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SP Plus Corp. v. IPT, LLC

United States District Court, E.D. Louisiana

May 19, 2017

SP PLUS CORPORATION
v.
IPT, LLC, d/b/a PAYLOCK

         SECTION "F"

          ORDER AND REASONS

          MARTIN L. C. FELDMAN, UNITED STATES DISTRICT JUDGE

         Before the Court are the plaintiff's and third-party defendant's motions for a judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c). For the reasons that follow, the motions are GRANTED.

         Background

         This declaratory judgment action arises out of the contention by defendant IPT, LLC (“Paylock”) that the use of “self-release” parking boot enforcement in the City of New Orleans (“City”) infringes upon two of Paylock's federally-registered patents.

         On May 16, 2014, the City awarded a prime contract to Professional Account Management, LLC (“PAM”), the third-party defendant in this action, to handle the city's parking ticket processing operations. Two months later, on July 17, 2014, PAM entered a subcontract with SP Plus Corporation (“SP Plus”), the plaintiff in this action. The subcontract binds SP Plus to assist PAM in overseeing “vehicle immobilization/release functions, ” including the placement of immobilizing “boots” on vehicles parked illegally or belonging to a driver with outstanding fines or violations. To remove the boot immobilizing the vehicle, the driver must pay a fee as well as any outstanding fines.

         Beginning in September 2014, SP Plus began attaching “self-release” boots[1] to infracting vehicles. By calling a telephone number left by SP Plus personnel, the driver of a booted vehicle could pay the costs over the telephone and receive a code that enabled the driver to immediately unlock and remove the boot before returning it to a designated drop-off spot. SP Plus offered this self-release option for more than 16 months.

         Paylock is the holder of U.S. Patent No. 7, 950, 570, titled “Parking Environment Management System and Method, ” and U.S. Patent No. 7, 988, 046, titled “Vehicle Violation Enforcement System and Method” (the “570” and “046” patents). Both the ‘570 and ‘046 patents describe the steps involved in and technology requisite for a particularized process of enforcing parking violation penalties through self-release booting. Relying on “commercially available” components such as a Personal Digital Assistant (PDA), an immobilizing boot, an encoded lock, and a radio frequency identification (RFID) receiver, the patents claim a method of facilitating vehicle immobilization, penalty payment, and subsequent vehicle release without compelling the vehicle owner to wait for a municipal or booting company employee to arrive on scene and release the boot.

         By following the processes outlined in the patents, an individual authorized to issue tickets and summonses can use the PDA to interact with a summons-issuing governing body database (SDB) to determine whether a vehicle is in violation[2] and subsequently attach an immobilizing boot with encoded lock and RFID receiver if appropriate. The individual responsible for the booted vehicle can then pay all outstanding fines by telephone before receiving the code -- identifiable by the centralized SDB via the boot's RFID receiver -- to unlock the immobilizing boot. According to Paylock, its patents remedied an inefficiency that had long maligned the parking violation enforcement industry. Neither patent specifies the kind of PDA, RFID receiver, or encoded lock that must be employed.

         On February 4, 2016, Paylock informed PAM in a letter that the ongoing self-release booting operations in New Orleans infringed upon at least claim 9 of the ‘570 patent and claim 1 of the ‘046 patent. The letter threatened suit unless PAM immediately ceased any and all infringing activities and confirmed to Paylock within a month that its self-release booting days were over.

         SP Plus claims to have learned about Paylock's letter on or around February 19, 2016. Out of an “abundance of caution, ” SP Plus discontinued its self-release booting operations a week later. SP Plus has since dispatched staff to manually unlock parking boots on an around-the-clock basis. On Paylock's March 4 response deadline, SP Plus identified itself as PAM's subcontractor to Paylock, and requested an additional 30 days to investigate and respond to Paylock's allegations. PAM asked for the same extension, which Paylock subsequently granted.

         Instead of responding to Paylock, SP Plus filed a declaratory judgment action with this Court on March 25, 2016. SP Plus alleges that both the ‘570 and ‘046 patents are facially invalid under the requirements for patentable subject-matter in 35 U.S.C. § 101 or, in the alternative, that its conduct infringes upon none of the patents' claims.[3]

         On August 25, 2016, Paylock filed an infringement suit against PAM -- and PAM alone -- in the United States District Court for the District of New Jersey. There, Paylock alleges that PAM, with either full awareness of or willful blindness to the existence of Paylock's patents, knowingly and intentionally infringed the ‘570 or ‘046 patents. Paylock additionally accuses PAM of inducing the City into infringement, selling and offering for sale the self-release booting operations, and “contracting with others and instructing others in connection with the infringement.” Finally, paragraph 11 of the complaint includes the allegation that PAM “has contacted multiple municipalities in the United States with the intent of engaging in booting operations, ” without specifying whether PAM offered to engage in self-release booting operations for those other municipalities.

         Because Paylock's infringement suit arose largely out the same nucleus of facts as SP Plus's first-filed declaratory action, this Court exercised its discretion to enjoin the prosecution of the New Jersey infringement action while this declaratory action proceeds. See Order and Reasons 12/12/16 (granting SP Plus's motion for preliminary injunction and denying Paylock's motion to dismiss, stay, or transfer federal patent law claims, but granting Paylock's motion to dismiss SP Plus's state law claims).[4]Thereafter, Paylock answered SP Plus's complaint and filed a third-party complaint against PAM in this Court.

         SP Plus and PAM[5] now ask this Court to enter judgment on the pleadings, pursuant to Rule of Federal Rule of Civil Procedure 12(c), and declare that the ‘570 and ‘046 patents are directed to ineligible subject matter under 35 U.S.C. § 101. SP Plus asserts that the patents merely spell out a conventional, non-inventive process for implementing the abstract idea of “self-service” in the parking enforcement industry.

         I.

         Federal Rule of Civil Procedure 12(c) permits any party to move for a judgment on the pleadings, provided the motion is made early enough to avoid delaying trial. A court may grant a Rule 12(c) motion only if the pleadings evince no disputes of genuine material fact and questions of law alone remain. Great Plains Trust Co. v. Morgan Stanley Dean Witter & Co., 313 F.3d 305, 312 (5th Cir. 2002)(citations omitted). Courts should thus adhere to the same standard in reviewing a 12(c) motion as they do in reviewing motions to dismiss under Rule 12(b)(6), accepting all well-pleaded facts as true and drawing all factual inferences in favor of the non-movant. See id. at 313 n.8; Thompson v. City of Waco, Texas, 764 F.3d 500, 502 (5th Cir. 2014) (citing Doe ex rel. Magee v. Covington Cnty. Sch. Dist. ex rel. Keys, 675 F.3d 849, 854 (5th Cir. 2012)(en banc)); Doe v. Myspace, Inc., 528 F.3d 413, 418 (5th Cir. 2008); 5C Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1368 (3d ed. 2004).

         “‘[A] complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'” Gonzalez v. Kay, 577 F.3d 600, 603 (5th Cir. 2009)(quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009))(internal quotation marks omitted). “Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact).” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)(citations and footnote omitted). “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 (“The plausibility standard is not akin to a ‘probability requirement, ' but it asks for more than a sheer possibility that a defendant has acted unlawfully.”). “Where a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief.” Id. at 679 (internal quotations omitted) (citing Twombly, 550 U.S. at 557).

         Finally, just like when it reviews a motion to dismiss under Rule 12(b)(6), when reviewing a Rule 12(c) motion, “a district court ‘must consider the [pleadings in their] entirety, as well as other sources ordinarily examined when ruling on Rule 12(b)(6) motions to dismiss, in particular, documents incorporated into the complaint by reference, and matters of which a court may take judicial notice.” Funk v. Stryker Corp., 631 F.3d 777, 783 (5th Cir. 2011)(quoting Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007)).

         Here, in addition to the pleadings, the Court may consider the language of the ‘570 and ‘046 patents in reaching its decision. See Anderson v. Kimberly-Clark Corp., 570 Fed. App'x 927, 932 (Fed. Cir. 2014)(“[A] court may rely on documents outside the pleadings if they are integral to the plaintiff's claims and their authenticity is not disputed.”). In reviewing this motion, then, the Court will accept the well-pleaded factual allegations of Paylock, the non-movant, as true, and draw all reasonable inferences from the language of the claims of the ‘570 and ‘046 patents in Paylock's favor. This deference to the non-movant, however, does not entail accepting as true “allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences.” Iqbal, 556 U.S. at 678.

         II.

         A.

         35 U.S.C. § 101 defines patentable subject matter:

Whoever invents or discovers any new and useful process, machine, manufacture or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.

35 U.S.C. § 101 (2012). This provision, the Supreme Court has held, implicitly excepts “laws of nature, physical phenomena, and abstract ideas” from these general parameters of eligibility. Ass'n for Molecular Pathology v. Myriad Genetics, Inc., 133 S.Ct. 2107, 2116 (2013)(citation omitted); Diamon ...


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