Georgetown Law
Technology Review

On March 16, 2018, a federal judge granted HTC’s motion to dismiss with leave to amend in Electronic Scripting Products, Inc. v. HTC America, Inc. et al.  In this case, Electronic Scripting Products, Inc. (ESPI) sued both HTC America, Inc. (HTC), a designer and manufacturer of mobile devices, and Valve Corporation (Valve), an American video game developer and distribution company. ESPI alleged infringement of their patents, United States Patent No. 8,553,935 (“the ‘935 Patent) and No. 9,235,934 (“the ‘934 Patent”).1Electronic Scripting Products, Inc. v. HTC America Inc. et al., NO. 3:17-CV-05806, 2018 WL 1367324 at *1 (N.D. Cal. Mar. 16, 2018).

Both patents are in the same family, and they are directed to measuring a three-dimensional position as well as the orientation of objects located in real 3D environments.2James Korenchan, Virtual Reality Patents Survive Patent-Eligibility Challenge, PATENT DOCS (Mar. 28, 2018), http://www.patentdocs.org/2018/03/electronic-scripting-products-inc-v-htc-america-inc-nd-cal-2018.html. The methods and apparatuses that are claimed in the two patents have applications in both augmented reality and virtual reality.3Id. The patents both emphasize a need for improved motion tracking in 3D space. This can be achieved with a more robust determination of objects such as gaming controllers or remote controls.4Id.

HTC hoped to dismiss claims by ESPI on the grounds outlined by Alice Corp v. CLS Bank International. Alice was a 2014 Supreme Court decision that has had a massive impact on the patent sphere. In it, the Supreme Court held that claims that are drawn to an abstract idea are patent-ineligible subject matter under 35 U.S.C. §101.5Alice Corporation Pty. Ltd. v. Cls Bank International et al., 134 U.S. 2347, 2349-50 (2014) In Electronic Scripting Products Inc., U.S. District Judge Richard Seeborg found that ESPI’s patents were valid under Alice, but determined that ESPI’s allegations needed to be more detailed if the case were to move forward.6Dorothy Atkins, HTC Beats $45m Virtual Reality Patent Suit, for Now, LAW 360 (Mar. 21, 2018, 3:24 p.m.), https://www.law360.com/ip/articles/1023406/htc-beats-45m-virtual-reality-patent-suit-for-now. Judge Seeborg asserted that “ESPI makes no attempt at all to walk through the elements of the claims at issue, nor provide any information about how HTC’s product functions.”7Id.

HTC claimed that the case was similar to the Federal Circuit’s 2016 decision In re TLI Communications, LLC Patent Litigation. In In re TLI, the tangible components claimed, which consisted of r scanner and telephone units, were determined to be “merely a conduit for the abstract idea” and therefore patent ineligible.8In re TLI Communications, LLC Patent Litigation, 823 F.3d 607, 612 (Fed. Cir. 2016).. ESPI, on the other hand, relied on the decision of the Federal Circuit in Thales Visionix Inc. v. U.S. In Thales, the court determined that the claims of a patent, which disclosed a system to track the motion of an object relative to a moving reference frame, “[we]re not merely directed to the abstract idea of using mathematical equations for determining the relative position of a moving object to a moving reference frame,” but were rather “directed to systems and methods that use inertial sensors in a non-conventional manner to reduce errors in measuring the relative position and orientation of a moving object on a moving reference frame.”9Thales Visionix Inc. v. United States, 850 F.3d 1343, 1348-49 (Fed. Cir. 2017).

Though Judge Seeborg said in his ruling that it was a “close call” regarding the patent-eligibility issue, he concluded that the claims were patent-eligible due to the sensor’s unique placement, which he determined to be “integral to the improved functioning of the system.”10Atkins, supra note 6. However, Judge Seeborg determined that ESPI’s complaint failed to state a claim and dismissed the case.11Electronic Scripting Products, Inc., 2018 WL 1367324 at *10. He found that the complaint failed to distinguish between Valve and HTC, and that the complaint simply provided “conclusory statements that recite the legal definitions of direct and induced infringement” instead of detailing specific factual material, or explaining how HTC’s product used the claims in the patents-at-issue.12Id. ESPI was granted leave to amend its complaint within 20 days of the decision.13Id.This case has broader implications for the patent sphere because although HTC’s motion to dismiss was granted, Judge Seeborg nonetheless found that ESPI’s patents were valid under Alice, which departs from the current trend of shooting down software patents for being abstract ideas. This could show a pivot in the courts towards being more friendly to the patenting of software in the future.