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Agri-Labs Holdings LLC v. Taplogic, LLC

United States District Court, N.D. Indiana, Fort Wayne Division

January 16, 2018

AGRI-LABS HOLDING LLC, Plaintiff,
v.
TAPLOGIC, LLC, Defendant.

          OPINION AND ORDER

          THERESA L. SPRINGMANN, UNITED STATES DISTRICT COURT CHIEF JUDGE

         This matter comes before the Court on Motions for Summary Judgment [ECF Nos. 129, 131] filed by Defendant Taplogic, LLC, and a Motion for Summary Judgment [ECF No. 142] filed by Plaintiff Agri-Labs Holding LLC. The Defendant has moved for summary judgment on non-infringement, invalidity, and lack of personal jurisdiction and venue. The Plaintiff has moved for summary judgment on infringement. These Motions are now fully briefed and ripe for review.

         BACKGROUND

         On January 22, 2015, the Plaintiff filed its Complaint [ECF No. 1] against the Defendant, alleging that the Defendant infringed the Plaintiff's U.S. Patent No. 8, 286, 857 (“the '857 Patent”) regarding a “Soil Sample Tracking System and Method.” The Defendant answered on February 17, 2015 [ECF No. 11], alleging numerous affirmative defenses and counterclaiming for a declaratory judgment that it has not infringed the '857 Patent and that the '857 Patent is invalid.

         The '857 Patent involves a method and system directed to soil sampling to determine nutrient levels across various areas in fields. After samples were collected, they could then be tested to determine any nutritional deficiencies. The test results would be transferred to a fertilizer applicator, which would adjust the flow of nutrients according to recorded geographic positions. Previously, a farmer who wanted to evaluate the nutritional needs of soil would collect soil samples from various places and mark the containers into which the samples were placed with individual identifiers to memorialize the precise geographic position from which each sample was collected. Handwritten identifiers and pre-printed labels were two common methods for marking sample containers. However, both of these methods were time-consuming and prone to errors. Technicians could misread handwritten identifiers in a lab. They could also incorrectly enter the information on the pre-printed labels into a computer. The '857 Patent purported to solve these issues.

         There are two independent claims at issue. Independent Claim 1 recites:

A method comprising: generating a plurality of soil sample containers each having a unique identifier associated therewith; manually pulling at least one soil sample from a field and placing said at least one soil sample in a respective one of said plurality of soil sample containers; scanning said unique identifier associated with said soil sample container containing said at least one soil sample with a handheld remote terminal, wherein said handheld remote terminal includes a handheld remote terminal sampling application, wherein said handheld remote terminal sampling application is configured to allow a sample taker to enter a farm/client name and a field identifier, and wherein said handheld remote terminal sampling application includes a handheld scanning application configured to allow said sample taker to scan said unique identifier with a scanner on said handheld remote terminal; obtaining a geographic coordinate reading associated with a location in said field from where said soil sample is obtained; and associating said soil sample with said unique identifier and said geographic coordinate reading.
Independent Claim 13 recites:
A system, comprising: a plurality of containers each containing a unique identifier; a handheld remote terminal including a device operable to read said unique identifiers and geographic position sensor, wherein a plurality of soil samples are manually taken from a field and as each said soil sample is placed in said container said handheld remote terminal includes an application operable to read said unique identifier and associate said unique identifier and thus said container with said soil sample, wherein said handheld remote terminal is operable to automatically use said geographic position sensor to obtain a position reading in said field and further associate said soil sample with said geographic position, wherein said unique identifier and said geographic position are stored in a database; a second application on said handheld remote terminal operable to sync the contents of said database to a lab device, wherein said lab device is operable to read said unique identifier upon receipt of said containers; a test instrument operable to test said soil samples and generate one or more test results as a function of said soil sample, wherein said test results are uploaded to said unique identifier.

         The product accused of violating the claimed method and system is called the AgPhD Soil Test application (“the AgPhD App”), developed by the Defendant for use with smartphones. The Plaintiff accuses the Defendant of infringement because when the end-users of the AgPhD App use the smartphone app for its intended purpose, the Plaintiff asserts that both the method and system claims of the '857 Patent are infringed. The Plaintiff argues that the Defendant is liable for this infringement because all of the relevant steps of the method and all of the components of the system are attributable to the Defendant. The Plaintiff asserts that the Defendant is liable both for direct and indirect infringement.

         JURISDICTION AND VENUE

         First, the Court will address the Defendant's arguments regarding personal jurisdiction and improper venue. As to jurisdiction, the Plaintiff argues that the Defendant waived its right to challenge personal jurisdiction when it appeared, answered, and asserted counterclaims against the Plaintiff. The Court agrees. “[B]y asking the court for relief, [the Defendant] consented to jurisdiction in the same way a plaintiff consents to jurisdiction by filing an action with a court.” Mallard v. Mallard, No. 90 C 3335, 1992 WL 47998, at *5 (N.D. Ill. Mar. 4, 1992) (citing Adam v. Saenger, 303 U.S. 59 (1938)). “[E]ven when a valid personal jurisdiction defense exists, the defense is waived if the objecting party . . . proceeds to litigate the case on its merits.” Blockowicz v. Williams, 630 F.3d 563, 566 (7th Cir. 2010) (internal citation omitted); see also Continental Bank, N.A. v. Meyer, 10 F.3d 1293, 1296-97 (7th Cir. 1993) (finding that despite raising the defense in its answer, the defendant consented to the court's jurisdiction by failing to argue the point until summary judgment). In this case, the Defendant affirmatively requested declaratory relief, litigated this case on the merits for nearly three years, and only now, at summary judgment, argues the point. Therefore, the Defendant has waived this defense, and the Court has personal jurisdiction over the Defendant.

         Venue in patent actions is governed exclusively by 28 U.S.C. § 1400(b), which provides: “Any civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.” In TC Heartland LLC v. Kraft Foods Group Brands LLC, the Supreme Court affirmed that the “residence” of a domestic corporation for the purposes of § 1400(b) is where the corporation is incorporated. 137 S.Ct. 1514, 1515 (2017). Thus, the Defendant argues, in this case, venue is improper because the Defendant resides in Kentucky and has no “regular and established” place of business in Indiana. The Defendant also argues that it has not waived its right to challenge venue because of this recent change in controlling law.

         Resolving a split among the district courts, the Federal Circuit recently held that venue challenges based on TC Heartland were not previously available to defendants under the meaning of Rule 12(g)(2) and, thus, were not waived under Rule 12(h)(1)(A). In re Micron Tech., Inc., 875 F.3d 1091, 1099-1100 (Fed. Cir. 2017). However, the Federal Circuit also noted that “Rule 12(h)(1) is not the sole basis on which a district court might, in various circumstances, rule that a defendant can no longer present a venue defense that might have succeeded on the merits.” Id. at 1100. Rather, “Congress has provided express statutory confirmation of judicial authority to consider the timeliness and adequacy of a venue objection.” Id. Under 28 U.S.C. § 1406(b), “[n]othing in this chapter shall impair the jurisdiction of a district court in any matter involving a party who does not interpose timely and sufficient objection to the venue.” Thus, the Federal Circuit found it “clear that, apart from Rule 12(g)(2) and (h)(1)(A), district courts have authority to find forfeiture of a venue objection.” Id.

         However, the Federal Circuit has not “provided a precedential answer to the question of whether the timeliness determination may take account of factors other than the sheer time from when the defense becomes available to when it is asserted, including factors such as how near is the trial, which may implicate efficiency or other interest of the judicial system and of other participants in the case.” Id. at 1102. Rather, the Federal Circuit explicitly declined to “explore the contours of timeliness outside Rule 12(g)(2) and (h)(1)(A) or how to assess what constitutes consent to venue or what if any other considerations could justify a finding of forfeiture even when the defendant has not waived its objection under Rule 12(g)(2) and (h)(1)(A).” Id. The Federal Circuit reiterated that the Federal Rules of Civil Procedure “are not all encompassing” and that there are “standard procedural devices trial courts around the country use every day in service of Rule 1's paramount command: the just, speedy, and inexpensive resolution of disputes.” Id. at 1100 (quoting Dietz v. Bouldin, Inc., 136 S.Ct. 1885, 1891 (2016)). “[A] district court possesses inherent powers that are ‘governed not by rule or statute but by the control necessarily vested in courts to manage their own affairs so as to achieve the orderly and expeditious disposition of cases'” Id. (quoting Link v. Wabash R. Co., 370 U.S. 626, 630-31 (1962)). However, the Court's “exercise of an inherent power must be a ‘reasonable response to the problems and needs' confronting the court's fair administration of justice.” Id. (quoting Degen v. United States, 517 U.S. 820, 823-24 (1996)).

         Per In re Micron, the Defendant has not waived its objection to venue based on Rules 12(g)(2) and (h)(1)(A). Nevertheless, the Court finds that the Defendant's objection is not timely given the circumstances of the case. The district courts that have had the opportunity to consider whether to deny a motion to dismiss for improper venue on grounds other than under Rules 12(g)(2) and (h)(1)(A) have taken into account impending trial dates, see Treehouse Avatar LLC v. Valve Corp., No. 15-427, 2017 WL 5564153, at *3 (D. Del. Nov. 20, 2017) (granting motion where trial date not set until 2019), and other considerations such as the defendant's litigation conduct post TC Heartland, judicial resources already expended, and prejudice to the plaintiff in “reopening a dormant venue dispute, ” see Intellectual Ventures II LLC v. FedEx Corp., NO. 2:16-CV-980, 2017 WL 5630023, at *3 (E.D. Tex. Nov. 22, 2017) (denying motion where the Defendant waited more than two months after TC Heartland was decided to seek dismissal and had “continued actively litigating this case”).

         In the instant case, the Defendant admittedly raised its objection to venue only a month after the Supreme Court's decision in TC Heartland. However, granting the Defendant's motion at this late stage in the case would not promote the just, speedy, and inexpensive resolution of the dispute. This case has been pending for nearly three years. The Defendant's venue objection was filed concurrently with its Motions for Summary Judgment, [1] and significant judicial resources have already been expended. Thus, the Court finds that under the circumstances of this case, and Rules 12(g)(2) and (h)(1)(A) notwithstanding, the Defendant's motion is not timely.

         Accordingly, the Court will not dismiss this action based on a lack of personal jurisdiction or improper venue.

         STANDARD OF REVIEW

         Summary judgment is proper where the evidence of record shows that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). The moving party bears the initial burden of informing the Court of the basis for its motion and identifying those portions of the record it believes demonstrate the absence of a genuine issue of material fact. Id. at 323. The burden then shifts to the non-movant to “go beyond the pleadings” to cite evidence of a genuine factual dispute that precludes summary judgment. Id. at 324. “[A] court has one task and one task only: to decide, based on the evidence of record, whether there is any material dispute of fact that requires a trial.” Waldridge v. Am. Heochst Corp., 24 F.3d 918, 920 (7th Cir. 1994). If the non-movant does not come forward with evidence that would reasonably permit the finder of fact to find in its favor on a material issue, then the Court must enter summary judgment against it. Id.

         ANALYSIS

         A. Whether the '857 Patent is Directed to a Patent-Ineligible Concept

         The Defendant argues that the '857 Patent is directed to an abstract idea, which is ineligible for patent protection under 35 U.S.C. § 101. Whether a patent is invalid under § 101 is a question of law. CyberSource Corp. v. Retail Decision, Inc., 654 F.3d 1366, 1369 (Fed. Cir. 2011); In re Bilski, 545 F.3d 943, 951 (Fed. Cir. 2008) (en banc).

         In evaluating whether a patent is directed to ineligible subject matter under § 101, the Court “must distinguish patents that claim the building blocks of human ingenuity, which are ineligible for patent protection, from those that integrate the building blocks into something more thereby transforming them into a patent-eligible invention.” Alice Corp. Pty. Ltd. v. CLS Bank Int'l, 134 S.Ct. 2347, 2350 (2014) (internal quotation marks omitted) (citing Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S.Ct. 1289, 1297 (2012)). This requires a two-step analysis. The Court must (1) “determine whether the claims at issue are directed to a patent-ineligible concept”; and (2) ask “whether the claim's elements, considered both individually and as an ordered combination, transform the nature of the claim into a patent-eligible application.” Id. at 2357 (internal citations omitted).

         “[A]n invention is not rendered ineligible for patent simply because it involves an abstract concept.” Id. at 2347. Rather, “all inventions . . . embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas.” Id. at 2354 (quoting Mayo Collaborative Servs., 132 S.Ct. at 1293). Thus, application of abstract concepts “to a new and useful end” are still patent eligible. Alice, 134 S.Ct. at 2354 (quoting Gottschalk v. Benson, 409 U.S. 63, 67 (1973)). However, “‘[s]imply appending conventional steps, specified at a high level of generality, ' to a method already ‘well known in the art' is not ‘enough' to supply the ‘inventive concept' needed to make this transformation.” Id. at 2350 (quoting Mayo Collaborative Servs., 132 S.Ct. at 1294).

         The Defendant argues that “soil sampling was well-known to be a way of assigning a unique identifier to a soil sample, keeping a record of the unique identifier, assigning a location to the unique identifier, adding additional information to the unique identifier like a farm or field name, sending it to a lab, and receiving results as a function of the unique identifier.” (Def. Br. 5-5, ECF No. 26.) The Court agrees with the Defendant that soil sampling for the purpose of evaluating the nutritional deficiencies in a field is an abstract idea. However, the Court does not agree that a method for performing soil sampling is necessarily abstract.

         Claims directed to a “new and useful technique” for performing a particular task are not directed to an abstract idea. See Diamond v. Diehr, 450 U.S. 175 (1981) (method for calculating optimal cure time for rubber); Thales Visionix Inc. v. United States, 850 F.3d 1343 (Fed. Cir. 2017) (“new and useful techniques for using sensors to more efficiently track an object on a moving Platform”); Rapid Litig. Mgmt. Ltd. v. Ce!zDirect, Inc., 827 F.3d 1042 (Fed. Cir. 2016) (“new and useful laboratory technique for preserving hepatocytes”). That is, technological inventions that improve upon existing processes to come to the same result more efficiently or more accurately are patent-eligible subject matter. See Diehr, 450 U.S. at 184 n.7. In Alice, the Supreme Court reiterated that the computer-implemented process for curing rubber in Diehr was patent eligible, not because it merely “involved a computer, ” but rather because “it improved an existing technological process.” Alice, 134 S.Ct. at 2358 (noting that, even though the invention in Diehr made use of a well-known mathematical equation, the invention accomplished something “the industry had not been able to obtain”). In DDR Holdings, LLC v. Hotels.com, L.P., the Federal Circuit found that the claimed system “amount[ed] to an inventive concept for resolving [a] particular Internet-centric problem.” 773 F.3d 1245, 1258-59 (Fed. Cir. 2014). Similarly, in Bascom Global Internet Services, Inc. v. AT&T Mobility LLC, the Federal Circuit noted that the invention at issue was “a technical way to satisfy an existing problem[, ] . . . . a technology-based solution (not an abstract-idea-based solution implemented with generic technical components in a conventional way) to [achieve the desired result] that overcomes existing problems with other [methods of achieving the desired result].” 827 F.3d 1341, 1351 (Fed. Cir. 2016).

         The '857 Patent is directed to a specific technique regarding soil sampling. It is the technique that the '857 Patent claims, not the overall concept of soil sampling to evaluate the nutritional needs of a field. The '857 Patent purports to solve issues associated with existing techniques by coming to the end result more efficiently and accurately. Therefore, the Court does not find that the '857 Patent is directed to an abstract idea that is ineligible for patent protection.

         But, even if the Court were to find that the '857 Patent was directed to an abstract idea, the Court would still have to proceed to the second step in the analysis, which is to determine whether there is an “inventive concept.” The cases to which the Defendant cites to support its argument that the '857 Patent is directed to an abstract concept with no inventive step are distinguishable. For example, in FairWarning IP, LLC v. Latric Systems, Inc., the Federal Circuit found the subject matter to be abstract because it “merely present[ed] the results of abstract processes of collecting and analyzing information, without more (such as identifying a particular tool for presentation.” 839 F.3d 1089, 1093 (Fed. Cir. 2016) (internal quotations omitted). In Electric Power Group, LLC v. Alstom S.A., the Federal Circuit found the subject matter of the invention at issue to be abstract where the claimed “advance” was “a process of gathering and analyzing information of a specified content, then displaying the results” rather than “any particular assertedly inventive technology for performing those functions.” 830 F.3d 1350, 1354 (Fed. Cir. 2016). The Federal Circuit noted with approval the district court's invocation of “an important common-sense distinction between ends sought and particular means of achieving them, between desired results (functions) and particular ways of achieving (performing) them.” Id. at 1356. That is because “there is a critical difference between patenting a particular concrete solution to a problem and attempting to patent the abstract idea of a solution to the problem in general.” Id. In Secured Mail Solutions LLC v. Universal Wilde, Inc., the Federal Circuit invalidated a patent as abstract because the patents were “not directed to specific details of the barcode or the equipment for generating and processing it” and was “not limited to any particular technology of generating, printing, or scanning a barcode, or sending a mail object, or of sending the recipient-specific information over a network.” 873 F.3d 905, 910-11 (Fed. Cir. 2017). The Federal Circuit, and the district court below, took issue with the fact that the patent failed to “cit[e] a specific way to solve a specific problem . . . .” Id. at 912. The '857 Patent, however, provides a specific way to solve a specific problem. The '857 Patent does not claim the ends sought, but rather claims the means of achieving those ends.

         Prior to the invention claimed in the '857 Patent, several different techniques existed, and still exist today, for soil sampling. One such technique involves the use of a computer to guide the human sampler to a location in a field where, upon arrival, a sample would be obtained and placed into a container. The sampler would then handwrite information on the container to identify the container, such as a farm name, a field name, and a method of identification, like a number. This method was time consuming and prone to errors caused by mislabeling or misreading the information. Another technique involved pre-printing labels. In this technique, a sampler would place a pre-printed label onto a container after obtaining the sample. This technique was also time consuming and also vulnerable to errors such as misplacing labels. Both techniques were also vulnerable to errors in the laboratory; the identifiers could be misread or incorrectly entered into a computer. Others sought to solve these problem with complex machinery that was expensive to purchase and to fix. The invention embodied in the '857 Patent improves the technological process of soil sampling and the manner in which soil sample containers are tracked and associated with the geographic location in the field from where the samples are obtained. The method and system claimed in the '857 Patent therefore accomplish something the industry had not previously been able to accomplish and resolve a particular problem related to the collection of soil samples.

         The Defendant also argues that the Plaintiff has done no more than add a generic computer to a method conventionally known in the art. In Multimedia Plus, Inc. v. Playerlync, LLC, the court noted that “[f]or a computer to ‘impose a meaningful limit on the scope of a claim, it must play a significant part in permitting the claimed method to be performed, rather than function solely as an obvious mechanism for permitting a solution to be achieved more quickly, i.e., through the utilization of a computer for performing calculations.'” 198 F.Supp.3d 264, 271 (S.D.N.Y. 2016) (finding that “the patent [did] not disclose any specialized programming or other specific technology for accomplishing [the claimed] functions”) (quoting SiRF Tech., Inc. v. Int'l Trade Comm'n, 601 F.3d 1319, 1333 (Fed. Cir. 2010)). In Burnett v. Panasonic Corp. of N.A., the court found that, where the computer in the patent was “used only to complete the process of converting alphanumeric into natural numbers, ” it was “‘merely as a tool' in the conversion process.” No. PX 17-00236, 2017 WL 4947013, at *6 (D. Md. Nov. 1, 2017). For the use of a computer to “salvage an otherwise patent-ineligible process, [it] must be integral to the claimed invention, facilitating the process in a way that a person making calculations or computations could not.” Bancorp Servs. L.L.C. v. Sun Life Assur. Co., 687 F.3d 1266, 1278 (Fed. Cir. 2012). The '857 Patent does just that. The application on the smartphone is integral to the claimed invention, and it permits the user to accomplish the process of soil sampling in a way that a person making calculations or computations could not. See SiRF Tech., 601 F.3d at 1332-33 (finding that “the presence of the GPS receiver in the claims places a meaningful limit on the scope of the claims” because “the use of [the] ...


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