Tli Communications LLC v. Av Automotive, L.L.C.

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