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Mankes v. Fandango, LLC

United States District Court, E.D. North Carolina, Western Division

February 28, 2017



          LOUISE W. FLANAGAN United States District Judge

         This matter is before the court on defendants' motion to dismiss, pursuant to Federal Rule of Civil Procedure 12(b)(6). (DE 92, 101). The issues presented are ripe for ruling. For the following reasons, defendants' motion is granted.


         On October 14, 2013, plaintiff, inventor and owner of United States Patent Number 6, 477, 503 (“ ‘503 patent”), initiated this suit asserting claims against defendant Fandango, LLC, (“Fandango”), an online retailer of movie tickets, for patent infringement in violation of 35 U.S.C. § 271(a) and induced infringement in violation of 35 U.S.C. § 271(b).[1] Defendant responded with a motion to dismiss, later mooted by the court's allowance of plaintiff's motion to amend, resulting in an amended complaint filed March 7, 2014. In answer filed March 24, 2014, defendant denied liability and asserted two counterclaims against plaintiff. (DE 37).

         At the time plaintiff initiated this action, relevant law relating to plaintiff's claims was in a state of flux. The court allowed the parties joint motion to stay proceedings pending outcome of Limelight Networks, Inc. v. Akamai Technologies, Inc., 134 S.Ct. 2111 (2014). On June 2, 2014, in unanimous ruling, the Supreme Court held that liability for induced infringement only can be found when there is direct patent infringement. Id. at 2117. The Supreme Court remanded the case back to the United States Court of Appeals for the Federal Circuit for further proceedings. Ultimately stay was lifted in this case, where the court declined to continue it pending the Federal Circuit's address on remand.

         Thereafter, plaintiff moved to dismiss defendant Fandango's counterclaims, (DE 50), and defendant filed a motion for judgment on the pleadings. (DE 55). On February 26, 2015, this court, applying relevant law as it then stood, granted judgment on the pleadings in favor of defendant. (DE 60). The February 26, 2015, order also held in abeyance plaintiff's motion to dismiss, pending further briefing. (Id.). However, before the court could address the merits of plaintiff's motion, defendant Fandango's counterclaims voluntarily were dismissed on March 5, 2015. (DE 61).

         Following the court's February 26, 2015, order, plaintiff appealed to the Federal Circuit. During briefing on the merits of plaintiff's appeal, the Federal Circuit issued an en banc decision in Akamai Technologies, Inc. v. Limelight Networks, Inc., 797 F.3d 1020 (Fed. Cir. 2015) (en banc) (Akamai IV), which revised the legal standards this court had applied in granting judgment on the pleadings in favor of defendant. In Akamai IV, the Federal Circuit held that when more than one actor is involved in practicing the steps of a claimed method, a single entity will be liable for others' performance of method steps, and ultimately direct infringement, “where that entity directs or controls the others' performance” or “where the actors form a joint enterprise.” Id. at 1022.

         On April 22, 2016, the Federal Circuit vacated this court's judgment on the pleadings against plaintiff and remanded the case for further proceedings in light of Akamai IV. Mankes v. Vivid Seats Ltd., 822 F.3d 1302, 1309 (Fed. Cir. 2016). Specifically, the Federal Circuit held that because this court's decision was “squarely based on [an] earlier, narrower [legal] standard, ” reinstatement and remand were appropriate for determining whether or not plaintiff's claims survived the new legal standard. Id. at 1305. Following the Federal Circuit's opinion, this court directed plaintiff to file an amended complaint.

         On June 30, 2016, plaintiff filed the instant second amended complaint against defendants Fandango and Regal Entertainment Group (“Regal”), asserting claims for patent infringement in violation of 35 U.S.C. § § 271 et seq. (DE 81). Plaintiff alleges that defendant Fandango's operation of an Internet-based reservation system, in conjunction with defendant Regal's operation of a local reservation system, infringes the ‘503 patent. Plaintiff seeks declaratory and injunctive relief, monetary damages, and trial by jury.

         On August 24, 2016, defendant Fandango moved to dismiss the instant complaint (DE 92). Defendant Regal joined in that motion. (DE 101). Defendants argue that plaintiff's patent claims are directed to an abstract idea and therefore fail to cover patentable subject matter under 35 U.S.C. § 101.


         The facts alleged in plaintiff's second amended complaint are summarized as follows. Plaintiff is owner and inventor of the ‘503 patent, which issued on November 5, 2002. (DE 81 ¶ 12-13). The ‘503 patent, entitled “Active Reservation System, ” claims methods for a system to control inventory when goods and services are sold both through the Internet and at a physical site. (Id. ¶ 13). Ordinarily, when vendors sell inventory online and at a physical site, inventory is divided and allocated between the two locations. U.S. Patent No. 6, 477, 503, col. 1.ll. 30-58. However, when inventory is divided, “neither [site] ha[s] contemporaneous information on the overall state of the local inventory.” Id. at col. 1.ll. 43-67. As a result, inventory is often undersold. Id. at col. 1.ll. 57-58.

         The ‘503 patent specification describes a method reservation system which allows vendors to control entire inventory at a single, local site. Id. at col. 2.ll. 58-60. The local site uses a local server to allocate, control and reserve inventory. Id. at col. 2.ll. 61-63. The local server communicates over the Internet to an online reservation server certain information regarding available inventory. Id. at col. 3.ll. 6-9. The reservation system then makes the available inventory accessible for purchase by consumers online. Id. at col. 3.ll. 10-12. When inventory is sold online, the Internet site communicates the sale to the local site, which then confirms the sale and updates total available inventory. Id. at col. 3.ll. 16-19. Confirmation of the sale, along with updated inventory, is then transmitted to the reservation server and forwarded to the consumer. Id. at col. 3.ll. 37-41. Any time a sale is made, the local site is able to control available inventory and communicate information regarding the same, regardless of whether the sale was made online or at the local site. Id. at col. 3.ll. 42-46.

         These features of plaintiff's invention generally are found in the four claims of the ‘503 patent. Of the four claims, Claims 1 through 3 are at issue. Claim 1 is representative of the asserted claims, stating:

1. A method for operating an Internet based active reservation system for the purchase of goods and services, comprising:
(a) providing an owner event server located at and operated by a local event owner having an available inventory of goods ...

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