Linksmart Wireless Technology, LLC v. Caesars Entertainment Corporation ( 2019 )

1 2 3 UNITED STATES DISTRICT COURT 4 DISTRICT OF NEVADA 5 * * * 6 LINKSMART WIRELESS TECHNOLOGY, Case No. 2:18-cv-00862-MMD-NJK LLC, 7 ORDER Plaintiff, 8 v. 9 CAESARS ENTERTAINMENT CORPORATION, et al., 10 Defendants. 11 12 I. SUMMARY 13 Plaintiff Linksmart Wireless Technology, LLC alleges that Defendants Caesars 14 Entertainment Corporation, Golden Nugget, Inc., Landry’s Inc., Las Vegas Sands Corp., 15 MGM Resorts International, and Wynn Las Vegas LLC infringe U.S. Reissued Patent No. 16 RE46,459 (the “’459 Patent”) in this consolidated patent case1 because they have systems 17 at their hotels that ask guests for login information the first time those guests connect to 18 the WiFi. (ECF No. 1.) Before the Court are Defendants’ motions to dismiss under Federal 19 Rule of Civil Procedure 12(b)(6), arguing the ’459 Patent is not directed to patentable 20 subject matter under 35 U.S.C. § 101, and is thus invalid as a matter of law.2 (ECF Nos. 21 77, 78, 79.) Because the Court is unpersuaded by Defendants’ argument that the ’459 22 Patent is directed to an abstract idea, but instead finds the patent claims a solution to a 23 24 1The Court consolidated Case Nos. 2:18-cv-00864-MMD-NJK, 2:18-cv-00865- 25 MMD-NJK, 2:18-cv-00867-MMD-NJK, and 2:18-cv-00868-MMD-NJK under this case number. (ECF No. 45.) 26 2Plaintiff filed a consolidated response to all three motions. (ECF No. 91.) 27 Defendants filed replies. (ECF Nos. 92, 93, 94.) As the motions to dismiss and corresponding replies are substantively the same, the Court refers throughout this order 28 1 || problem specifically arising in the realm of computer networks—and as further explained 2 || below—the Court will deny the motions to dismiss. 3 |] Ul. BACKGROUND 4 The following facts are adapted from the Complaint. (ECF No. 1.) The ’459 Patent 5 || is entitled “User specific automatic data redirection system.” (/d. at 2.) The ’459 Patent 6 || claims priority to U.S. Provisional Pat. App. No. 60/084,014 (the “014 Application’), filed 7 || on May 4, 1998 (ECF No. 1-2 at 2), which primarily consists of a report authored by the 8 || °459 Patent’s co-inventors (ECF No. 1 at 4). The 459 Patent centers on an allegedly novel 9 || and innovative system featuring a “redirection server” that mediates an end user’s internet 10 || access based on rules regarding parameters such as time, or the location from which an 11 || end user is accessing the internet. (/d. at 4-6.) The redirection server sits between the end 12 || user and the wider internet. (/d. at 5.) The redirection server can therefore filter the end 13 || user’s requests based on rules programmed in the redirection server. (/d. at 5-6.) “By way 14 || of example, rule sets could be programmed such that a user would need to access a 15 || location, €.g., a page with advertising, before being able to freely surf the Web.” (/d. at 6.) 16 The innovation embodied in the '459 Patent is visually represented in the ’459 17 || Patent through a comparison between two figures: 18 . FIG.1 19 LE SESS ES 102 ¢ 21 “a Fee ae 22 SR | ce "0 23 FIG.2 24 <—( ISSSP je! via /RDRETON 28 “a9 1 (ECF No. 1-1 at 7 (emphasis added).) The red circle highlights the redirection server. 2 The Complaint explains: “Once the user is connected to the ISP in this case, the 3 user’s requests to the Internet first go to the redirection server.” (ECF No. 1 at 5.) As 4 mentioned, that means the redirection server could, for example, force the user to view an 5 advertisement before accessing the broader internet. Moreover, the ’459 Patent specifies 6 that the rule set used by the redirection server can be automatically modified. (Id. at 5, 6.) 7 “As another example of the redirection server automatically modifying the rule set if a user 8 has obtained access to the Internet through paid access for a limited time, the user’s 9 Internet access could be disabled once that time has been exceeded.” (Id. at 6.) 10 The Complaint goes on to explain this system solved problems associated with 11 preexisting redirection methods and systems. Specifically, at the time of the invention, 12 while redirection could be performed by HTML code on a web page, that redirection could 13 only occur once the user had already gained access to the internet, and not, as in the ’459 14 Patent, before the user can even access the internet. (Id.) Or redirection could be 15 accomplished through a proxy server programmed with a list of blocked or allowed 16 addresses—such that a user could only access certain sites—but those lists were 17 governed by static rules that needed to be reprogrammed by an external server to change 18 the sites the user could access. (Id. at 6-7.) 19 Plaintiff alleges that Defendants infringe the ’459 Patent by relying on technology 20 covered by the ’459 Patent to provide internet access to their hotel and resort guests. The 21 Complaint contains a specific example alleging that the system used in Defendant 22 Caesars Entertainment Corporation’s Las Vegas hotels infringes the ’459 Patent’s 23 exemplary claim 91. (Id. at 8-10.) Plaintiff alleges that, when a Caesars’ hotel guest first 24 attempts to connect to the internet from her hotel room, she is presented with a popup 25 window asking her to provided login credentials regardless of the web site URL she initially 26 enters into her browser bar. (Id. at 8-9.) But when that user enters her login information, 27 Caesars’ server modifies its rule set to allow her to access the internet for a period of 28 time—such as a day, if she has only paid for a day’s worth of internet access. (Id. at 9- 1 10.) Plaintiff thus alleges that, in this example, Defendant Caesars indirectly infringes the 2 ’459 patent under 35 U.S.C. § 271(b) by actively inducing infringement by its hotel guests 3 who follow Caesars’ instructions to access the WiFi network from her hotel room. (Id. at 4 10.) 5 The parties focus their arguments on claim 91 of the the ’459 patent, which reads: 6 A system comprising: 7 a redirection server programmed with a user’s rule set correlated to a 8 temporarily assigned network address; 9 wherein the rule set contains at least one of a plurality of functions used to control data passing between the user and a public network; 10 wherein the redirection server is configured to automatically modify at least 11 a portion of the rule set while the rule set is correlated to the temporarily 12 assigned network address; 13 wherein the redirection server is configured to automatically modify at least a portion of the rule set as a function of some combination of time, data 14 transmitted to or from the user, or location the user accesses; and 15 wherein the redirection server is configured to modify at least a portion of 16 the rule set as a function of time while the rule set is correlated to the temporarily assigned network address. 17 18 (ECF No. 1-1 at 15; see also ECF Nos. 77, 91 (focusing on this claim).) 19 III. LEGAL STANDARDS 20 A. Dismissal Under Rule 12(b)(6) 21 A court may dismiss a plaintiff’s complaint for “failure to state a claim upon which 22 relief can be granted.” Fed. R. Civ. P. 12(b)(6). A properly pled complaint must provide “a 23 short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. 24 R. Civ. P. 8(a)(2); Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). While Rule 8 25 does not require detailed factual allegations, it demands more than “labels and 26 conclusions” or a “formulaic recitation of the elements of a cause of action.” Ashcroft v. 27 Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 555.) “Factual allegations 28 must be enough to rise above the speculative level.” Twombly, 550 U.S. at 555. Thus, to 1 survive a motion to dismiss, a complaint must contain sufficient factual matter to “state a 2 claim to relief that is plausible on its face.” Iqbal, 556 U.S. at 678 (internal citation omitted). 3 In Iqbal, the Supreme Court clarified the two-step approach district courts are to 4 apply when considering motions to dismiss. First, a district court must accept as true all 5 well-pled factual allegations in the complaint; however, legal conclusions are not entitled 6 to the assumption of truth. See id. at 678-79. Mere recitals of the elements of a cause of 7 action, supported only by conclusory statements, do not suffice. See id. at 678. Second, 8 a district court must consider whether the factual allegations in the complaint allege a 9 plausible claim for relief. See id. at 679. A claim is facially plausible when the plaintiff’s 10 complaint alleges facts that allow a court to draw a reasonable inference that the 11 defendant is liable for the alleged misconduct. See id. at 678. Where the complaint does 12 not permit the court to infer more than the mere possibility of misconduct, the complaint 13 has “alleged—but it has not show[n]—that the pleader is entitled to relief.” Id. at 679 14 (internal quotation marks omitted). That is insufficient. A complaint must contain either 15 direct or inferential allegations concerning “all the material elements necessary to sustain 16 recovery under some viable legal theory.” Twombly, 550 U.S. at 562 (quoting Car Carriers, 17 Inc. v. Ford Motor Co., 745 F.2d 1101, 1106 (7th Cir. 1989) (emphasis in original)). When 18 the claims in a complaint have not crossed the line from conceivable to plausible, the 19 complaint must be dismissed. See Twombly, 550 U.S. at 570. 20 B. Patentable Subject Matter and the Alice Standard 21 Under Section 101 of the Patent Act, an inventor may obtain a patent on “any new 22 and useful process, machine, manufacture, or composition of matter, or any new and 23 useful improvement thereof.” 35 U.S.C. § 101. Courts, however, “have long held that this 24 provision contains an important implicit exception: Laws of nature, natural phenomena, 25 and abstract ideas are not patentable.” Alice Corp. Pty. v. CLS Bank Int’l, 134 S. Ct. 2347, 26 2354 (2014) (quoting Ass’n for Molecular Pathology v. Myriad Genetics, Inc., 133 S. Ct. 27 2107, 2116 (2013)). The concern behind these excepted categories is “one of pre- 28 emption”—if an inventor could obtain patent protection over these “building blocks of 1 human ingenuity,” then the patent scheme would work to undermine, not promote, future 2 innovation. Id. at 2354. But courts are careful to balance concerns over preemption with 3 the fact that “all inventions at some level embody, use, reflect, rest upon, or apply laws of 4 nature, natural phenomena, or abstract ideas.” Mayo Collaborative Servs. v. Prometheus 5 Labs., Inc., 132 S. Ct. 1289, 1293 (2012). Thus, where an invention moves beyond an 6 abstract idea by applying it “to a new and useful end,” the invention will meet the Section 7 101 standard. Alice, 134 S. Ct. at 2354 (quoting Gottschalk v. Benson, 409 U.S. 63, 67 8 (1972)). 9 In light of these competing concerns, the Supreme Court has developed a two-part 10 test to assess whether a patent covers an abstract idea. First, courts must determine 11 whether a patent’s claims are directed to a “patent-ineligible concept,” such as an abstract 12 idea. Id. at 2355. Abstract ideas may be “preexisting, fundamental truth[s]” such as 13 mathematical equations, and also encompass “method[s] of organizing human activity” or 14 “longstanding commercial practice[s]” like intermediated settlement or risk hedging. Id. at 15 2356. 16 Second, if the court “determine[s] that the patent is drawn to an abstract idea or 17 otherwise ineligible subject matter,” then the court examines “whether the remaining 18 elements, either in isolation or combination with the non-patent-ineligible elements, are 19 sufficient to ‘transform the nature of the claim into a patent-eligible application.’” Intellectual 20 Ventures I LLC v. Capital One Bank (USA), 792 F.3d 1363, 1366-67 (Fed. Cir. 2015) 21 (quoting Alice, 134 S. Ct. at 2358). 22 Whether a patent is eligible under § 101 is a question of law that may be determined 23 at the dismissal stage. See Accenture Glob. Servs., GmbH v. Guidewire Software, Inc., 24 728 F.3d 1336, 1340-41 (Fed. Cir. 2013) (reviewing a § 101 determination de novo, but 25 noting that the legal issue on review “may contain underlying factual issues”); see also 26 Internet Patents Corp. v. Active Network, Inc., 790 F.3d 1343, 1348-49 (Fed. Cir. 2015) 27 (affirming a district court’s granting of a motion to dismiss on § 101 grounds). 28 /// 1 IV. DISCUSSION 2 The Court is unpersuaded it should move beyond step one of the Alice inquiry. 3 Defendants argue in pertinent part—through analysis of representative claim 91 of the’459 4 Patent—that the ’459 Patent is “directed to the abstract idea of controlling the flow of data 5 based on a changing set of rules.” (ECF No. 77 at 7.) Plaintiff counters that the ’459 Patent 6 is not directed to an abstract idea, but is instead directed to an improvement in computer 7 networking technology. (ECF No. 91 at 6.) The Court agrees with Plaintiff.3 8 The issue with Defendants’ formulation of the abstract idea to which the ’459 Patent 9 is allegedly directed is that it reads out the redirection server. But the claims, specification, 10 and even the figures of the ’459 Patent make clear that the redirection server is an integral 11 piece of the invention embodied in the the ’459 Patent. (ECF No. 1-1 at 2 (describing in 12 the abstract that the redirection server is the thing that redirects data), 7 (indicating in the 13 figures that the redirection server is the difference over the prior art systems) 9-10 (stating 14 the redirection server is logically located between the user’s computer and the network, 15 and explaining how the redirection server works with other components of the system), 11 16 (“The redirection server 208 programs the rule set and IP address so as to filter and 17 redirect the user’s packets according to the rule set.”), 15-18 (containing myriad references 18 to a redirection server).) Thus, a formulation of the subject matter of the the ’459 Patent 19 that ignores the redirection server—along with its allegedly novel placement between the 20 user and the broader internet—is incorrect. (Id. at 9-10.) Indeed, the Court is persuaded 21 by Plaintiff’s counterargument that “controlling the flow of data based on a changing set of 22 rules” could describe any software, but does not speak to the redirection server and its 23 operation as described in the claims of the ’459 Patent. (ECF No. 91 at 6-7.) 24 Moreover, the Court is persuaded by Plaintiff’s argument that the “claims of the ‘459 25 patent are directed to specific ways of improving computer networking technology to 26 3Plaintiff also disputes whether claim 91 is representative of the claims of the ’459 27 Patent, but the Court need not—and does not—address that argument because the Court agrees with Plaintiff that the claims of the ’459 Patent are not directed to an abstract idea. 28 1 control user access to an external public network, such as the Internet, by using a new 2 ‘redirection server’ that dynamically redirects a user’s request to access the public network 3 using specific structure, content, and functionality.” (ECF No. 91 at 7.) See also DDR 4 Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245, 1257 (Fed. Cir. 2014) (describing as 5 patent eligible claims “necessarily rooted in computer technology in order to overcome a 6 problem specifically arising in the realm of computer networks.”). Like the claims at issue 7 in DDR Holdings, the Court finds that the claims of the the ’459 Patent are patent eligible 8 because they are directed to solving a problem without an offline analogue specific to the 9 functioning of a computer network. See id. at 1257-1259. More specifically, the ’459 10 Patent’s claims are directed to solving the problem4 of how to redirect end users to take 11 actions the network owner wants or requires them to take before they are able to access 12 the broader internet, and continue to control the end user’s access to the internet, using 13 rules that can be changed automatically—like making a user input a username and 14 password before they can access the internet, and then kicking that same user off when 15 the internet access time they paid for has expired. (ECF Nos. 1 at 6-7 (explaining the 16 problem the ’459 Patent seeks to solve and its advantages over prior art systems), 91 at 17 8, 12-14, 23 (making the argument).) That problem is specific to computer networks. 18 It also does not appear to the Court that the claims of the ’459 Patent represent 19 merely a mathematical algorithm executed on a generic computer, nor are they merely 20 “fundamental economic and conventional business practices.” DDR Holdings, 773 F.3d at 21 1256 (noting these types of claims are not eligible for patent protection). Similarly, the 22 Court does not find the claims of the ’459 Patent recite merely “the collection, transfer, and 23 publishing of data[.]” Cellspin Soft, Inc. v. Fitbit, Inc., 927 F.3d 1306, 1315 (Fed. Cir. 2019) 24 (stating the Federal Circuit has consistently held these types of claims are directed to an 25 4The problem is more a problem for owners of networks allowing connection to the 26 broader internet than it is a problem for end users. End users presumably want to access the internet without any forced redirection. But owners of places like hotels would 27 presumably like to control who accesses the internet from their networks, and force redirection of anyone trying to connect to ensure they have paid the appropriate fee, or 28 1 abstract idea). Claim 91 of the the ’459 Patent is not directed to data collection, but instead 2 describes a redirection server that modifies rules over time to control data “passing 3 between the user and a public network[.]” (ECF No. 1-1 at 15.) The claims of the ’459 4 Patent therefore do not cleanly fall into the categories of claims the Federal Circuit has 5 found directed to an abstract idea. 6 Another way of demonstrating patent claims are directed to an abstract idea is by 7 showing they reflect nothing more than a mental process easily done with pen and paper, 8 but instead done on a computer. See, e.g., Elec. Power Grp., LLC v. Alstom S.A., 830 9 F.3d 1350, 1354 (Fed. Cir. 2016) (“we have treated analyzing information by steps people 10 go through in their minds, or by mathematical algorithms, without more, as essentially 11 mental processes within the abstract-idea category.”); Loyalty Conversion Sys. Corp. v. 12 Am. Airlines, Inc., 66 F. Supp. 3d 829, 842 (E.D. Tex. 2014) (“The fact that an invention 13 consists of simple calculations that can readily be performed by humans is a factor that 14 has frequently been held to be indicative of unpatentability.”). But that schematic for 15 determining patent eligibility does not seem to apply here either. The claims of the ’459 16 Patent cover the configuration and behavior of a system including a redirection server, not 17 merely simple mental processes. See, e.g., SRI Int’l, Inc. v. Cisco Sys., Inc., 930 F.3d 18 1295, 1304 (Fed. Cir. 2019) (“we tend to agree with SRI that the human mind is not 19 equipped to detect suspicious activity by using network monitors and analyzing network 20 packets as recited by the claims.”) (currently on appeal). 21 Overall, the Court finds the claims of the ’459 Patent are “are more like the patent- 22 eligible claims in DDR Holdings” that “were directed to more than an abstract idea that 23 merely required a ‘computer network operating in its normal, expected manner.’” Id. 24 Indeed, the purported invention embodied in the ’459 Patent is a new-and-improved way 25 to configure a computer network to perform better when optimizing for particular goals— 26 epitomized by effectively charging end users for internet access. (ECF No. 1-1 at 11.) The 27 problem the’459 Patent aims to solve is specific to computer networks. Thus, the claims 28 at issue here are unlike the generic ‘do it on a computer’ claims so often invalidated under 1 Alice. See, e.g., Apple, Inc. v. Ameranth, Inc., 842 F.3d 1229, 1243 (Fed. Cir. 2016) 2 (finding certain claims unpatentable and stating “is not enough to point to conventional 3 applications and say ‘do it on a computer.’”). 4 The Court also finds the key cases Defendants rely on distinguishable. For 5 example, Defendants argue the claims at issue here are like the claims at issue in 6 FairWarning IP, LLC v. Iatric Sys., Inc., 839 F.3d 1089 (Fed. Cir. 2016). (ECF No. 77 at 7 15-16.) But in FairWarning, the Federal Circuit found the asserted claims covering the 8 implementation of rules for detecting fraud in healthcare data were directed to an abstract 9 idea because the rules asked “the same questions (though perhaps phrased with different 10 words) that humans in analogous situations detecting fraud have asked for decades, if not 11 centuries.” Id. at 1095. Thus, even though the claims required that the rules were applied 12 by a computer, they were not patent eligible. See id. In contrast, and as explained above, 13 the claims of the ’459 Patent are directed to a system with no similar historical analogue 14 that cannot be easily recreated in a human person’s mind. 15 The Court further disagrees with Defendants that the claims at issue here are 16 ineligible because they are like the claims at issue in Elec. Power, 830 F.3d 1350. (ECF 17 No. 92 at 8.) The Federal Circuit found that those claims were directed to an abstract idea 18 because they were directed to a “process of gathering and analyzing information of a 19 specified content, then displaying the results, and not any particular assertedly inventive 20 technology for performing those functions.” Id. at 1354. The Federal Circuit went on to 21 contrast the claims at issue there with non-abstract claims directed to “computer- 22 functionality improvements[.]” Id. But the claims of the ’459 Patent are just that—directed 23 to computer functionality improvements—especially from the perspective of someone like 24 a hotel owner who charges for temporary internet access. And that is the case even though 25 the purported improvement of the ’459 Patent is to a computer network, not a singular 26 computer. See, e.g., DDR Holdings, 773 F.3d at 1257. 27 Finally, the Court is unpersuaded by Defendants’ argument that the claims of the 28 the ’459 Patent are directed to an abstract idea because they do not recite a specific 1 structure or implementing mechanism. (ECF Nos. 77 at 15, 92 at 9-10.) The specific 2 structure or implementing mechanism is the redirection server. (ECF No. 1-1 at 9-10, 15.) 3 In claim 91, the redirection server is configured to modify at least a portion of the rule set 4 it applies as a function of time. (Id. at 15.) 5 Having rejected Defendants’ primary arguments and found that the claims of the 6 ’459 Patent are directed to a solution to a problem specifically arising in the realm of 7 computer networks, the Court finds that the claims of the ’459 Patent are not directed to 8 an abstract idea at step one of the Alice inquiry. Thus, the Court will not proceed to step 9 two. See Enfish, LLC v. Microsoft Corp., 822 F.3d 1327, 1339 (Fed. Cir. 2016) (“Because 10 the claims are not directed to an abstract idea under step one of the Alice analysis, we do 11 not need to proceed to step two of that analysis.”). And the Court will therefore deny 12 Defendants’ motions to dismiss. 13 V. CONCLUSION 14 The Court notes that the parties made several arguments and cited to several cases 15 not discussed above. The Court has reviewed these arguments and cases and determines 16 that they do not warrant discussion as they do not affect the outcome of Defendants’ 17 motions to dismiss. 18 It is therefore ordered that Defendants’ motions to dismiss (ECF Nos. 77, 78, 79) 19 are denied. 20 DATED THIS 23rd day of December 2019. 21 22 MIRANDA M. DU 23 CHIEF UNITED STATES DISTRICT JUDGE 24 25 26 27 28