Court Opinion

ID: 9954965
Source: CourtListenerOpinion
Date Created: 2024-03-27 15:01:17.941121+00
Date Added: 2024-06-11T08:15:07.868889
License: Public Domain

Case: 22-2218    Document: 43     Page: 1   Filed: 03/27/2024

        NOTE: This disposition is nonprecedential.

   United States Court of Appeals
       for the Federal Circuit
                  ______________________

                     MAX A. RADY,
                    Plaintiff-Appellant

                             v.

   THE BOSTON CONSULTING GROUP, INC., DE
              BEERS UK LTD.,
             Defendants-Appellees
            ______________________

                        2022-2218
                  ______________________

    Appeal from the United States District Court for the
 Southern District of New York in No. 1:20-cv-02285-ALC-
 BCM, Judge Andrew L. Carter.
                  ______________________

                 Decided: March 27, 2024
                 ______________________

     STEVEN EDWARD TILLER, Whiteford, Taylor & Preston,
 LLP, Baltimore, MD, argued for plaintiff-appellant. Also
 represented by PETER JAMES DAVIS; KEVIN HROBLAK, Ice
 Miller LLP, Baltimore, MD.

     BRIAN ROBERT MATSUI, Morrison & Foerster LLP,
 Washington, DC, argued for all defendants-appellees. De-
 fendant-appellee Boston Consulting Group, Inc. also repre-
 sented by SHAUN PATRICK DELACY, KYLE W.K. MOONEY,
Case: 22-2218     Document: 43     Page: 2    Filed: 03/27/2024

 2                    RADY v. BOSTON CONSULTING GROUP, INC.

 New York, NY.

    CHRISTOPHER P. BORELLO, Venable LLP, New York,
 NY, for defendant-appellee De Beers UK Ltd. Also repre-
 sented by JOSHUA DANIEL CALABRO.
                 ______________________

  Before REYNA, MAYER, and CUNNINGHAM, Circuit Judges.
 PER CURIAM.
      Max A. Rady appeals an order of the United States Dis-
 trict Court for the Southern District of New York dismiss-
 ing his patent infringement claim after concluding that his
 asserted patent claimed ineligible subject matter under 35
 U.S.C. § 101. For the reasons discussed below, we affirm.
                       I. BACKGROUND
      Rady owns U.S. Patent No. 10,469,250 (the “’250 pa-
 tent”), which is directed to “a framework [for] record[ing] to
 a blockchain” the “unique identification[s] (signatures) of
 physical items which have unique, random properties.”
 ’250 patent, Abstract. The claimed invention involves
 scanning a physical item, such as a gemstone, determining
 its unique pattern of imperfections, i.e., the item’s “signa-
 ture,” and then recording that signature to a blockchain if
 the physical object has not previously been registered. Id.
 col. 1 ll. 22–53. The patent purports to solve problems re-
 lated to asset provenance and asset and supply chain man-
 agement. Id. col. 3 l. 33–col. 5 l. 43. Claim 1 of the ’250
 patent recites:
     1. A network node comprising:
     one or more processing devices;
     a storage device, coupled to the one or more pro-
     cessing devices and storing instructions for execu-
     tion by at least some of the one or more processing
     devices;
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 RADY v. BOSTON CONSULTING GROUP, INC.                      3

    a communications subsystem, coupled to the one or
    more processing devices, to communicate with at
    least one or more other nodes of a peer-to-peer net-
    work; and
    item analysis components coupled to the one or
    more processing devices, the item analysis compo-
    nents comprising at least one imaging device con-
    figured to determine spectral analysis data and 3D
    scan data from measurements generated by the
    item analysis components;
    wherein the one or more processing devices operate
    to configure the network node to:
    analyze an instance of a physical item using the
    item analysis components to determine a unique
    signature for the instance, the unique signature de-
    termined using 3D spatial mapping to define the
    unique signature from the spectral analysis data
    and 3D scan data generated by the item analysis
    components for the physical item;
    determine, using the unique signature, whether
    the instance of the physical item is previously rec-
    orded to a blockchain maintained by the peer-to-
    peer network to provide item tracking and authen-
    tication services, comparing the unique signature
    generated by the network node to previously rec-
    orded unique signatures using 3D spatial analysis
    techniques, rotating in virtual space features of the
    physical item defined in the unique signature to de-
    termine a match with features defined in the pre-
    viously recorded unique signatures; and
    record the instance of the physical item to the
    blockchain in response to the determining whether
    the instance is previously recorded.
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 4                          RADY v. BOSTON CONSULTING GROUP, INC.

 Id. col. 19 ll. 15–51. *
     In March 2020, Rady filed suit against The Boston Con-
 sulting Group, Inc. and De Beers UK Ltd. (collectively,
 “BCG”), alleging infringement of the ’250 patent. BCG
 thereafter filed a motion to dismiss Rady’s infringement
 claim pursuant to Federal Rule of Civil Procedure 12(b)(6).
 In its motion to dismiss, BCG asserted that “the claims of
 the ’250 patent are directed to the patent-ineligible ab-
 stract idea of collecting, processing, and storing data to
 track physical items” and they “do not improve anything
 about computer technology itself.” J.A. 196.
     In granting BCG’s motion, the district court stated that
 while Rady’s claimed system “record[s] a fingerprint for a
 gemstone” to a blockchain, the patent does “not improv[e]
 the functionality of storing and processing data on a block-
 chain.” J.A. 5. The court noted, moreover, that “a block-
 chain is merely a ledger maintained and verified through a
 peer-to-peer network, and [Rady] d[id] not describe how the
 patent improves blockchains.” J.A. 5–6. Furthermore, ac-
 cording to the court, “tracking physical objects do[es] not
 make [the] claims any less abstract.” J.A. 5. **
    Rady then filed a timely appeal with this court. We
 have jurisdiction under 28 U.S.C. § 1295(a)(1).

     *    Because Rady has not adequately developed any el-
 igibility arguments about claims of the ’250 patent other
 than claim 1, we treat claim 1 as representative.

     **  In addition to patent infringement claims, Rady’s
 Second Amended Complaint contained breach of contract
 and trade secret misappropriation claims. See J.A. 183–86.
 After the district court entered its order dismissing his in-
 fringement claims, Rady agreed to dismiss, with prejudice,
 his breach of contract and trade secret misappropriation
 claims. See J.A. 728–29.
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 RADY v. BOSTON CONSULTING GROUP, INC.                        5

                        II. DISCUSSION
                    A. Standard of Review
      We apply regional circuit law when reviewing motions
 to dismiss for failure to state a claim un-
 der Rule 12(b)(6). Content Extraction & Transmission
 LLC v. Wells Fargo Bank, Nat’l Ass’n, 776 F.3d 1343, 1346
 (Fed. Cir. 2014). “In the Second Circuit, grant of a motion
 to dismiss is reviewed de novo to determine whether the
 claim is plausible on its face, accepting the material factual
 allegations in the complaint and drawing all reasonable in-
 ferences in favor of the plaintiff.” Ottah v. Fiat Chrysler,
 884 F.3d 1135, 1141 (Fed. Cir. 2018) (first citing Ashcroft
 v. Iqbal, 556 U.S. 662, 678 (2009); and then citing Johnson
 v. Priceline.com, Inc., 711 F.3d 271, 275 (2d Cir. 2013)).
                     B. Patent Eligibility
     Section 101 defines patent-eligible subject matter as
 “any new and useful process, machine, manufacture, or
 composition of matter, or any new and useful improvement
 thereof.” 35 U.S.C. § 101. It has been long recognized that
 this language excludes “[l]aws of nature, natural phenom-
 ena, and abstract ideas.” Ass’n for Molecular Pathology v.
 Myriad Genetics, Inc., 569 U.S. 576, 589 (2013) (“Myriad”)
 (quoting Mayo Collaborative Servs. v. Prometheus Lab’ys,
 Inc., 566 U.S. 66, 70 (2012)); see also Alice Corp. v. CLS
 Bank Int’l, 573 U.S. 208, 216 (2014).
     The Supreme Court has articulated a two-stage frame-
 work to determine whether a claim falls outside the scope
 of section 101. See Alice, 573 U.S. at 217–18. In the first
 stage, a court must determine whether the claim at issue
 is directed to a patent-ineligible concept, such as an ab-
 stract idea. Id. at 217. If so, the court, in the second stage,
 must assess whether the elements of the claim, considered
 both individually and as an ordered combination, are suffi-
 cient to “‘transform the nature of the claim’ into a patent-
 eligible application” of the concept. Id. (quoting Mayo, 566
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 6                    RADY v. BOSTON CONSULTING GROUP, INC.

 U.S. at 78). This second stage of the eligibility analysis is
 often referred to as the “search for an ‘inventive concept’—
 i.e., an element or combination of elements that is ‘suffi-
 cient to ensure that the patent in practice amounts to sig-
 nificantly more than a patent upon the [ineligible concept]
 itself.’” Id. at 217–18 (alteration in original) (quoting
 Mayo, 566 U.S. at 72–73).
                      C. Alice Step One
     The Alice step-one analysis requires us to consider the
 claims “in their entirety to ascertain whether their charac-
 ter as a whole is directed to excluded subject matter.” In-
 ternet Pats. Corp. v. Active Network, Inc., 790 F.3d 1343,
 1346 (Fed. Cir. 2015). “[W]hile the specification may help
 illuminate the true focus of a claim, when analyzing patent
 eligibility, reliance on the specification must always yield
 to the claim language in identifying that focus.” Charge-
 Point, Inc. v. SemaConnect, Inc., 920 F.3d 759, 766 (Fed.
 Cir. 2019).
      We agree with the district court that, at step one, the
 claims of the ’250 patent are directed to an abstract idea.
 See J.A. 5. Claim 1 requires identifying a physical item’s
 unique pattern of physical imperfections, or “signature,”
 and then recording that information to a blockchain if the
 object has not been previously registered. ’250 patent
 col. 19 ll. 15–51. As we have often emphasized, however,
 claims directed to gathering and storing data, without
 more, are impermissibly abstract. See, e.g., Int’l Bus.
 Machs. Corp. v. Zillow Grp., Inc., 50 F.4th 1371, 1378 (Fed.
 Cir. 2022) (explaining that this court has “repeatedly held
 claims directed to collection of information, comprehending
 the meaning of that collected information, and indication
 of the results, all on a generic computer network operating
 in its normal, expected manner to be abstract” (citation and
 internal quotation marks omitted)); In re Killian, 45 F.4th
 1373, 1382 (Fed. Cir. 2022) (explaining that because
 “[i]nformation as such is an intangible,” claims directed to
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 RADY v. BOSTON CONSULTING GROUP, INC.                       7

 “gathering and analyzing information of a specified con-
 tent, then displaying the results without any particular as-
 sertedly inventive technology for performing those
 functions is an abstract idea” (alteration in original) (cita-
 tion and internal quotation marks omitted)).
      We note, moreover, that identifying items by their
 unique physical features is a long-standing and well-estab-
 lished practice. See, e.g., Bilski v. Kappos, 561 U.S. 593,
 611 (2010) (concluding that claims covering “the basic con-
 cept of hedging, or protecting against risk” described “a
 fundamental economic practice long prevalent in our sys-
 tem of commerce and taught in any introductory finance
 class” and were therefore directed to “an unpatentable ab-
 stract idea” (citation and internal quotation marks omit-
 ted)); Solutran, Inc. v. Elavon, Inc., 931 F.3d 1161, 1167
 (Fed. Cir. 2019) (concluding that claims reciting a method
 for electronically processing checks were patent ineligible
 and explaining that “[t]he desire to credit a merchant’s ac-
 count as soon as possible” was a “long-standing commercial
 practice”). As the specification of the ’250 patent acknowl-
 edges, it has been long understood that many physical ob-
 jects have unique “small-scale imperfections.” ’250 patent
 col. 5 l. 19. Diamonds, for example, have “carbon imperfec-
 tions/carbon flaws” that “are unique in 3D space in the di-
 amond’s shape and type.” Id. col. 3 ll. 55–56. Indeed,
 Rady’s specification incorporates by reference a jewelry
 website that explains that diamonds can be identified by
 their unique imperfections. Id. col. 3 ll. 56–59 (incorporat-
 ing by reference J.A. 268–70).
     The fact that Rady’s patent describes the use of special-
 ized hardware does not, standing alone, mean that his
 claims are not directed to an abstract idea. As we have
 previously recognized, “claims are not saved from abstrac-
 tion merely because they recite components more specific
 than a generic computer.” BSG Tech LLC v. BuySeasons,
 Inc., 899 F.3d 1281, 1286 (Fed. Cir. 2018); see also Univer-
 sal Secure Registry LLC v. Apple Inc., 10 F.4th 1342, 1352
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 8                     RADY v. BOSTON CONSULTING GROUP, INC.

 (Fed. Cir. 2021) (concluding that claims were directed to an
 abstract idea notwithstanding the fact that they recited the
 use of a “biometric sensor”); In re TLI Commc’ns LLC Pat.
 Litig., 823 F.3d 607, 611 (Fed. Cir. 2016) (concluding that
 a claim was directed to an abstract idea notwithstanding
 the fact that it “require[d] concrete, tangible components
 such as a telephone unit and a server” because “the speci-
 fication ma[de] clear that the recited physical components
 merely provide[d] a generic environment in which to carry
 out the abstract idea of classifying and storing digital im-
 ages in an organized manner” (internal quotation marks
 omitted)); Content Extraction, 776 F.3d at 1347 (concluding
 that claims were directed to an abstract idea notwithstand-
 ing the fact that they required the use of a scanner).
      From an eligibility perspective, the principal shortcom-
 ing in Rady’s claims is that they “recite generic steps and
 results—as opposed to a specific solution to a technological
 problem,” Universal Secure Registry, 10 F.4th at 1355.
 Claim 1 of the ’250 patent recites, in broad terms, the use
 of “item analysis components” to gather “spectral analysis
 data and 3D scan data” about the unique imperfections
 present in physical objects. ’250 patent col. 19 ll. 23–28.
 Rady’s patent, however, does not purport to have invented
 any new measurement techniques or measurement devices
 to identify such imperfections. Instead, it relies upon ex-
 isting devices, such as a “[s]pectral imager,” “[l]aser projec-
 tor,” “laser receiver,” and “[x]enon light source,” to analyze
 these imperfections. Id. col. 8 ll. 32–47.
     Rather than providing any significant details regard-
 ing how these various item analysis components function
 to determine an object’s “unique signature,” id. col. 1 ll. 47–
 48, the specification simply incorporates by reference a
 prior publication which discloses “an end-to-end measure-
 ment system for capturing spectral data on 3D objects,”
 J.A. 220, and which explains how components such as spec-
 tral imagers, J.A. 221–23, laser scanning systems, J.A.
 225–26, and a xenon light source, J.A. 225–26, can be used
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 RADY v. BOSTON CONSULTING GROUP, INC.                         9

 to analyze and identify various physical objects, including
 “minerals,” J.A. 226. See ’250 patent col. 8 ll. 32–47. Rady’s
 specification then goes on to explain that, in the claimed
 invention, spectral imagers, laser scanning systems, and
 light sources are used as “described in” this prior publica-
 tion. Id.; see also id. col. 4 ll. 38–50 (explaining that a dia-
 mond can be reoriented in virtual space using techniques
 similar to those described in a previously published arti-
 cle). In essence, Rady’s specification “underscores the . . .
 abstract nature of the idea embodied in [his] claims,” Affin-
 ity Labs of Tex., LLC v. DIRECTV, LLC, 838 F.3d 1253,
 1259 (Fed. Cir. 2016), because rather than purporting to
 disclose any technological improvement to the item analy-
 sis components, it confirms that such devices are used in
 the same manner as they have been used in the past.
      The specification makes clear, moreover, that the
 claimed invention relies on the conventional use of existing
 blockchain technology. It explains that existing “[b]lock-
 chain technologies implement distributed ledgers on peer-
 to-peer networks,” ’250 patent col. 1 ll. 6–7, and notes that
 “[b]lockchains provide a way to trace unique digital items
 without reliance on a third party,” id. col. 1 ll. 11–12. It
 further describes widely-used standard protocols for con-
 structing and operating blockchains. Id. col. 7 ll. 46–57 (de-
 scribing the existing “Blockchain Authentication and Trust
 Module (BATM) framework”). Rather than purporting to
 disclose any new type of blockchain or any improvement in
 blockchain functionality, the specification incorporates by
 reference papers describing conventional blockchain con-
 struction and performance. Id. col. 7 ll. 20–25, 46–57 (in-
 corporating by reference J.A. 272–82 and J.A. 386–91).
 The specification recognizes, moreover, that blockchain
 technology has previously been used in connection with the
 management of “physical assets.” Id. col. 3 ll. 36–37.
     On appeal, Rady asserts that “counterfeiting is a wide-
 spread economic problem that results in billions of dollars
 in lost revenue each year, exposing individuals and
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 10                   RADY v. BOSTON CONSULTING GROUP, INC.

 corporations to heightened health, safety, and cybersecu-
 rity risks from fraudulent materials and defective parts.”
 Appellant’s Br. 10. He further states that “[a]n application
 to confirm the provenance of gemstones . . . allow[s] stones
 to be traced by their unique characteristics, allowing banks
 and lenders to identify any ‘double spending’ of stones.” Id.
 at 11. In his view, his “claimed invention is the first use
 case that pairs the use of a non-invasive, unique, non-re-
 producible identifier for the unique identification, authen-
 tication [and] self-provenance of individual physical items,
 with blockchain technology, thus enabling the supply chain
 management to reap the full benefits of blockchain technol-
 ogy and succeed in combating counterfeiting.” Id. at 35.
     Rady’s claimed system may be useful in preventing the
 counterfeiting of gemstones, but utility is not the measure
 of patent eligibility. See Myriad, 569 U.S. at 591 (explain-
 ing that “[g]roundbreaking, innovative, or even brilliant
 discovery does not by itself satisfy the § 101 inquiry”).
 Rady’s claims are directed to an abstract idea because they
 do not purport to solve any technological problem, but in-
 stead use existing imaging and blockchain technology in
 predictable ways to address the economic problem of coun-
 terfeit goods. In effect, Rady’s claims rely on existing tech-
 nological tools to gather and record data but disclose no
 purported improvement in the tools themselves. See Elec.
 Power Grp., LLC v. Alstom S.A., 830 F.3d 1350, 1354 (Fed.
 Cir. 2016) (concluding that claims were directed to an ab-
 stract idea where their “focus” was not on “an improvement
 in computers as tools, but on certain independently ab-
 stract ideas that use computers as tools”); see also Trading
 Techs. Int’l, Inc. v. IBG LLC, 921 F.3d 1084, 1093 (Fed. Cir.
 2019) (concluding that claims were directed to an abstract
 idea because they did “not improve the functioning of the
 computer, make it operate more efficiently, or solve any
 technological problem”).
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 RADY v. BOSTON CONSULTING GROUP, INC.                     11

                      D. Alice Step Two
     Turning next to Alice step two, we conclude that Rady’s
 claims fail to recite any elements that, either individually
 or as an ordered combination, transform the abstract idea
 of gathering and storing data about the unique imperfec-
 tions of a physical object into a patent-eligible application
 of that idea. See Alice, 573 U.S. at 217. Rady argues that
 his “claims are directed to the inventive combination of
 multiple item analyses components to capture” the unique
 imperfections in physical objects. Appellant’s Br. 39. We
 do not find this argument persuasive. Rady’s patent does
 not meaningfully explain how the various “item analysis
 components,” ’250 patent col. 19 l. 23, are configured and
 combined, much less purport to combine those components
 in an inventive way. See TLI Commc’ns, 823 F.3d at 615
 (emphasizing that “vague, functional descriptions of . . .
 components are insufficient to transform [an] abstract idea
 into a patent-eligible invention”).
     Nor does Rady plausibly allege that recording infor-
 mation about the unique imperfections of a physical object
 on a blockchain, rather than another type of ledger, sup-
 plies an inventive concept. As discussed previously, Rady’s
 patent does not purport to disclose any novel type of block-
 chain or other decentralized network. It does not, moreo-
 ver, disclose any improved or otherwise unconventional
 technique for storing data on a blockchain. In this regard,
 the fact that the patent describes recording a particular
 type of information—data about the unique pattern of im-
 perfections in a physical object—to a blockchain does not
 mean that it improves the underlying blockchain technol-
 ogy. See BSG Tech, 899 F.3d at 1288 (explaining that “an
 improvement to the information stored by a database is not
 equivalent to an improvement in the database’s function-
 ality”). Thus, because the claims of the ’250 patent use con-
 ventional item analysis components and existing
 blockchain technology to implement the abstract idea of
 gathering and storing information about physical objects,
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 12                   RADY v. BOSTON CONSULTING GROUP, INC.

 they fail to supply the inventive concept required at Alice
 step two. See Trinity Info Media, LLC v. Covalent, Inc., 72
 F.4th 1355, 1367 (Fed. Cir. 2023) (explaining that this
 court has “found no inventive concept where claims merely
 recited ‘generic features’ or ‘routine functions’ to imple-
 ment the underlying abstract idea” (citations omitted)).
                    E. Motion to Dismiss
      We reject, moreover, Rady’s contention that the district
 court prematurely resolved the eligibility question. “Like
 other legal questions based on underlying facts, [the eligi-
 bility] question may be, and frequently has been, resolved
 on a Rule 12(b)(6) or (c) motion where the undisputed facts,
 considered under the standards required by that Rule, re-
 quire a holding of ineligibility under the substantive stand-
 ards of law.” SAP Am., Inc. v. InvestPic, LLC, 898 F.3d
 1161, 1166 (Fed. Cir. 2018). In response to BCG’s Rule
 12(b)(6) motion, Rady asserted that his claimed invention
 passed muster under section 101 because it relied upon
 specialized sensors, J.A. 327–28, and “solv[ed] a compli-
 cated and long[-]standing problem plaguing many indus-
 tries,” J.A. 335. Because Rady failed to present non-
 conclusory allegations that his patent disclosed any specific
 technical improvements to computers, measurement de-
 vices, blockchains, or any other technology, however, the
 district court properly resolved the eligibility question at
 the pleadings stage. See, e.g., Simio, LLC v. FlexSim Soft-
 ware Prods., Inc., 983 F.3d 1353, 1365 (Fed Cir. 2020) (“We
 disregard conclusory statements when evaluating a com-
 plaint under Rule 12(b)(6).”). We have considered Rady’s
 remaining arguments but do not find them persuasive.
                      III. CONCLUSION
    Accordingly, the order of the United States District
 Court for the Southern District of New York is affirmed.
                        AFFIRMED