Morales v. Square, Inc.

75 F. Supp. 3d 716, 2014 U.S. Dist. LEXIS 178525, 2014 WL 7396568
District Court, W.D. Texas·Decided December 30, 2014·No. CV No. 5:13-cv-1092-DAE·Published·Cited by 4 cases

Opinion

ORDER GRANTING DEFENDANT’S MOTION TO DISMISS

DAVID ALAN EZRA, Senior District Judge.

Before the Court is a Motion to Dismiss filed by Defendant Square, Inc. (“Defendant”) (Dkt. # 10). Plaintiff Fernando Morales (“Plaintiff’) filed a Response to the Motion, (Dkt. # 16), and Defendant subsequently filed a Reply (Dkt. # 19). The Court held a hearing on Defendant’s Motion to Dismiss on December 5, 2014. At the hearing, Matthew Murrell, Esq. [719] appeared on behalf of Plaintiff, and Stefani E. Shanberg, Esq. appeared on behalf of Defendant. After careful consideration of the memoranda in support of and in opposition to the Motion, and in light of the parties’ arguments at the hearing, the Court, for the reasons that follow, GRANTS Defendant’s Motion to Dismiss.

BACKGROUND

The following facts are drawn from the Complaint and taken as true for purposes of this opinion. Plaintiff is the owner of U.S. Patent No. 5,872,589 (the “'589 patent”), titled “Interactive TV System for Mass Distribution.” (Compl., Dkt. # 1 ¶¶ 13, 15.) The system allows viewers of television programs to respond to offers for products and services displayed on the television screen using a remote control. ('589 Patent, Dkt. # 1-1.) When a viewer accepts an offer, an audible signal corresponding to a unique product or service code is picked up by a microphone and transmitted, along with the remote control indication of acceptance, by a transmitter at the viewer’s location to a repeater station. (Id.) This data is then relayed to a central data collection system where the acceptance is processed. (Id.)

Defendant produces and sells a product, known as the “Square Reader,” that allows its users to conduct credit card transactions using a smartphone or tablet. (Compl., Dkt. # 1 ¶¶ 24-25.) The Square Reader inserts into the headphone jack of compatible mobile devices. (Id. ¶ 26.) When a credit card is swiped through the Square Reader, data is sent through the jack to the mobile device. (Id. ¶ 27.) Using software installed on the mobile device, the device then sends data identifying the device and the terms of the credit transaction to Defendant’s servers, which process the transaction. (Id. ¶ 30-32.)

On December 3, 2013, Plaintiff filed a Complaint in this Court alleging infringement of its '589 patent by Defendant. (Id.) Plaintiff sought a declaration that he is the sole owner of the '589 patent, and requests damages, attorney’s fees, and an injunction against further infringement. (Id. ¶¶ 54-57, DH.)

LEGAL STANDARD

Federal Rule of Civil Procedure 12(b)(6) authorizes dismissal of a complaint for “failure to state a claim upon which relief can be granted.” In analyzing a motion to dismiss for failure to state a claim, the court “accept[s] ‘all well pleaded facts as true, viewing them in the light most favorable to the plaintiff.’ ” United States ex rel. Vavra v. Kellogg Brown & Root, Inc., 727 F.3d 343, 346 (5th Cir.2013) (quoting In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir.2007)). To survive a Rule 12(b)(6) motion to dismiss, the plaintiff must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).

DISCUSSION

I. Sufficiency of the Complaint in Stating a Claim for Infringement

Direct infringement requires a single party to perform every step of a claimed method. Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318, 1329 (Fed. Cir.2008). Where the actions of multiple parties combine to perform every step of a claimed method, the claim is directly infringed only if one party exercises “control [720] or direction” over the entire process such that every step is attributable to the controlling party. Id. For direct infringement to be found when more than one party performs the steps of a method claim, an agency relationship or other contractual obligation to perform the steps must exist. Centillion Data Sys., LLC v. Qwest Commc’n Int’l, Inc., 631 F.3d 1279, 1287 (2011).

Section 271(b) provides that “[wjhoever actively induces infringement of a patent shall be liable as an infringer.” 35 U.S.C. § 271(b) (2012). Where there has been no direct infringement, there can be no inducement, of infringement under § 271(b). Limelight Networks, Inc. v. Akamai Tech., Inc., — U.S.-, 134 S.Ct. 2111, 2117, 189 L.Ed.2d 52 (2014).

Defendant argues that the process described by Claim 6 requires multiple actors, and that as a result, Defendant cannot be liable for direct infringement absent a contractual or agency relationship with a third party that performs the other steps of the process. (Mtn. to Dismiss, Dkt. # 10 at 9-10.) Because Plaintiff has not alleged any such relationship, Defendant argues, Plaintiff’s claims for direct infringement must be dismissed. (Id. at 10.) Finally, because there can be no contributory or inducement of infringement absent direct infringement, Defendant argues that Plaintiffs claims for inducement and contributory infringement must also be dismissed. (Id. at 11.)

There is no indication on the face of Claim 6 that the claimed process inherently requires the participation of more than one party. Claim 6 recites:

A method of data communication comprising the steps:
generating a unique signal by receiving an audible signal from an electronic device;
combining the received audible signal with a unique identifier of a response unit;
communicating the unique signal from the response unit to a local area repeater station;
verifying the unique signal at the local area repeater station; and communicating the generated signal from the repeater station to a data center for processing.

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Morales v. Square, Inc., 75 F. Supp. 3d 716, 2014 U.S. Dist. LEXIS 178525, 2014 WL 7396568 (W.D. Tex. 2014).

75 F. Supp. 3d 716 (Morales v. Square, Inc.) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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