket no. 26 at 10. In response, CPS Energy contends that the Court should construe the terms in the manner most favorable to Ubiquitous (i.e., using its proposed constructions), but that even so dismissal under Rule 12(b)(6) is warranted. The Court will adopt Ubiquitous’s proposed constructions for purposes of the motion. See Two-Way Media Ltd. v. Comcast Cable Comms., LLC, 874 F.3d 1329, 1336 (Fed. Cir. 2017).

         B. CPS Energy’s Motion to Dismiss

         CPS Energy argues that the patents-in-suit are invalid under 35 U.S.C. § 101 because they are directed to the abstract idea of monitoring and controlling appliances and do not include any inventive concept because they contain only well-understood, routine, and conventional features. CPS Energy contends that the only two claims specifically referenced in the Complaint – Claim 19 of the ‘935 Patent and Claim 1 of the ‘655 Patent – are representative.

         Claim 19 of the ‘935 patent claims:

A communication system having wireless connectivity, the communication system comprising:
a base unit operatively interfaced with an environmental device, and configured to receive a current status of ...

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