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Gemalto S.A. v. CPI Card Group Inc.

United States District Court, D. Colorado

March 2, 2017

GEMALTO S.A., Plaintiff,



         This matter is before the Court on defendant CPI Card Group, Inc.'s (“CPI”) motion to dismiss plaintiff Gemalto S.A.'s (“Gemalto”) patent infringement suit. ECF No. 10. For the reasons described below, the Court DENIES that motion.

         I. FACTS

         A. The ‘418 Patent.

         To comprehend this case, one must understand U.S. Patent No. 6, 786, 418 (“the ‘418 patent”). See ECF No. 1-1 (patent). That patent, which plaintiff Gemalto obtained on September 7, 2004, see ECF No. 1-1 at 1; Compl., ECF No. 1 at ¶8, claims a computerized system for individually customizing microcircuit cards, also known as “smart cards, ” with customer information, applications, and other data.[1] See ECF No. 1-1 at cols. 1-6. Although Gemalto gave this system the deceptively generic title of “Smart Card Customizing System, ” the customizing system Gemalto designed through the ‘418 patent was really a purported improvement upon existing card customization systems. See Id. As the specification explains, Gemalto's Smart Card Customizing System improved prior systems by solving two problems routinely encountered with those existing systems. See, e.g., id. at col. 1:52-55, col. 2:3-4.

         First, the Smart Card Customizing System allegedly improved how “customizing stations” linked with corresponding customizing data servers during the card customization process. Id. at col. 2:3-67, col. 3:1-21; ECF No. 23 at 2-3. In prior art, the patent explained, customizing stations linked to a single customizing data server to retrieve customizing information in a predetermined fashion. See ECF No. 1-1 at col. 2:3-4; see also ECF No. 10-2 at 6 (prosecution history). This process caused backups and inefficiencies if multiple customizing stations tried to simultaneously link to the same data server to retrieve information while other available customizing data servers went unused. ECF No. 1-1 at col. 2:5-8. To fix those issues, Gemalto created a system that utilized a management interface with what it calls “bi-directional communication” between customization devices and servers. Id. at col. 5:1-15 (claim 1). In layman's terms, Gemalto designed an improved, flexible linking system with a “traffic cop” interface that could send and receive information and therefore direct customizing stations to servers that were available to service their request.[2] See id. This interface allegedly enhanced functionality by reducing “traffic jams” and therefore wait times during the customization process. See Id. at col. 2:5-12.

         The Smart Card Customizing System's second claimed advance came by separating out the transmission of customizing data from the transmission of encryption data, both of which must eventually be transmitted to smart cards. Id. at col. 1:52-67. Prior customizing systems conveyed both sets of data simultaneously via the same communication system (called “the bus, ” see ECF No. 23 at 3). ECF No. 1-1 at col. 6:30-43. This resulted in transfers of extremely large data loads that could exceed the bus' capacity and presumably stall the customization process. See id. By separating out customizing data from encryption data and transferring only the customizing data on the bus and the encryption data via other “hardwire” computer links, Gemalto designed a system that was supposed to be faster than prior systems. See id., col. 6:30- 43 (Claim 13). It could also handle greater transmission volumes and could be “scaled up” for enhanced customizing flexibility. See id. at col. 3:1-21.

         B. Procedural History.

         In this case, Gemalto has alleged that CPI infringed upon the ‘418 patent's improved customization system with its own smart card personalization system called “Card@Once®.” ECF No. 1 at ¶¶20-27. Initially, Gemalto contended that CPI's Card@Once® system infringed Claims 1 and 7 of the ‘418 patent. Id. at ¶¶14-15, 25. On May 25, 2015 CPI filed a motion to dismiss Gemalto's infringement suit. ECF No. 10. That motion, which is the subject of this Order, argues that this Court should invalidate the ‘418 patent under Section 101 of the Patent Act, 35 U.S.C. § 101. Id. at 1-2; see, e.g., Alice Corp. Pty. Ltd. v. CLS Bank Int'l, 134 S.Ct. 2347, 2354-55 (2014). Summarized briefly, CPI's argument is that the ‘418 patent should be invalidated because it is merely directed towards the “abstract idea” of communicating orders through an intermediary (i.e., a “traffic cop”), and that it does not involve any patentable inventive concept. See ECF No. 10 at 1-2.

         Roughly two months after CPI moved to dismiss Gemalto's suit, Gemalto served CPI with a Disclosure of Asserted Claims and Infringement Contentions pursuant to D.C.COLO.LPtR 4 and the Court's Scheduling Order, see ECF No. 25. Gemalto alleged additional infringements by CPI of Claims 1-2, 4, 7-13, and 15-17 of the ‘418 patent, see ECF No. 36. CPI subsequently filed a motion to supplement its motion to dismiss to include arguments related to those new claims. ECF Nos. 37, 40. The Court initially denied defendant's motion, but later granted it. ECF Nos. 39, 47. Defendant's original motion and motion to supplement have both been fully briefed.


         A. Rule 12(b)(6).

         To survive a Rule 12(b)(6) motion to dismiss, the complaint must contain “enough facts to state a claim to relief that is plausible on its face.” Ridge at Red Hawk, L.L.C. v. Schneider, 493 F.3d 1174, 1177 (10th Cir. 2007) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A plausible claim is a claim 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 (2009). While the Court must accept the well-pleaded allegations of the complaint as true and construe them in the light most favorable to the plaintiff, Robbins v. Wilkie, 300 F.3d 1208, 1210 (10th Cir. 2002), conclusory allegations are not entitled to be presumed true, Iqbal, 556 U.S. at 681. However, so long as the plaintiff offers sufficient factual allegations such that the right to relief is raised above the speculative level, he has met the threshold pleading standard. See, e.g., Twombly, 550 U.S. at 556; Bryson v. Gonzales, 534 F.3d 1282, 1286 (10th Cir. 2008).

         B. 35 U.S.C. § 101.

         Whether or not claims within a patent are directed to patent-ineligible subject matter under § 101 of the Patent Act, 35 U.S.C. § 101, is a question of law that can be decided at the motion to dismiss stage even before formal claim construction. See, e.g., Genetic Techs. Ltd. v. Merial LLC., No. 2015-1202, 2016 WL 1393573, at *3 (Fed. Cir. Apr. 8, 2016) (“We have repeatedly recognized that in many cases it is possible and proper to determine patent eligibility under 35 U.S.C. § 101 on a Rule 12(b)(6) motion.”); Concaten, Inc. v. Ameritrak Fleet Sols., LLC, 131 F.Supp.3d 1166, 1171 (D. Colo. 2015), aff'd, No. 2016-1112, 2016 WL 5899749 (Fed. Cir. Oct. 11, 2016). However, while it is proper to determine at the motion to dismiss stage this question of validity, see, e.g., OIP Technologies, Inc. v., Inc., 788 F.3d 1359 (Fed. Cir. 2015), “it is appropriate for the Court to take the proposed claim constructions in favor of the non-moving party” at this point in the litigation, see, e.g., Pragmatus Telecom, LLC v. Genesys Telecommunications Labs., Inc., 114 F.Supp.3d 192, 199 ...

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