Content Extraction v. Wells Fargo Bank , 776 F.3d 1343 ( 2014 )

United States Court of Appeals
for the Federal Circuit
______________________
CONTENT EXTRACTION AND TRANSMISSION
LLC,
Plaintiff-Appellant,
v.
WELLS FARGO BANK, NATIONAL ASSOCIATION,
Defendant-Appellee,
AND
THE PNC FINANCIAL SERVICES GROUP, INC. AND
PNC BANK, N.A.,
Defendants-Appellees.
-------------------------
DIEBOLD, INCORPORATED,
Plaintiff-Counterdefendant-Cross Appellant,
v.
CONTENT EXTRACTION AND TRANSMISSION
LLC,
Defendant-Counterplaintiff-Appellant,
AND
MITCHELL MEDINA, CATHERINE ELIAS, AND
JEAN-MARC ZIMMERMAN,
Defendants,
2 CONTENT EXTRACTION v. WELLS FARGO BANK
AND
JOHN DOE COMPANIES 1-100, JOHN DOE
COMPANIES 1-99, TD BANK GROUP, AND TD
BANK, N.A.
Third-Party Defendants.
______________________
2013-1588, -1589,
2014-1112, -1687
______________________
Appeals from the United States District Court for the
District of New Jersey in Nos. 12-CV-2501, 12-CV-6960,
and 12-CV-7640, Judge Michael A. Shipp.
______________________
Decided: December 23, 2014
______________________
ANATOLY S. WEISER, Zimmerman & Weiser LLP, of
Westfield, New Jersey, argued for plaintiff-appellant
Content Extraction and Transmission LLC. With him on
the brief was JEAN-MARC ZIMMERMAN.
FREDERICK L. WHITMER, Kilpatrick, Townsend &
Stockton LLP, of New York, New York, argued for de-
fendant-appellee Wells Fargo Bank, National Association.
Of counsel on the brief for defendant-appellees The PNC
Financial Services Group, Inc., et al. was NOAM J.
KRITZER, Bakos & Kritzer of Florham Park, New Jersey.
ROY H. WEPNER, Lerner, David, Littenberg, Krumholz
& Mentlik, LLP, of Westfield, New Jersey, argued for
plaintiff-counterdefendant-cross appellant Diebold, Incor-
porated. With him on the brief were ARNOLD I. RADY and
BRIAN D. HILL.
______________________
CONTENT EXTRACTION v. WELLS FARGO BANK 3
Before DYK, TARANTO, and CHEN, Circuit Judges.
CHEN, Circuit Judge.
Content Extraction and Transmission LLC and its
principals (collectively, CET) appeal from the grant of a
motion to dismiss under Rule 12(b)(6) of the Federal
Rules of Civil Procedure (FRCP), in which the United
States District Court for the District of New Jersey held
that the claims of CET’s asserted patents are invalid as
patent-ineligible under 35 U.S.C. § 101. Cross-appellant
Diebold, Inc. (Diebold) appeals from the district court’s
dismissal of its tortious interference and Racketeer Influ-
enced and Corrupt Organizations Act (RICO) claims
against CET in a related action. We affirm the district
court’s dismissal of both CET’s and Diebold’s claims.
BACKGROUND
CET owns U.S. Patent Nos. 5,258,855 (’855 patent),
5,369,508 (’508 patent), 5,625,465 (’465 patent), and
5,768,416 (’416 patent) (collectively, the asserted patents).
The ’508, ’465, and ’416 patents are continuations of the
’855 patent, and share substantially the same specifica-
tion. The four patents contain a total of 242 claims. The
claims generally recite a method of 1) extracting data
from hard copy documents using an automated digitizing
unit such as a scanner, 2) recognizing specific information
from the extracted data, and 3) storing that information
in a memory. This method can be performed by software
on an automated teller machine (ATM) that recognizes
information written on a scanned check, such as the
check’s amount, and populates certain data fields with
that information in a computer’s memory.
Claim 1 of the ’855 patent recites:
4 CONTENT EXTRACTION v. WELLS FARGO BANK
A method of processing information from a diver-
sity of types of hard copy documents, said method
comprising the steps of:
(a) receiving output representing a diver-
sity of types of hard copy documents from
an automated digitizing unit and storing
information from said diversity of types of
hard copy documents into a memory, said
information not fixed from one document
to the next, said receiving step not preced-
ed by scanning, via said automated digit-
izing unit, of a separate document
containing format requirements;
(b) recognizing portions of said hard copy
documents corresponding to a first data
field; and
(c) storing information from said portions
of said hard copy documents correspond-
ing to said first data field into memory lo-
cations for said first data field.
’855 patent, 16:19–34.
In April and November 2012 respectively, CET filed
infringement actions against appellees Wells Fargo Bank,
N.A. (Wells Fargo) and The PNC Financial Services
Group, Inc. and PNC Bank, N.A. (collectively, PNC),
alleging that they were using ATMs with check deposit
software that infringed its patents. In December 2012,
Diebold, the manufacturer of Wells Fargo’s and PNC’s
ATMs, filed an action against CET seeking 1) a declarato-
ry judgment that its ATMs did not infringe CET’s assert-
ed patents and that CET’s patents were invalid, and 2)
injunctive and monetary relief for tortious interference
and violations of the RICO Act arising from CET’s act of
CONTENT EXTRACTION v. WELLS FARGO BANK 5
filing allegedly baseless infringement suits against Wells
Fargo, PNC, and other Diebold customers. CET counter-
claimed against Diebold by asserting direct and indirect
infringement of its patents. The district court eventually
consolidated the three inter-related actions between CET
and Wells Fargo, PNC, and Diebold for pretrial purposes.
Relevant here, PNC subsequently moved to dismiss
CET’s complaint in its entirety pursuant to FRCP
12(b)(6), on the ground that each claim of the asserted
patents was invalid as patent-ineligible under 35 U.S.C.
§ 101. PNC focused its arguments on two claims: claim 1
of the ’855 patent and claim 1 of the ’416 patent. PNC
contended that these two claims were representative, and
that none of the other claims included anything more
than minor changes in format or phrasing. In its opposi-
tion to PNC’s motion, CET did not challenge PNC’s char-
acterization of claim 1 of the ’855 patent or claim 1 of the
’416 patent as representative, instead focusing its argu-
ments on defending those two claims.
The district court agreed that all CET’s asserted
claims were invalid as patent-ineligible under § 101,
granted PNC’s motion, and dismissed CET’s complaints
against both PNC and Wells Fargo. Content Extraction &
Transmission LLC v. Wells Fargo Bank, Nat’l Ass’n, No.
12-6960, 2013 WL 3964909, at *5, *14 (D.N.J. July 31,
2013) (CET). In light of this holding, the district court
also dismissed Diebold’s request for a declaratory judg-
ment of invalidity and noninfringement as moot. Lastly,
the district court dismissed Diebold’s RICO and tortious
interference claims against CET, concluding that CET’s
act of filing lawsuits against Diebold’s customers—such as
Wells Fargo and PNC—was protected under the Noerr-
Pennington doctrine, as established in E. R.R. Presidents
Conference v. Noerr Motor Freight, Inc., 365 U.S. 127(1961), and United Mine Workers of Am. v. Pennington,
381 U.S. 657 (1965). CET appealed and Diebold cross-
6 CONTENT EXTRACTION v. WELLS FARGO BANK
appealed the district court’s order dismissing the parties’
complaints. We have jurisdiction under 28 U.S.C.
§ 1295(a)(1).
STANDARD OF REVIEW
We review a district court’s dismissal for failure to
state a claim under the law of the regional circuit. In re
Bill of Lading Transmission & Processing Sys. Patent
Litig., 681 F.3d 1323, 1331 (Fed. Cir. 2012). The Third
Circuit reviews challenges to a dismissal for failure to
state a claim under FRCP 12(b)(6) de novo. Sands v.
McCormick, 502 F.3d 263, 267 (3d Cir. 2007). We review
the district court’s determination of patent eligibility
under § 101 de novo. Dealertrack, Inc. v. Huber, 674 F.3d
1315, 1333 (Fed. Cir. 2012).
DISCUSSION
An invention is patent-eligible if it claims a “new and
useful process, machine, manufacture, or composition of
matter.” 35 U.S.C. § 101. The Supreme Court, however,
has long interpreted § 101 and its statutory predecessors
to contain an implicit exception: “laws of nature, natural
phenomena, and abstract ideas” are not patentable. Alice
Corp. Pty Ltd. v. CLS Bank Int’l, 573 U.S. __, 134 S. Ct.
2347, 2354 (2014). We focus here on whether the claims
of the asserted patents fall within the excluded category
of abstract ideas.
The Supreme Court’s two-step framework, described
in Mayo and Alice, guides our analysis. Id. at 2355 (citing
Mayo Collaborative Servs. v. Prometheus Labs., Inc., 566
U.S. __, 132 S. Ct. 1289, 1296–97 (2012)). We first deter-
mine whether a claim is “directed to” a patent-ineligible
abstract idea. If so, we then consider the elements of the
claim—both individually and as an ordered combination—
to assess whether the additional elements transform the
CONTENT EXTRACTION v. WELLS FARGO BANK 7
nature of the claim into a patent-eligible application of
the abstract idea. Id. This is the search for an “inventive
concept”—something sufficient to ensure that the claim
amounts to “significantly more” than the abstract idea
itself. Id.The Supreme Court has not “delimit[ed] the precise
contours of the ‘abstract ideas’ category.” Id. at 2357. We
know, however, that although there is no categorical
business-method exception, Bilski v. Kappos, 561 U.S.
593, 606, 608 (2010), claims directed to the mere for-
mation and manipulation of economic relations may
involve an abstract idea. See Alice, 134 S. Ct. at 2356–57.
We have also applied the Supreme Court’s guidance to
identify claims directed to the performance of certain
financial transactions as involving abstract ideas. See
buySAFE, Inc. v. Google, Inc., 765 F.3d 1350, 1355 (Fed.
Cir. 2014) (creating a transaction performance guaranty
for a commercial transaction on computer networks such
as the Internet); Accenture Global Servs., GmbH v.
Guidewire Software, Inc., 728 F.3d 1336, 1338 (Fed. Cir.
2013) (generating rule-based tasks for processing an
insurance claim); Bancorp Servs., L.L.C. v. Sun Life
Assur. Co. of Canada (U.S.), 687 F.3d 1266, 1278 (Fed.
Cir. 2012) (managing a stable value protected life insur-
ance policy); Dealertrack, 674 F.3d at 1333 (processing
loan information through a clearinghouse).
Applying Mayo/Alice step one, we agree with the dis-
trict court that the claims of the asserted patents are
drawn to the abstract idea of 1) collecting data, 2) recog-
nizing certain data within the collected data set, and 3)
storing that recognized data in a memory. The concept of
data collection, recognition, and storage is undisputedly
well-known. Indeed, humans have always performed
these functions. And banks have, for some time, reviewed
checks, recognized relevant data such as the amount,
8 CONTENT EXTRACTION v. WELLS FARGO BANK
account number, and identity of account holder, and
stored that information in their records.
CET attempts to distinguish its claims from those
found to be abstract in Alice and other cases by showing
that its claims require not only a computer but also an
additional machine—a scanner. 1 Appellant’s Br. 31–32.
CET argues that its claims are not drawn to an abstract
idea because human minds are unable to process and
recognize the stream of bits output by a scanner. Id. at
29. However, the claims in Alice also required a computer
that processed streams of bits, but nonetheless were
found to be abstract. See 134 S. Ct. at 2358. Similar to
how the computer-implemented claims in Alice were
directed to “the concept of intermediated settlement,” id.
at 2356, and the claims in Dealertrack were directed to
the concept of “processing information through a clearing-
house,” 674 F.3d at 1333, CET’s claims are drawn to the
basic concept of data recognition and storage.
For the second step of our analysis, we determine
whether the limitations present in the claims represent a
patent-eligible application of the abstract idea. Alice, 134
S. Ct. at 2357. For the role of a computer in a computer-
implemented invention to be deemed meaningful in the
context of this analysis, it must involve more than per-
formance of “well-understood, routine, [and] conventional
activities previously known to the industry.” Id. at 2359(quoting Mayo, 132 S. Ct. at 1294 (internal quotation
1 We note that some of CET’s claims do not explicit-
ly require the use of either a computer or scanner, and
refer instead to a generic “application unit” and “auto-
mated digitizing unit.” See, e.g., ’855 patent, 18:52–19:3.
We assume for purposes of PNC’s motion to dismiss,
however, that these claims require the presence of both a
computer and a scanner.
CONTENT EXTRACTION v. WELLS FARGO BANK 9
marks and brackets omitted)). Further, “the mere recita-
tion of a generic computer cannot transform a patent-
ineligible abstract idea into a patent-eligible invention.”
Id. at 2358.
Applying Mayo/Alice step two, we agree with the dis-
trict court that the asserted patents contain no limita-
tions—either individually or as an ordered combination—
that transform the claims into a patent-eligible applica-
tion. CET conceded at oral argument that the use of a
scanner or other digitizing device to extract data from a
document was well-known at the time of filing, as was the
ability of computers to translate the shapes on a physical
page into typeface characters. Oral Arg. at 3:35–3:55;
16:12–16:17, available at http://oralarguments.
cafc.uscourts.gov/default.aspx?fl=2013-1588.mp3. CET’s
claims merely recite the use of this existing scanning and
processing technology to recognize and store data from
specific data fields such as amounts, addresses, and dates.
See id. There is no “inventive concept” in CET’s use of a
generic scanner and computer to perform well-understood,
routine, and conventional activities commonly used in
industry. See Alice, 134 S. Ct. at 2359. At most, CET’s
claims attempt to limit the abstract idea of recognizing
and storing information from hard copy documents using
a scanner and a computer to a particular technological
environment. Such a limitation has been held insufficient
to save a claim in this context. See Alice, 134 S. Ct. at
2358; Ultramercial, Inc. v. Hulu, LLC, 772 F.3d 709, 715–
16 (Fed Cir. 2014); buySAFE, 765 F.3d at 1355.
CET next argues that the failure of PNC or the dis-
trict court to individually address every one of its claims
is inconsistent with the statutory presumption of validity
that requires proving the invalidity of each claim by clear
and convincing evidence. See Dana Corp. v. Am. Axle &
Mfg., Inc., 279 F.3d 1372, 1376 (Fed. Cir. 2002). The
district court, however, correctly determined that address-
10 CONTENT EXTRACTION v. WELLS FARGO BANK
ing each claim of the asserted patents was unnecessary.
After conducting its own analysis, the district court
determined that PNC is correct that claim 1 of the ’855
patent and claim 1 of the ’416 patent are representative,
because all the claims are “substantially similar and
linked to the same abstract idea.” CET, 2013 WL
3964909, at *5 (citing Bilski, 561 U.S. at 612). Moreover,
CET never asserted in its opposition to PNC’s motion that
the district court should have differentiated any claim
from those identified as representative by PNC. Nor did
CET identify any other claims as purportedly containing
an inventive concept. If CET disagreed with PNC’s or the
district court’s assessment, CET could have identified
claims in its opposition brief that it believed would not be
fairly represented by claims 1 of the ’855 and ’416 patents
for purposes of PNC’s § 101 challenge. Regardless, we
have reviewed all the claims of CET’s asserted patents,
and agree with the district court that, for the purposes of
PNC’s § 101 challenge, 1) the claims of the asserted
patents are substantially similar in that they recite little
more than the same abstract idea, and 2) claim 1 of the
’855 patent and claim 1 of the ’416 patent are representa-
tive.
CET argues on appeal that certain dependent claims
recite additional steps, such as extracting and detecting
specific data fields, repeating some steps, and storing data
as images or text, rendering those claims patent-eligible.
Appellant’s Br. 40–41. For instance, CET notes that
dependent claim 44 of the ’416 patent additionally re-
quires: “defining a set of symbols which designate fields of
information required by an application program; and
detecting the presence of a particular one of said defined
set of symbols on a hard copy document and extracting a
field of information required by an application program
based on said detecting.” Id. This limitation merely
describes generic optical character recognition technology,
which CET conceded was a routine function of scanning
CONTENT EXTRACTION v. WELLS FARGO BANK 11
technology at the time the claims were filed. Oral Arg. at
3:35–3:55, 16:12–16:17, available at http://oralarguments.
cafc.uscourts.gov/default.aspx?fl=2013-1588.mp3. Indeed,
all of the additional limitations in the claims cited in
CET’s appeal brief recite well-known, routine, and con-
ventional functions of scanners and computers. Thus,
while these claims may have a narrower scope than the
representative claims, no claim contains an “inventive
concept” that transforms the corresponding claim into a
patent-eligible application of the otherwise ineligible
abstract idea.
Finally, CET contends that the district court erred by
declaring its claims patent-ineligible under § 101 at the
pleading stage without first construing the claims or
allowing the parties to conduct fact discovery and submit
opinions from experts supporting their claim construction
positions. Although the determination of patent eligibil-
ity requires a full understanding of the basic character of
the claimed subject matter, claim construction is not an
inviolable prerequisite to a validity determination under
§ 101. See Ultramercial, 772 F.3d at 714–15; Bancorp,
687 F.3d at 1273–74. The district court construed the
terms identified by CET “in the manner most favorable to
[CET],” necessarily assuming that all of CET’s claims
required a machine, even though several claims do not
expressly recite any hardware structures. See supra note
1; CET, 2013 WL 3964909, at *12. Nonetheless, the
district court determined the claims of the asserted pa-
tents were patent-ineligible. Likewise, we conclude that
even when construed in a manner most favorable to CET,
none of CET’s claims amount to “significantly more” than
the abstract idea of extracting and storing data from hard
copy documents using generic scanning and processing
technology. The district court’s resolution of PNC’s mo-
tion to dismiss at the pleading stage was therefore proper.
12 CONTENT EXTRACTION v. WELLS FARGO BANK
DIEBOLD’S CROSS-APPEAL
We turn next to Diebold’s appeal from the district
court’s dismissal of its tortious interference and RICO
violation claims against CET. Diebold’s claims all arise
from the following predicate act: the filing of allegedly
frivolous infringement suits by CET against Wells Fargo,
PNC, and other Diebold customers in an attempt to
obtain nuisance settlements from them. The district
court, however, concluded that the Noerr-Pennington
doctrine immunized CET from both Diebold’s tortious
interference and RICO violation claims. 2
Under Noerr-Pennington, a person’s act of petitioning
the government is presumptively shielded from liability
by the First Amendment against certain types of claims.
See BE & K Const. Co. v. N.L.R.B., 536 U.S. 516, 525
(2002) (quoting Cal. Motor Transp. Co. v. Trucking Un-
limited, 404 U.S. 508, 511, (1972)); Sosa v. DIRECTV,
Inc., 437 F.3d 923, 930, 931 (9th Cir. 2006) (applying
Noerr-Pennington to bar a RICO violation claim); Pers.
Dep’t, Inc. v. Prof’l Staff Leasing Corp., 297 F. App’x 773,
779 (10th Cir. 2008) (holding that Noerr-Pennington can
provide immunity from liability arising from a tortious
2 We note that other circuits have held that the act
of filing a lawsuit, even one which is frivolous, does not by
itself constitute an act of “extortion” under the Hobbs Act,
18 U.S.C. § 1951(b)(2), and therefore cannot constitute a
predicate act under RICO. See, e.g., Deck v. Engineered
Laminates, 349 F.3d 1253, 1258 (10th Cir. 2003); Raney v.
Allstate Ins. Co., 370 F.3d 1086, 1088 (11th Cir. 2004).
Treating meritless litigation as a form of extortion pun-
ishable under RICO would substantially chill even valid
court petitioning, as it could subject almost any unsuc-
cessful lawsuit or set of lawsuits to a colorable claim of a
RICO violation. Deck, 349 F.3d at 1258.
CONTENT EXTRACTION v. WELLS FARGO BANK 13
interference claim). To overcome this presumptive im-
munity, a plaintiff must establish that the defendant’s
instigation of litigation was merely a “sham.” Prof’l Real
Estate Investors, Inc. v. Columbia Pictures Indus., Inc.,
508 U.S. 49, 60 (1993) (PRE). This two-part test requires
the plaintiff to show not only that the litigation was
objectively baseless, but also that the defendant subjec-
tively intended to harm the plaintiff through the abuse of
a governmental process itself, as opposed to harms flow-
ing from the outcome of that process. See id.The district court found that Diebold established the
first, but not the second prong of the PRE sham litigation
test. In an oral ruling, the district court held that Diebold
successfully alleged objective baselessness based on the
district court’s own analysis of CET’s patent claims as
ineligible under § 101, and “[Diebold’s] allegations that
[CET]’s litigation conduct was solely designed to engender
settlement” with Diebold’s customers. J.A. 687–89.
However, the district court also determined that Diebold
had not shown CET subjectively intended to harm
Diebold through its instigation of litigation, as required
under prong two of the PRE test. Id. Although we agree
with the district court’s ultimate conclusion regarding
CET’s immunity, we find instead that Diebold’s allegation
fails the first prong of the PRE test, and thus the district
court’s analysis under the second prong was unnecessary.
Under the first prong, a “sham” lawsuit must be ob-
jectively baseless “in the sense that no reasonable litigant
could realistically expect success on the merits.” No-
belpharma AB v. Implant Innovations, Inc., 141 F.3d
1059, 1071 (Fed. Cir. 1998) (quoting PRE, 508 U.S. at 50).
Given the focus on the act of filing the complaint as the
actionable event, CET’s infringement suits, though un-
successful, were not objectively baseless. This is because
the state of the law of § 101 was deeply uncertain at the
time CET filed its complaints against Wells Fargo and
14 CONTENT EXTRACTION v. WELLS FARGO BANK
PNC in 2012. Compare Ultramercial, Inc. v. Hulu, LLC,
657 F.3d 1323, 1327–28 (Fed. Cir. 2011) (subsequently
vacated), with Dealertrack, 674 F.3d at 1333–35. See also
CLS Bank Int’l v. Alice Corp. Pty Ltd., 717 F.3d 1269,
1273 (Fed. Cir. 2013) (en banc), cert. granted, 134 S. Ct.
734 (2013), and aff’d, 571 U.S. __, 134 S. Ct. 2347 (2014).
Under these circumstances, we cannot conclude that as a
matter of law, no reasonable litigant in 2012 could have
expected success on at least one of CET’s claims.
The Supreme Court has held that “even unsuccessful
but reasonably based suits advance some First Amend-
ment interests,” and therefore should receive protection
under the First Amendment. BE & K, 536 U.S. at 532.
Although we conclude the claims of CET’s asserted pa-
tents are invalid under § 101, we decline to find CET’s
infringement suits against Wells Fargo and PNC to be
objectively baseless at the time they were filed. There-
fore, since the act of filing its suits was shielded from
liability by the Noerr-Pennington doctrine, the district
court correctly dismissed Diebold’s tortious interference
and RICO violation claims against CET.
CONCLUSION
We affirm the district court’s grant of PNC’s motion to
dismiss under FRCP 12(b)(6) on the ground that the
claims of CET’s asserted patents are invalid as patent-
ineligible under § 101. Because CET’s infringement suits
against Wells Fargo and PNC were not objectively base-
less, we also affirm the district court’s dismissal of
Diebold’s tortious interference and RICO violation claims.
Finally, because the claims of CET’s asserted patents are
invalid under § 101, we need not reach the district court’s
dismissal of Diebold’s request for a declaratory judgment
of noninfringement and invalidity.
AFFIRMED
CONTENT EXTRACTION v. WELLS FARGO BANK 15
COSTS
No costs.