Vindolor, LLC v. Walmart Inc.

Western District of Texas, txwd-6:2019-cv-00339

MOTION to Dismiss Under Rule 12(B)(6) by Walmart Inc.

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9 IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS WACO DIVISION VINDOLOR LLC, CASE NO. 6:19-cv-00339-ADA Plaintiff, JURY TRIAL DEMANDED v. WALMART INC., Defendant. DEFENDANT WALMART INC.'S MOTION TO DISMISS UNDER RULE 12(B)(6) 9 TABLE OF CONTENTS Page I. INTRODUCTION ............................................................................................................. 1 II. STATEMENT OF FACTS ................................................................................................ 2 III. ARGUMENT ..................................................................................................................... 5 A. Vindolor's Complaint Fails to Sufficiently Allege That Walmart Directly Infringes the Asserted Patent. ................................................................................ 7 1. The Complaint Fails to Plausibly State a Claim that Walmart "Sold" the Claimed System or "Offered" the Claimed System for Sale............................................................................................................. 7 2. Walmart Did Not "Use" the Claimed System.......................................... 11 IV. CONCLUSION ................................................................................................................ 13 i 9 TABLE OF AUTHORITIES Page CASES Ashcroft v. Iqbal, 556 U.S. 662 (2009) ...............................................................................................................6, 7 Bayer AG v. Elan Pharm. Research Corp., 212 F.3d 1241 (Fed. Cir. 2000)..................................................................................................7 Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) ...............................................................................................................6, 7 Bowlby v. City of Aberdeen, Miss., 681 F.3d 215 (5th Cir. 2012) .....................................................................................................6 Centillion Data Sys., LLC v. Qwest Communications Int'l, Inc., 631 F.3d 1279 (Fed. Cir. 2011)......................................................................................8, 11, 13 City of Clinton, Ark. v. Pilgrim's Pride Corp., 632 F.3d 148 (5th Cir. 2010) .....................................................................................................6 Cross Med. Prods., Inc. v. Medtronic Sofamor Danek Inc., 424 F.3d 1293 (Fed. Cir. 2005)......................................................................................7, 10, 11 Fujitsu Ltd. v. Netgear Inc., 620 F.3d 1321 (Fed. Cir. 2010)................................................................................................10 Global-Tech Appliances, Inc. v. SEB S.A., 563 U.S. 754 (2011) ...................................................................................................................7 Grecia v. McDonald's Corp., 724 Fed. Appx. 942 (Fed. Cir. 2018) .................................................................................11, 13 Intellectual Ventures I, LLC v. Motorola Mobility, LLC, 870 F.3d 1320 (Fed. Cir. 2017)................................................................................................11 Koninklijke Philips N.V. v. Zoll Med. Corp., 656 Fed. Appx. 504 (Fed. Cir. 2016) ...................................................................................8, 10 Med. Components, Inc. v. Osiris Med., Inc., No. 15-cv-305, 2016 WL 7638155 (W.D. Tex. July 12, 2016) .................................................7 Mikkelsen Graphic Eng'g, Inc. v. Zund Am., Inc., No. 07-C-0391, 2011 U.S. Dist. LEXIS 141548 (Dec. 8, 2011 E. D. Wisc.)..........................10 NTP, Inc. v. Research in Motion, Ltd., 418 F.3d 1282 (Fed. Cir. 2005)................................................................................................11 i 9 TABLE OF AUTHORITIES (continued) Page Ruby Sands LLC v. Am. Nat'l Bank of Tex., No. 2:15-cv-1955, 2016 WL 3542430 (E.D. Tex. June 28, 2016) ............................................7 Vindolor LLC v. Best Buy Co., Inc., Case No. 6:19-cv-158 ..............................................................................................................12 Vindolor LLC v. Euromarket Designs Inc., d/b/a Crate & Barrel, Case No. 6:18-cv-105, Dkt. 15 ............................................................................................2, 12 STATUTES 35 U.S.C. § 271(a) .......................................................................................................................3, 7 35 U.S.C. § 271(b) ...........................................................................................................................7 35 U.S.C. § 271(c) ...........................................................................................................................7 OTHER AUTHORITIES Fed. R. Civ. P. 8 ...............................................................................................................................7 Fed. R. Civ. P. 8(a)(2) ......................................................................................................................6 Fed. R. Civ. P 12(b)(6).......................................................................................................2, 5, 6, 13 Fed. R. Civ. P. 84 .............................................................................................................................7 ii 9 I. INTRODUCTION Plaintiff Vindolor, LLC's ("Vindolor") Complaint against Defendant Walmart Inc. ("Walmart") should be dismissed because it does not state a plausible claim for relief. Indeed, the Court has previously analyzed very similar allegations by Vindolor against Crate & Barrel and concluded that Crate & Barrel's motion to dismiss for failure to state a claim for direct infringement had merit. The same is true here. Specifically, the single patent at issue in this case is directed to a "portable identification system." That system requires not only a device that includes certain components, but also user data that "is derived from biometric or other distinctive characteristics of the user." Vindolor alleges that Walmart directly infringes the asserted claims by "using, offering to sell, and selling" the accused devices. But, taking Vindolor's allegations as true, the accused devices themselves are not the claimed "portable identification system" and Walmart's sale of the accused devices alone cannot constitute direct infringement. Rather, the allegedly infringing system is created by the end user/customer when he/she enrolls the device in a mobile payment system and provides the requisite biometric data. Thus, according to Vindolor's own pleading, the sale of the accused mobile devices themselves cannot directly infringe because they lack the necessary data. Nor does Vindolor state a claim that Walmart "uses" the accused devices because Walmart does not, among other things, put the accused devices into service as required by controlling Federal Circuit precedent. Vindolor's allegations demonstrate that, if anything, it is Walmart's customers who may decide to enroll the mobile device in a mobile payment system upon their own volition, provide the necessary data, and determine whether or not to make a purchase with the enrolled device. Vindolor's pleadings demonstrate it is Walmart's customers, not Walmart, that direct and control the allegedly infringing system and Vindolor's Complaint does not allege that Walmart infringes based on its own use or testing. 1 9 Because Vindolor cannot plausibly claim that Walmart infringes, the Complaint should be dismissed under Rule 12(b)(6). II. STATEMENT OF FACTS This lawsuit is one in a long line of lawsuits filed by Vindolor against retailers asserting infringement of expired U.S. Patent No. 6,213,391 ("the '391 patent"). Vindolor filed this case on May 30, 2019. Vindolor filed similar lawsuits against Macy's, Lululemon Athletica, Best Buy, and Target in the first and/or second quarters of 2019. Prior to this latest group of lawsuits, Vindolor had filed at least eleven other lawsuits alleging infringement of the '391 patent, including a case against Crate & Barrel. In that case, Crate & Barrel filed a motion to dismiss under Rule 12(b)(6) arguing that Vindolor failed to state a claim for direct infringement because the complaint relied on Crate & Barrel's customers' use of their phones. Vindolor LLC v. Euromarket Designs Inc., d/b/a Crate & Barrel, Case No. 6:18-cv-105, Dkt. 15, Defendant Euromarket Designs Inc.'s Motion to Dismiss Under Rule 12(b)(6) (June 4, 2018). On September 27, 2018, this Court issued an order stating that it "is of the opinion that [the motion to dismiss] is meritorious other than with the Plaintiff's claim of liability based on the alleged testing and use of the accused infringing devices" and ordered further discovery as to Plaintiff's allegations of testing. Id. at Dkt. 32. The parties filed a joint motion to dismiss the Crate & Barrel case soon after. The Complaint filed in this case alleges that Walmart infringes the same two claims of the '391 patent by using, offering for sale and selling the accused devices. Here, Vindolor does not allege that Walmart infringes the asserted claims through its own testing of the accused devices. The '391 patent expired on September 10, 2017. The patent is directed to a biometric identification system. More specifically, the patent contemplates "a card or other small portable 2 9 device that contains a device which positively identifies the cardholder as an authorized or unauthorized user" through "any biometric analysis system (e.g., fingerprint, DNA, palm print, retina scan, etc.)." See Dkt. 1, Ex. A at 3:47-58. The '391 patent includes two claims. Both claims require two actors. Claim 1 recites "[a] portable identification system" comprising five components: [1] a storage medium for storing electronic data; [2] one or more inputs; [3] one or more outputs; [4] a verifying means for determining user authorization or non-authorization, said verifying means receiving data from at least one of said one or more inputs, which data is derived from biometric or other distinctive characteristics of the user, said verifying means generating an identification profile for each user, wherein said identification profile is determined from said data; and [5] a code generator employing at least one code generating algorithm for generating one or more access codes based upon said identification profile wherein at least one of the said one or more access codes is an identification specific digital signature. Ex. A to Dkt. 1, at 12:24-37. The remaining dependent claim recites that the "digital signature may be encoded for secure transmission." Id. at 12:38-39. Vindolor alleges only direct infringement under 35 U.S.C. § 271(a), under the theory that Walmart directly infringes the asserted claims by "using, offering to sell, and selling" the accused devices. The Complaint identifies the "Accused Infringing Devices" as "Apple mobile devices and Samsung mobile devices (among others)" (Dkt. 1, at ¶ 42), "that implement a portable identification system" that allegedly includes the claim elements identified above. Id. at ¶¶ 42, 45. According to Vindolor's allegations, the "portable identification system" (e.g., the Apple iPhone 6 and the Apply Pay Service (id. at ¶ 47)) could not exist until: (1) a customer 3 9 obtains an Apple iPhone 6 (id. at ¶ 49); (2) the customer enables the Apple Pay Service (id. at ¶¶ 47, 49); (3) the iPhone 6 has been "configured with a customer's credit card account" (id. at ¶¶ 50, 71, 76); (4) the customer has "enrolled fingerprint data and payment information" (id. at ¶¶ 56, 68); and (5) the "owner of an iPhone 6" so enabled, "authorizes" a transaction, i.e., the user makes the decision to purchase a product using his/her iPhone. Id. at ¶ 75. Indeed, the Complaint is clear that these elements are required to sustain Vindolor's infringement allegations:  "With the iPhone 6 configured with a customer's credit card account, Defendant has initiated a credit card transaction with use of a NFC-enabled credit card payment terminal ("POS terminal") and a connection to a credit card processing server." Id. at ¶ 50 (emphasis added).  "As supported by the disclosures of Apple, the enrolled fingerprint data and Device Account Number are electronic data …." Id. at ¶ 57 (emphasis added).  "When a user makes a purchase with Apple Pay using the iPhone 6, the user can use Touch ID to authorize the purchase." Id. at ¶ 66 (emphasis added).  "In doing so, the Touch ID images the user's fingerprint." Id. at ¶ 67 (emphasis added).  "The Secure Enclave chip then uses this fingerprint data and compares it to enrolled fingerprint data to identify a match." Id. at ¶ 68 (emphasis added).  "When a user registers a credit card, the card issuer generates a Device Account Number, and sends it, along with other data, including a key used to generate dynamic security codes unique to each transaction to the iPhone registering the credit card." Id. at ¶ 71 (emphasis added).  "The Device Account Number is stored in the Secured Element and represents a distinctive characteristic of the user." Id. at ¶ 72 (emphasis added).  "The Secure Enclave and Secure element generate an identification profile for the user, which includes the Device Account Number, in order for the code generator to generate an access code." Id. at ¶ 73 (emphasis added).  "When a transaction is authorized by the owner of an iPhone 6, the Secure Enclave sends signed data about the type of authentication and details about the 4 9 type of transaction to the Secure Element, tied to an Authorization Random ("AR") value." Id. at ¶ 75 (emphasis added).  "The AR is generated in the Secure Enclave when the user first provisions a credit card and is persisted while Apply Pay is enabled." Id. at ¶ 76 (emphasis added). Thus, although the Complaint alleges that Walmart directly infringed the claims by "using, offering to sell, and selling" the Accused Devices (id. at ¶ 46), Vindolor cannot make a credible argument that Walmart's sales of, or offers to sell, mobile devices, by themselves, include the claimed system. Vindolor's allegations, in fact, demonstrate that such sales and offers are not, by themselves, sales or offers to sell, the claimed system. See id. at ¶¶ 56, 67 (The Secure Enclave and Secure Element "store enrolled fingerprint data"; Secure Enclave chip compares a user's finger print to the "enrolled fingerprint"), ¶¶ 50, 71 (referring to an iPhone 6 "configured with a customer's credit card account"; "when a user registers a credit card," the card issuer generates a Device Account Number that is stored in the Secured Element and represents a distinctive characteristic of the user). Based on Vindolor's own allegations, the mobile devices sold by Walmart do not include a "portable identification system" until the user provides the fingerprint and credit card information. See Complaint at ¶¶ 73-74 (the Secure Enclave and Secure [E]lement generate an identification profile for the user using the previously-provided data). Nor are there any factual allegations that support the allegation that Walmart "used" the claimed system in connection with a customer's purchase of a product. III. ARGUMENT Vindolor's infringement claim against Walmart should be dismissed because the Complaint "fail[s] to state a claim on which relief can be granted." Fed. R. Civ. P. 12(b)(6). Vindolor's Complaint does not, and cannot, state a claim for direct infringement against Walmart because (1) Vindolor's "sale" and "offer for sale" allegations do not plausibly establish that the 5 9 mobile devices by themselves could infringe the claims, and (2) Vindolor's "use" allegations fail to establish that Walmart put the invention into service and benefited from each and every element of the claim. To state a claim for relief pursuant to Fed. R. Civ. P. 12(b)(6), a complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). In this regard, "[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (emphasis added); Bowlby v. City of Aberdeen, Miss., 681 F.3d 215, 219 (5th Cir. 2012). If the factual allegations "do not permit the court to infer more than the mere possibility of misconduct," Aschcroft, 556 U.S. at 679, then the plaintiff has "not nudged [its] claims. . . across the line from conceivable to plausible." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (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." Iqbal, 556 U.S. at 678 (emphasis added); Bowlby, 681 F.3d at 219. Although a court must assume that the facts alleged by a plaintiff are true in determining whether a complaint has alleged sufficient facts to state a plausible claim for relief, the court should disregard "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements." Iqbal, 556 U.S. at 678; City of Clinton, Ark. v. Pilgrim's Pride Corp., 632 F.3d 148, 152-53 (5th Cir. 2010). Thus, a complaint is insufficient if it offers only "labels and conclusions," or "a formulaic recitation of the elements of a cause of action." Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 555); Bowlby, 681 F.3d at 219. Moreover, it is insufficient for a complaint to "plead[] facts that are merely consistent with a defendant's liability." Iqbal, 556 U.S. at 678 (internal quotation marks omitted). 6 9 While Form 18 of Fed. R. Civ. P. 84 previously governed pleading requirements for allegations of direct infringement in patent cases, that rule was abrogated on December 1, 2015, "in favor of the more stringent pleading requirements of Federal Rule of Civil Procedure 8." Med. Components, Inc. v. Osiris Med., Inc., No. 15-cv-305, 2016 WL 7638155, at *3 (W.D. Tex. July 12, 2016). Accordingly, Twombly and Iqbal now apply to a plaintiff's infringement claims. Ruby Sands LLC v. Am. Nat'l Bank of Tex., No. 2:15-cv-1955, 2016 WL 3542430, at *2-3 (E.D. Tex. June 28, 2016). A. Vindolor's Complaint Fails to Sufficiently Allege That Walmart Directly Infringes the Asserted Patent. Vindolor alleges only direct infringement under 35 U.S.C. § 271(a), under the theory that Walmart directly infringes the asserted claims by "using, offering to sell, and selling" the accused devices. Because the '391 patent expired before Vindolor filed this lawsuit, Vindolor does not, and cannot, allege indirect infringement under 35 U.S.C. § 271(b) or (c), which requires contemporaneous knowledge of the asserted patent. See Global-Tech Appliances, Inc. v. SEB S.A., 563 U.S. 754, 763, 766 (2011). Here, Vindolor's direct infringement allegations against Walmart must fail because the claims require a system with a device that has already been configured with a user's information—which is not included when Walmart sells the accused devices. 1. The Complaint Fails to Plausibly State a Claim that Walmart "Sold" the Claimed System or "Offered" the Claimed System for Sale. Literal infringement requires that each and every limitation of the claim appear in the accused product. Cross Med. Prods., Inc. v. Medtronic Sofamor Danek Inc., 424 F.3d 1293, 1310 (Fed. Cir. 2005). If a claim element is missing, there is no literal infringement. See, e.g., Bayer AG v. Elan Pharm. Research Corp., 212 F.3d 1241, 1247 (Fed. Cir. 2000). Here, to plausibly state a claim that Walmart sold the claimed system (or offered it for sale), the 7 9 Complaint must set forth sufficient factual matter that, if accepted as true, would indicate that the sale and/or offer for sale of the mobile devices themselves constituted a sale/offer for sale of the claimed system. See Koninklijke Philips N.V. v. Zoll Med. Corp., 656 Fed. Appx. 504, 519-520 (Fed. Cir. 2016) (refusing to find sale of device that, when sold, did not provide first and second electrodes in electrical communication with the exterior of the patient as required by the claims); Centillion Data Sys., LLC v. Qwest Communications Int'l, Inc., 631 F.3d 1279, 1288 (Fed. Cir. 2011) (finding Qwest did not "make" the claimed system because Qwest manufactured only part of the system, the customer completed the system by providing the required "personal computer data processing means" and installing the Qwest software). Similar to Centillion, and based on Vindolor's allegations, the mobile device itself does not and cannot infringe. Claim 1 recites "[a] portable identification system" comprising, among other things, "a verifying means for determining user authorization or non-authorization." Complaint, at ¶ 45; Ex. A, at 12:24-33. The "verifying means" must: (i) receive data from at least one or more inputs, (ii) the data must be derived from biometric or other distinctive characteristics of the user, and (iii) the verifying means generates an identification profile for each user that is determined from the user's data of part (ii). Ex. A, at 12:-24-33. Claim 1 further recites "a code generator employing at least one code generating algorithm for generating one or more access codes based upon said identification profile" wherein at least one or more of the access codes is an "identification specific digital signature." Id. at 12:33-37. Here, Vindolor's allegations—and common sense—demonstrate the "verifying means" and "code generator" elements do not exist until a user (i) activates the mobile device, (ii) implements a mobile payment system, such as Apple Pay, and (iii) provides the requisite 8 9 information (i.e., the user's credit card number and identification information (e.g., fingerprint data)) without which the "portable identification system" does not exist. First, it is the customer, not Walmart, that activates the device and enables the payment system service, such as the Apple Pay service. See, e.g., Complaint, at ¶¶ 47-82, 85-97 (exemplary infringement allegations for an Apple iPhone 6 with Apple Pay service). Vindolor's allegations, particularly regarding the "verifying means" and "code generator," clearly require that the customer has enabled a mobile payment system such as Apple Pay for there to be any direct infringement. See, e.g., Complaint, at ¶¶ 47-51, 53, 56-57, 59-62, 65-82. Second, according to Vindolor's allegations, it is the customer, not Walmart, who provides the information necessary to create the alleged "portable identification system"—i.e., the customer's credit card and fingerprint information. When the accused products are sold by Walmart, they include no information that identifies a user. Just as a card that contains no information about a person is not an identification card, a system that has no information about a person is not an identification system. In order to show that the iPhone 6 is a "portable identification system," Vindolor does not rely merely on the devices as sold, but instead alleges that the iPhone 6 is "configured with a customer's credit card account." Complaint, at ¶ 50. Moreover, Vindolor's allegations are clear—that a necessary element of the alleged "verifying means" is the user's "enrolled" finger print data and "registered" credit card. See, e.g., id., at ¶¶ 56, 68-70 ("enrolled finger print data"); ¶¶ 50, 71 ("When a user registers a credit card, the card issue generates a Device Account Number, and sends it, along with other data, ...to the iPhone registering the credit card"). Similarly, according to Vindolor's pleadings, the "code generator" element requires the user to provision a credit card (id., at ¶ 76) and also requires that "verifying means" provide the user's identification profile. See id. at ¶¶ 76-82 ("Secure Element is a code 9 9 generator that employs a code generating algorithm for generating an access code based upon the user's identification profile, which includes the provision key." (¶ 82)). Walmart does not provision the mobile devices it sells with the purchaser's/customer's credit card numbers at the time of sale or thereafter. Nor does Walmart provide its purchaser's/customer's finger print information to enable Apple Pay or any other payment. Without this information, the claimed "portable identification system," as alleged by Vindolor, does not exist, and therefore, as a matter of law Walmart cannot directly infringe by its sale of the device. Simply selling a device that is capable of being made into an allegedly infringing device by the customer is not sufficient for direct infringement. See Fujitsu Ltd. v. Netgear Inc., 620 F.3d 1321, 1329 (Fed. Cir. 2010) ("Unless the claim language only requires the capacity to perform a particular claim element, we have held that it is not enough to simply show that a product is capable of infringement."); Cross Med., 424 F.2d at 1310 (reversing finding of infringement where Medtronic's medical device, although capable of being made into an infringing device by the surgeon-user, did not itself contain a claim limitation at the time it was sold); Philips, 656 Fed. Appx. at 520-21 (Fed. Cir. 2016) (finding evidence insufficient to support the jury's infringement verdict because Zoll's defibrillator device, although capable of being in electrical communication with the patient, were not in such communication when sold by Zoll); Mikkelsen Graphic Eng'g, Inc. v. Zund Am., Inc., No. 07-C-0391, 2011 U.S. Dist. LEXIS 141548, at 14-16 (Dec. 8, 2011 E. D. Wisc.) (sales of device capable of being modified to operate in an infringing manner does not, by itself, support a finding of infringement). The Federal Circuit's decision in Cross Medical is instructive here. Cross Medical Products involved orthopedic surgical implants that were used to stabilize and align the bones of a patient's spine. 424 F.3d at 1297. The claim at issue included a limitation requiring the 10 9 "anchor seat" portion of the claimed apparatus to be "operatively joined" to a bone segment. Id. at 1310-11. The Federal Circuit found that, as a matter of law, making a device that could be placed in contact with bone did not constitute direct infringement; instead, direct infringement required an apparatus where the anchor seat actually contacted the bone. Id. at 1311-12. And because the defendant did not make or sell such an apparatus, it was not a direct infringer. Id. Here, just as the system claimed in Cross Medical, the allegedly infringing system identified in Vindolor's Complaint does not exist without a third party taking an action to create the claimed system. Vindolor's Complaint thus fails to allege a plausible claim against Walmart. 2. Walmart Did Not "Use" the Claimed System. To "use" a system for the purposes of infringement, a party must "put the invention into service." Centillion, 631 F.3d at 1284. To "put the invention into service," an actor must "control the system and obtain benefit from it." Id., at 1286 (citing NTP, Inc. v. Research in Motion, Ltd., 418 F.3d 1282, 1317 (Fed. Cir. 2005)). The "control" contemplated is the "ability to place the system as a whole into service," meaning "using all portions of the claimed invention." Id. at 1284. To "obtain benefit from a system," the alleged infringer "must 'benefit from each claimed component' i.e., from 'each and every element of the claimed system.'" Grecia v. McDonald's Corp., 724 Fed. Appx. 942, 946-47 (Fed. Cir. 2018) (quoting Intellectual Ventures I, LLC v. Motorola Mobility, LLC, 870 F.3d 1320, 1329 (Fed. Cir. 2017)). The alleged benefits "should be tangible, not speculative, and tethered to the claims." Grecia, 724 Fed. Appx. at 947. Here, the pleadings demonstrate that, as a matter of law, Walmart did not "use" the claimed system. As an initial matter, Vindolor's allegations regarding Walmart's alleged "use" of the claimed system are sparse. Aside from boilerplate language that Walmart has infringed "by using, offering to sell and selling without authority," the Complaint contains no factual 11 9 allegations that Walmart itself used or tested the allegedly infringing system.1 Complaint, at ¶¶ 46, 48-50. For that reason alone, the Complaint should be dismissed. Indeed, in the prior Crate & Barrel case, this Court found that Crate & Barrel's motion to dismiss based on no direct infringement "is meritorious other than with the Plaintiff's claim of liability based on the alleged testing and use of the accused infringing devices." Vindolor LLC v. Euromarket Designs Inc., d/b/a Crate & Barrel, Case No. 6:18-cv-105, Dkt. 32. Because Vindolor's Complaint contains no factual allegations that Walmart itself used or tested the infringing systems, it should be dismissed. To the extent Vindolor's Complaint alleges that use of a mobile payment system by Walmart's customers is what infringes, that allegation also fails. Walmart did not "put the invention into service" because Walmart does not control the claimed system as a matter of law. The relevant legal inquiry is what entity put the invention into service. The Complaint ignores the undisputable fact, that it is the customer, not Walmart, who puts the alleged invention into service by deciding whether to (1) make a purchase at Walmart, and (2) utilize an Apple iPhone with Apple Pay (or another mobile device equipped with that device maker's payment system) to make the payment. Walmart does not control the actions of its customers. Rather, it is the customers that decide what form of payment method to use, whether to provision their mobile device with Apple Pay, or another payment system, whether to place their mobile device near a point-of-sale terminal to initiate payment authorization, and whether to authenticate their 1 It is unclear whether Vindolor alleges that Walmart allegedly infringes based on use, because it included this same boilerplate language in its Amended Complaint against Best Buy (see Vindolor LLC v. Best Buy Co., Inc., Case No. 6:19-cv-158, Amended Complaint, Dkt 12 (May 30, 2019) at ¶ 46) but in its response to Best Buy's Motion to Dismiss, Vindolor states that it does "not allege the Defendant puts the Accused Infringing Devices into use at the point of sale." Vindolor LLC v. Best Buy Co., Inc., Case No. 6:19-cv-158, Vindolor's Response to Motion to Dismiss, Dkt. 29 (Aug. 14, 2019) at 19. 12 9 payment with the phone's fingerprint scanner. It is the customer, therefore, not Walmart, who "uses" the allegedly infringing system because the customer controls whether the allegedly infringing system is put into service. See Centillion, 631 F.3d at 1286 (Qwest did not "use" the claimed system because Qwest's customers, not Qwest, controlled the customers' respective personal computers upon which the front end of the allegedly infringing system was located). Without the customer choosing to use a mobile device equipped with a mobile payment system, such as Apple Pay, to make a purchase, the allegedly infringing system is not utilized. Id. Put simply, "[s]upplying the software for the customer to use [which Walmart also does not do] is not the same thing as using the system." Id. Walmart also does not put the claimed system into service because it does not "use each and every element of the claimed system." Id. The claims require five elements: [1] a storage medium, [2] one or more inputs, [3] one or more outputs, [4] verifying means ... and, [5] a code generator. Ex. A, at 12:24-37. The Complaint does not allege that any Walmart hardware or software constitute any of those five elements. Rather, the Complaint recites general benefits of the claimed system as a whole (e.g., "Defendant benefited and profited from the sales transactions with its customers: (Complaint, at ¶¶ 87, 93)). Such recitation falls far short of the recitation of "tangible" benefits "tethered to the claims" that is required. See Grecia, 724 Fed. Appx. at 947. IV. CONCLUSION The Complaint fails to make allegations sufficient to support Vindolor's direct infringement claim. Walmart, therefore, respectfully requests the Court grant this motion to dismiss under Fed. R. Civ. P. 12(b)(6) for failure to state a claim upon which relief can be granted. 13 9 Dated: September 25, 2019 Respectfully submitted, /s/ John M. Guaragna John M. Guaragna Texas Bar No. 24043308 john.guaragna@dlapiper.com DLA PIPER LLP (US) 401 Congress Avenue, Suite 2500 Austin, TX 78701-3799 Telephone: (512) 457-7000 Facsimile: (512) 457-7001 Sharon A. Israel Texas Bar No. 00789394 sisrael@shb.com SHOOK, HARDY & BACON LLP 600 Travis St., Suite 3400 Houston, TX 77002 Tel: (713) 546-5689 Fax: (713) 227-9508 Counsel for Defendant Walmart Inc. 14 9 CERTIFICATE OF SERVICE I certify that the foregoing document was filed electronically on September 25, 2019, pursuant to Local Rule CV-5(a) and has been served on all counsel whom have consented to electronic service. Any other counsel of record will be served by first class U.S. mail on this same date. /s/ John M. Guaragna John M. Guaragna 15