Tli Communications LLC v. Av Automotive, L.L.C. , 823 F.3d 607 ( 2016 )

United States Court of Appeals
for the Federal Circuit
______________________
IN RE: TLI COMMUNICATIONS LLC PATENT
LITIGATION
---------------------------------------------------------------------------------
TLI COMMUNICATIONS LLC,
Plaintiff-Appellant
v.
AV AUTOMOTIVE, L.L.C., HALL AUTOMOTIVE,
LLC, YAHOO! INC., TUMBLR, INC., TWITTER, INC.,
PINTEREST, INC., IMGUR LLC, SHUTTERFLY,
INC., TRIPADVISOR INC., TRIPADVISORY LLC,
SNAPCHAT INC.,
CAPITAL ONE FINANCIAL CORPORATION,
CAPITAL ONE, N.A., CAPITAL ONE SERVICES,
LLC, VINE LABS, INC.,
Defendants-Appellees
APPLE INC., WHI INC., GOOGLE, INC.,
FACEBOOK, INC., INSTAGRAM, LLC, YELP, INC.,
DROPBOX INC., IAC/INTERACTIVECORP,
CITYGRID MEDIA LLC, VIMEO LLC,
Defendants
______________________
2015-1372, -1376, -1377, -1378, -1379, -1382, -1383, -1384,
-1385, -1417, -1419, -1421
______________________
2 TLI COMMUNICATIONS LLC v. AV AUTOMOTIVE, L.L.C.
Appeals from the United States District Court for the
Eastern District of Virginia in Nos. 1:14-md-02534-TSE-
JFA, 1:14-cv-00136-TSE-JFA, 1:14-cv-00137-TSE-JFA,
1:14-cv-00138-TSE-JFA, 1:14-cv-00139-TSE-JFA, 1:14-cv-
00140-TSE-JFA, 1:14-cv-00142-TSE-JFA, 1:14-cv-00785-
TSE-JFA, 1:14-cv-00788-TSE-JFA, 1:14-cv-00790-TSE-
JFA, 1:14-cv-00791-TSE-JFA, 1:14-cv-00842-TSE-JFA,
Judge T. S. Ellis III.
______________________
Decided: May 17, 2016
______________________
ROBERT ALAN WHITMAN, Mishcon de Reya New York
LLP, New York, NY, argued for plaintiff-appellant. Also
represented by MICHAEL DEVINCENZO, MARK STEWART
RASKIN, CHARLES WIZENFELD.
MARK A. LEMLEY, Durie Tangri LLP, San Francisco,
CA, argued for defendants-appellees CityGrid Media LLC,
IAC/InterActiveCorp, Imgur LLC, Pinterest, Inc., Shutter-
fly, Inc., Snapchat Inc., TripAdvisor Inc., TripAdvisory
LLC, Tumblr, Inc., Twitter, Inc., Vimeo LLC, Vine Labs,
Inc., Yahoo! Inc. Also represented by ZAC COX, ALEXANDRA
HELEN MOSS.
JOSHUA BRYSON BRADY, Williams Mullen, PC,
McLean, VA, for defendants-appellees AV Automotive,
LLC, Hall Automotive, LLC.
ROBERT A. ANGLE, Troutman Sanders LLP, Richmond,
VA, for defendants-appellees Capital One Financial
Corporation, Capital One, N.A., Capital One Services,
LLC.
______________________
Before DYK, SCHALL, and HUGHES, Circuit Judges.
TLI COMMUNICATIONS LLC v. AV AUTOMOTIVE, L.L.C. 3
HUGHES, Circuit Judge.
TLI Communications LLC alleges that the defendants
infringe a patent relating to a method and system for
taking, transmitting, and organizing digital images. The
district court dismissed the complaint after concluding
that the patent-in-suit fails to claim patent-eligible sub-
ject matter under 35 U.S.C. § 101, and that, in the alter-
native, claims 1, 25, and their dependent claims are
invalid for failing to recite sufficient structure as required
by 35 U.S.C. § 112 ¶ 6. Because we agree with the district
court that the patent-in-suit claims no more than the
abstract idea of classifying and storing digital images in
an organized manner, we affirm the district court’s judg-
ment and do not reach the § 112 ¶6 issue.
I
In 2014, TLI Communications LLC (TLI) filed a series
of actions in the District of Delaware and the Eastern
District of Virginia, alleging that the defendants infringed
U.S. Patent No. 6,038,295 (the ’295 patent) by making,
selling, and/or using products and services that allow
uploading of digital photos from a mobile device, such as a
cell phone. The Judicial Panel on Multidistrict Litigation
consolidated the cases for pre-trial purposes in the East-
ern District of Virginia.
The ’295 patent “relates generally to an apparatus for
recording of a digital image, communicating the digital
image from the recording device to a storage device, and
to administering the digital image in the storage device.”
’295 patent, col. 1 ll. 7–10. The specification notes that a
“wide variety of data types” can be transmitted, including
audio and image stills. Id. at col. 1 ll. 15–26. Moreover,
“[s]o called cellular telephones may be utilized for image
transmissions,” id. at col 1 ll. 31–34, and, at the time of
the invention, it was known how to “digitize, compress
and transmit individual still pictures, such as photo-
4 TLI COMMUNICATIONS LLC v. AV AUTOMOTIVE, L.L.C.
graphs,” id. at col 1 ll. 35–42. Further, the specification
recognizes that the prior art taught “[a]n image and audio
communication system having a graphical annotation
capability . . . in which voice, data and image communica-
tions are used in telephone systems.” Id. at col 1 ll. 52–
59. But, “[w]hen a large number of digital images are
recorded and are to be archived in a central computer
unit, then the organization of the data base becomes a
problem.” Id. at col 1 ll. 43–45. “In particular, the prob-
lems of locating the data of an image data file increase as
the number of images to be archived increases.” Id. at col.
1 ll. 46–48. The invention seeks to solve this problem “by
providing for recording, administration and archiving of
digital images simply, fast and in such way that the
information therefore may be easily tracked.” Id. at col. 1
ll. 64–66.
More specifically, the invention teaches manually or
automatically assigning “classification data,” such as a
date or timestamp, to digital images and sending those
images to a server. The server then extracts the classifi-
cation data and stores the digital images, “taking into
consideration the classification information.” Id. at col. 2
ll. 35–45. Claim 17 is representative:
17. A method for recording and administering
digital images, comprising the steps of:
recording images using a digital pick up
unit in a telephone unit,
storing the images recorded by the digital
pick up unit in a digital form as digital
images,
transmitting data including at least the
digital images and classification infor-
mation to a server, wherein said classifica-
tion information is prescribable by a user
TLI COMMUNICATIONS LLC v. AV AUTOMOTIVE, L.L.C. 5
of the telephone unit for allocation to the
digital images,
receiving the data by the server,
extracting classification information which
characterizes the digital images from the
received data, and
storing the digital images in the server,
said step of storing taking into considera-
tion the classification information.
Id. at col. 10 ll. 1–17. Independent claims 1 and 25 recite
substantially the same concept but do so in the context of
an apparatus or system. Claim 1 includes a “means for
allocating classification information prescribed by a user
of said at least one telephone unit to characterize digital
images obtained by said digital pick up unit.” Likewise,
claim 25 recites a “means . . . to allocate information in
the corresponding digital still image data.” Claims 10 and
11 add an “image analysis unit” and a “control unit” to the
features of claim 1.
The defendants filed a motion to dismiss for failure to
state a claim, arguing that the ’295 patent is drawn to
patent-ineligible subject matter. The district court
agreed, concluding that the claims are directed to “the
abstract idea of taking, organizing, classifying, and stor-
ing photographs.” J.A. 16. The district court declined to
give patentable weight to the claims’ recitation of a tele-
phone unit or a server, or to the “means for allocating”
limitation in claims 1 and 25. As a result, the district
court granted the defendants’ motion to dismiss.
TLI appeals. We have jurisdiction under 28 U.S.C.
§ 1295(a)(1).
6 TLI COMMUNICATIONS LLC v. AV AUTOMOTIVE, L.L.C.
II
We apply regional circuit law to the review of motions
to dismiss for failure to state a claim under Rule 12(b)(6).
Content Extraction & Transmission LLC v. Wells Fargo
Bank, Nat’l Ass’n, 776 F.3d 1343, 1346 (Fed. Cir. 2014).
The Fourth Circuit reviews challenges to a dismissal for
failure to state a claim de novo. Burbach Broad. Co. of
Del. V. Elkins Radio Corp., 278 F.3d 401, 406 (4th Cir.
2002).. We review the district court’s patent eligibility
determination under § 101 de novo. OIP Techs., Inc. v.
Amazon.com, Inc., 788 F.3d 1359, 1362 (Fed. Cir. 2015).
A patent may be obtained for “any new and useful
process, machine, manufacture, or composition of matter,
or any new and useful improvement thereof.” 35 U.S.C.
§ 101. The Supreme Court has “long held that this provi-
sion contains an important implicit exception[:] Laws of
nature, natural phenomena, and abstract ideas are not
patentable.” Ass’n for Molecular Pathology v. Myriad
Genetics, Inc., 133 S. Ct. 2107, 2116 (2013) (quoting Mayo
Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct.
1289, 1293 (2012)). Under the now familiar two-part test
described by the Supreme Court in Alice, “[w]e must first
determine whether the claims at issue are directed to a
patent-ineligible concept,” such as an abstract idea. Alice
Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S. Ct. 2347, 2355
(2014). If so, we must then “consider 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.” Id.
(quoting Mayo, 132 S. Ct. at 1298, 1297). For the reasons
set forth below, we find that the claims are directed to the
abstract idea of classifying and storing digital images in
an organized manner and fail to add an inventive concept
sufficient to confer patent eligibility.
TLI COMMUNICATIONS LLC v. AV AUTOMOTIVE, L.L.C. 7
A
Turning to Alice step one, “[w]e must first determine
whether the claims at issue are directed to a patent-
ineligible concept,” such as an abstract idea. See Alice,
134 S. Ct. at 2355. “At step one of the Alice framework, it
is often useful to determine the breadth of the claims in
order to determine whether the claims extend to cover a
‘fundamental . . . practice long prevalent in our sys-
tem . . . .’” Intellectual Ventures I LLC v. Capital One
Bank (USA), 792 F.3d 1363, 1369 (Fed. Cir. 2015) (quot-
ing Alice, 134 S. Ct. at 2356). But in determining whether
the claims are directed to an abstract idea, we must be
careful to avoid oversimplifying the claims because “[a]t
some level, ‘all inventions . . . embody, use, reflect, rest
upon, or apply laws of nature, natural phenomena, or
abstract ideas,’” Alice, 134 S. Ct. at 2354 (quoting Mayo,
132 S. Ct. at 1293). Cf. Diamond v. Diehr, 450 U.S. 175,
189 n.12 (1981) (cautioning that overgeneralizing claims,
“if carried to its extreme, make[s] all inventions un-
patentable because all inventions can be reduced to
underlying principles of nature which, once known, make
their implementation obvious.”). However, not every
claim that recites concrete, tangible components escapes
the reach of the abstract-idea inquiry. See, e.g., Alice, 134
S. Ct. at 2360 (claims that recite general-purpose comput-
er components are nevertheless “directed to” an abstract
idea); Content Extraction, 776 F.3d at 1347 (claims recit-
ing a “scanner” are nevertheless directed to an abstract
idea); Mortg. Grader, Inc. v. First Choice Loan Serv. Inc.,
811 F.3d 1314, 1324–25 (Fed. Cir. 2016) (claims reciting
an “interface,” “network,” and a “database” are neverthe-
less directed to an abstract idea).
On its face, representative claim 17 is drawn to the
concept of classifying an image and storing the image
based on its classification. While claim 17 requires con-
crete, tangible components such as “a telephone unit” and
8 TLI COMMUNICATIONS LLC v. AV AUTOMOTIVE, L.L.C.
a “server,” the specification makes clear that the recited
physical components merely provide a generic environ-
ment in which to carry out the abstract idea of classifying
and storing digital images in an organized manner. And
the specification’s emphasis that the present invention
“relates to a method for recording, communicating and
administering [a] digital image” underscores that claim
17 is directed to an abstract concept. ’295 patent, col. 1
ll. 10–12. TLI’s characterization of the claimed invention
also supports our conclusion at step one. In its briefs, TLI
essentially parrots the disclosure of the ’295 patent,
asserting that claim 17 is “directed to a method for record-
ing and administering digital images.” Appellant’s Br. 28.
We recently clarified that a relevant inquiry at step
one is “to ask whether the claims are directed to an im-
provement to computer functionality versus being di-
rected to an abstract idea.” See Enfish, LLC v. Microsoft
Corp., No. 2015-2044, slip op. at *11 (Fed. Cir. May 12,
2016). We contrasted claims “directed to an improvement
in the functioning of a computer” with claims “simply
adding conventional computer components to well-known
business practices,” or claims reciting “use of an abstract
mathematical formula on any general purpose computer,”
or “a purely conventional computer implementation of a
mathematical formula,” or “generalized steps to be per-
formed on a computer using conventional computer activi-
ty.” Id. at *16–17. Contrary to TLI’s arguments on
appeal, the claims here are not directed to a specific
improvement to computer functionality. Rather, they are
directed to the use of conventional or generic technology
in a nascent but well-known environment, without any
claim that the invention reflects an inventive solution to
any problem presented by combining the two. According
to the ’295 patent, the problem facing the inventor was
not how to combine a camera with a cellular telephone,
how to transmit images via a cellular network, or even
TLI COMMUNICATIONS LLC v. AV AUTOMOTIVE, L.L.C. 9
how to append classification information to that data.
Nor was the problem related to the structure of the server
that stores the organized digital images. Rather, the
inventor sought to “provid[e] for recording, administration
and archiving of digital images simply, fast and in such
way that the information therefore may be easily
tracked.” ’295 patent, col. 1 ll. 62–65.
The specification does not describe a new telephone, a
new server, or a new physical combination of the two.
The specification fails to provide any technical details for
the tangible components, but instead predominately
describes the system and methods in purely functional
terms. For example, the “telephone unit” of the claims is
described as having “the standard features of a telephone
unit,” id. at col. 5 ll. 54–58, with the addition of a “digital
image pick up unit for recording images,” id. at col. 5 ll.
58–61, that “operates as a digital photo camera of the
type which is known,” id. at col. 6. ll. 1–2. Put different-
ly, the telephone unit itself is merely a conduit for the
abstract idea of classifying an image and storing the
image based on its classification. Indeed, the specification
notes that it “is known” that “cellular telephones may be
utilized for image transmission,” id. at col. 1 ll. 31–34,
and existing telephone systems could transmit pictures,
audio, and motion pictures and also had “graphical anno-
tation capability,” id. at col. 1 ll. 52–59.
Likewise, the server is described simply in terms of
performing generic computer functions such as storing,
receiving, and extracting data. See, e.g., id. at col. 5 ll. 1–
4 (“The server [ ] is a computer system which serves for
organizing a database which includes a large number of
digital images as well as classification information [ ]
which may potentially be allocated to the digital imag-
es.”). “The server includes a reception unit, an analysis
unit which analyzes the data that is sent from the tele-
phone unit with respect to classification information, . . .
10 TLI COMMUNICATIONS LLC v. AV AUTOMOTIVE, L.L.C.
as well as a memory for storing the digital images.” Id. at
col 2 ll. 28–32. But the functions of the server are de-
scribed in vague terms without any meaningful limita-
tions. See, e.g., id. at col. 5 ll. 4–13 (“The server A
includes . . . [a] receiving unit EE for receiving the data
sent from the telephone unit TE . . . and an analysis unit
AE . . . which extracts the classification information from
data received by the server S.”). In other words, the focus
of the patentee and of the claims was not on an improved
telephone unit or an improved server.
For these same reasons, the claims are not directed to
a solution to a “technological problem” as was the case in
Diamond v. Diehr, 450 U.S. 175 (1981). See OIP Techs.,
788 F.3d at 1364 (“[W]e must read Diehr in light of Alice,
which emphasized that Diehr does not stand for the
general proposition that a claim implemented on a com-
puter elevates an otherwise ineligible claim into a patent-
eligible improvement.”). Nor do the claims attempt to
solve “a challenge particular to the Internet.” DDR
Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245, 1256–
57 (Fed. Cir. 2014); cf. Intellectual Ventures I, 792 F.3d at
1371 (because the patent claims at issue did not “address
problems unique to the Internet, . . . DDR has no applica-
bility.”).
Instead, the claims, as noted, are simply directed to
the abstract idea of classifying and storing digital images
in an organized manner. Consistent with the Supreme
Court’s rejection of “categorical rules” to decide subject
matter eligibility, Bilski v. Kappos, 561 U.S. 604, 610
(2010), we have applied the “abstract idea” exception to
encompass inventions pertaining to methods of organizing
human activity. See, e.g., Intellectual Ventures I, 792 F.3d
at 1367 (finding the claim at issue “not meaningfully
different from the ideas found to be abstract in other
cases before the Supreme Court and our court involving
methods of organizing human activity”). Here, we find
TLI COMMUNICATIONS LLC v. AV AUTOMOTIVE, L.L.C. 11
that, like the claims at issue in Content Extraction which
were directed to “collecting data,” “recognizing certain
data within the collected data set,” and “storing the
recognized data in memory,” 776 F.3d at 1347, attaching
classification data, such as dates and times, to images for
the purpose of storing those images in an organized
manner is a well-established “basic concept” sufficient to
fall under Alice step 1. Lastly, although the claims limit
the abstract idea to a particular environment—a mobile
telephone system—that does not make the claims any less
abstract for the step 1 analysis. See OIP Techs., 788 F.3d
at 1362–63.
B
Turning to the second step in our analysis, we find
that the claims fail to recite any elements that individual-
ly or as an ordered combination transform the abstract
idea of classifying and storing digital images in an orga-
nized manner into a patent-eligible application of that
idea. It is well-settled that mere recitation of concrete,
tangible components is insufficient to confer patent eligi-
bility to an otherwise abstract idea. Rather, the compo-
nents must involve more than performance of “‘well-
understood, routine, conventional activit[ies]’ previously
known to the industry.” Alice, 134 S. Ct. at 2359 (quoting
Mayo, 132 S. Ct. at 1294). We agree with the district court
that the claims’ recitation of a “telephone unit,” a “server”,
an “image analysis unit,” and a “control unit” fail to add
an inventive concept sufficient to bring the abstract idea
into the realm of patentability.
As an initial matter, TLI argues that, even if known
in the prior art, the components recited in the claims
cannot be “conventional” within the meaning of the Alice
absent fact-finding by the court. While we must be mind-
ful of extraneous fact finding outside the record, particu-
larly at the motion to dismiss stage, here we need to only
12 TLI COMMUNICATIONS LLC v. AV AUTOMOTIVE, L.L.C.
look to the specification, which describes the telephone
unit and server as either performing basic computer
functions such as sending and receiving data, or perform-
ing functions “known” in the art. In other words, as will
be discussed below, the claimed functions are “well-
understood, routine, activit[ies]’ previously known to the
industry.” Id. at 2359 (quoting Mayo, 132 S. Ct. at 1294).
We turn first to the “telephone unit.” The claims
identify a telephone unit with a digital pick up device. In
its briefing, TLI suggests that this is akin to a “camera
phone” and is a core feature of the invention sufficient to
transform the claims into patent-eligible subject matter.
But TLI abandoned this position at argument, conceding
that the telephone unit itself is not an inventive concept
sufficient to confer patent eligibility. See, e.g., Oral Ar-
gument at 2:09–14, 9:11–34, 8:20–30 (April 7, 2016),
available at http://oralarguments.cafc.uscourts.gov/
default.aspx?fl=2015-1372.mp3. In any event, the specifi-
cation confirms that the telephone unit itself behaves as
expected: when it is not “be[ing] used as a ‘normal tele-
phone’ to make calls,” ’295 patent, col. 6 ll. 13–14, the
telephone unit’s “digital image pick up unit operates as a
digital photo camera of the type which is known,” id. at
col. 6 ll. 1–2, compresses images according to known
methods, id. at col. 6 ll. 5–8, and transmits image data
and classification data according to known methods, id. at
col. 1 ll. 31–34, 52–59. In other words, the telephone unit
simply provides the environment in which the abstract
idea of classifying and storing digital images in an orga-
nized manner is carried out.
Likewise, the server fails to add an inventive concept
because it is simply a generic computer that “adminis-
ter[s]” digital images using a known “arbitrary data bank
system.” Id. at col. 5 ll. 45–46. But “[f]or the role of a
computer in a computer-implemented invention to be
deemed meaningful in the context of this analysis, it must
TLI COMMUNICATIONS LLC v. AV AUTOMOTIVE, L.L.C. 13
involve more than performance of ‘well-understood, rou-
tine, [and] conventional activities previously known to the
industry.’” Content Extraction, 776 F.3d at 1347–48
(quoting Alice, 134 S. Ct at 2359). Here, the server simply
receives data, “extract[s] classification information . . .
from the received data,” and “stor[es] the digital imag-
es . . . taking into consideration the classification infor-
mation.” See ’295 patent, col. 10 ll. 1–17 (Claim 17).
These steps fall squarely within our precedent finding
generic computer components insufficient to add an
inventive concept to an otherwise abstract idea. Alice,
134 S. Ct. at 2360 (“Nearly every computer will include a
‘communications controller’ and a ‘data storage unit’
capable of performing the basic calculation, storage, and
transmission functions required by the method claims.”);
Content Extraction, 776 F.3d at 1345, 1348 (“storing
information” into memory, and using a computer to
“translate the shapes on a physical page into typeface
characters,” insufficient confer patent eligibility); Mortg.
Grader, 811 F.3d at 1324–25 (generic computer compo-
nents such as an “interface,” “network,” and “database,”
fail to satisfy the inventive concept requirement); Intellec-
tual Ventures I, 792 F.3d at 1368 (a “database” and “a
communication medium” “are all generic computer ele-
ments”); BuySAFE v. Google, Inc., 765 F.3d 1350, 1355
(Fed. Cir. 2014) (“That a computer receives and sends the
information over a network—with no further specifica-
tion—is not even arguably inventive.”).
Dependent claims 10 and 11 respectively recite an
“image analysis unit for determining quality of the digital
images” and a “control unit for controlling resolution of
digital images.” These components purportedly analyze
the image data sent from the telephone unit to determine
the quality of the image sent, and if certain criteria are
met, instruct the telephone unit to resend the image.
While these units purport to add additional functionality
14 TLI COMMUNICATIONS LLC v. AV AUTOMOTIVE, L.L.C.
to the server, ’295 patent, col. 5 ll. 14–32, the specification
limits its discussion of these components to abstract
functional descriptions devoid of technical explanation as
to how to implement the invention. For example, the
“image analysis unit” predictably analyzes the digital
images to “determine[ ] the quality of the digital image
provided to the server.” Id. at col. 5 ll. 14–16; see also id.
at col 8 ll. 24–26. And, the “control unit” predictably
“controls” various aspects of the claimed functionality. It
“controls the image resolution of the digital images” using
known image compression techniques, id. at col. 5 ll. 21–
24, and it “controls the transmission rate during trans-
mission of the data via the transmission system,” id. at
col. 5 ll. 30–33. Such vague, functional descriptions of
server components are insufficient to transform the
abstract idea into a patent-eligible invention.
In sum, the recited physical components behave exact-
ly as expected according to their ordinary use. Although
the claims recite that the abstract idea of classifying and
storing digital images in an organized manner is carried
out in a telephone system, the ’295 patent fails to provide
the requisite details necessary to carry out that idea.
Just as “[s]teps that do nothing more than spell out what
it means to ‘apply it on a computer’ cannot confer patent-
eligibility,” Intellectual Ventures I, 792 F.3d at 1371–72
(citing Alice, 134 S. Ct. at 2359), here, steps that generi-
cally spell out what it means to “apply it on a telephone
network” also cannot confer patent eligibility. Thus, we
find that the ’295 patent is directed to patent-ineligible
subject matter and we affirm the district court’s judg-
ment.
AFFIRMED