Cooperative Entertainment, Inc. v. Kollective Technology, Inc.

United States Court of Appeals
for the Federal Circuit
______________________
COOPERATIVE ENTERTAINMENT, INC.,
Plaintiff-Appellant
v.
KOLLECTIVE TECHNOLOGY, INC.,
Defendant-Appellee
______________________
2021-2167
______________________
Appeal from the United States District Court for the
Northern District of California in No. 5:20-cv-07273-EJD,
Judge Edward J. Davila.
______________________
Decided: September 28, 2022
______________________
MEREDITH MARTIN A DDY , AddyHart P.C., Atlanta, GA,
argued for plaintiff-appellant. Also represented by
BENJAMIN CAPPEL , Chicago, IL; MATTHEW MICHAEL
WAWRZYN, Wawrzyn LLC, Chicago, IL.
MICHAEL S. D OWLER, Park, Vaughan, Fleming & Dow-
ler LLP, Houston, TX, argued for defendant-appellee.
______________________
Before M OORE, Chief Judge, L OURIE and STARK, Circuit
Judges.
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MOORE, Chief Judge.
Cooperative Entertainment, Inc. (Cooperative) appeals
the United States District Court for the Northern District
of California’s dismissal of its amended complaint under
Rule 12(b)(6), which held all claims of U.S. Patent
No. 9,432,452 ineligible under 35 U.S.C. § 101. We reverse
the district court’s dismissal and remand for further pro-
ceedings.
BACKGROUND
The ’452 patent relates to systems and methods of
structuring a peer-to-peer (P2P) dynamic network for dis-
tributing large files, namely videos and video games. ’452
patent at 4:28–40. In prior art systems, video streaming
was controlled by content distribution networks (CDNs),
where content was “distributed directly from the CDN
server originating the content.” Id. at 3:35–36, 9:50–52.
The ’452 patent, in contrast, claims methods and systems
for a network in which content distribution occurs “outside
controlled networks and/or [CDNs],” i.e., outside a “static
network of controlled systems.” Id. at 3:40–43 (emphasis
added), 3:57–58, 5:38–42. It does this with dynamic P2P
networks comprising “peer nodes,” i.e., nodes consuming
the same content contemporaneously, that transmit con-
tent directly to each other instead of receiving content from
the CDN. Id. at 3:55–64, 4:52–60, 5:4–10, 6:40–43, 7:43–
46.
To facilitate content distribution, the claimed P2P net-
works use “content segmentation” in which a video file, for
example, is segmented into smaller clips and distributed
piecemeal. As a result, viewers can obtain individual seg-
ments as needed, preferably from other viewers. Id. at
8:10–12, Figs. 2–9. Content is segmented using several
techniques, including “CDN address resolution, trace route
to CDN and the P2P server manager, dynamic feedback
from peers reporting traffic rates between individual peer
and its neighbors, round-robin, other server side
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scheduling/resource allocation techniques, and combina-
tions thereof.” Id. at 5:51–56 (emphasis added).
Claim 1 recites:
1. A system for virtualized computing peer-
based content sharing comprising:
at least one content delivery server computer
constructed and configured for electrical connec-
tion and communication via at least one communi-
cations network; and
at least one peer-to-peer (P2P) dynamic net-
work including a multiplicity of peer nodes,
wherein the multiplicity of peer nodes consume the
same content within a predetermined time,
wherein the multiplicity of peer nodes are con-
structed and configured for electronic communica-
tion over the at least one P2P dynamic network,
wherein the at least one P2P dynamic network is
based on at least one trace route; wherein the mul-
tiplicity of peer nodes is distributed outside con-
trolled networks and/or content distribution
networks (CDNs) that are included within the at
least one communications network;
wherein the at least one content delivery server
computer is operable to store viewer information,
check content request, use the trace route to seg-
ment requested content, find peers, and return cli-
ent-block pairs;
wherein distribution of P2P content delivery
over the at least one P2P dynamic network is based
on content segmentation;
wherein content segmentation is based on CDN
address resolution, trace route to CDN and P2P
server manager, dynamic feedback from peers re-
porting traffic rates between individual peer and
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its neighbors, round-robin and other server side
scheduling/resource allocation techniques.
’452 patent at claim 1.
Cooperative sued Kollective Technology, Inc. (Kollec-
tive) for infringement of at least claims 1–3 and 5 of the
’452 patent.1 In response to Kollective’s first motion to dis-
miss under Rule 12(b)(6) arguing all claims are ineligible
under 35 U.S.C. § 101, Cooperative filed an amended com-
plaint. Kollective refiled its motion to dismiss. The district
court granted the motion. Coop. Ent., Inc. v. Kollective
Tech., Inc., 544 F. Supp. 3d 890, 902 (N.D. Cal. 2021). Co-
operative appeals. We have jurisdiction under 28 U.S.C.
§ 1295(a)(1).
D ISCUSSION
I
We review the district court’s dismissal under regional
circuit law, here the Ninth Circuit. In re TLI Commc’ns
LLC Pat. Litig., 823 F.3d 607, 610 (Fed. Cir. 2016). The
Ninth Circuit reviews de novo whether a complaint con-
tains “well-pleaded facts . . . that plausibly give rise to an
entitlement to relief.” Whitaker v. Tesla Motors, Inc., 985
F.3d 1173, 1176 (9th Cir. 2021) (internal citations and quo-
tation marks omitted).
Patent eligibility is ultimately a question of law we re-
view de novo. Eligibility, however, may depend on under-
lying issues of fact. See Berkheimer v. HP, Inc., 881 F.3d
1 The parties dispute what claims were at issue be-
low and whether the district court had jurisdiction to hold
ineligible all claims of the ’452 patent. Appellant’s Br. 48–
49; Appellee’s Br. 52–57. Because the alleged inventive
concepts are present in all claims, we need not address the
parties’ dispute over what claims were at issue before the
district court.
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1360, 1365 (Fed. Cir. 2018). To determine patent eligibil-
ity, we apply the Supreme Court’s two-step Alice frame-
work. See Alice Corp. v. CLS Bank Int’l, 573 U.S. 208, 217
(2014). At step one, we determine whether the claim is “di-
rected to” a “patent-ineligible concept,” such as an abstract
idea. Id. If it is, at step two we examine “the elements of
the claim to determine whether it contains an ‘inventive
concept’ sufficient to ‘transform’ the claimed abstract idea
into a patent-eligible application.” Id. at 221 (quot-
ing Mayo Collaborative Servs. v. Prometheus Labs., Inc.,
566 U.S. 66, 72, 79–80 (2012)). Specifically, we determine
whether the claim elements, individually and as an or-
dered combination, contain an inventive concept, which is
more than merely implementing an abstract idea using
“well-understood, routine, [and] conventional activities
previously known to the industry.” Content Extraction &
Transmission LLC v. Wells Fargo Bank, Nat’l Ass’n, 776
F.3d 1343, 1347–48 (Fed. Cir. 2014) (quoting Alice, 573
U.S. at 225) (alteration in original). Thus, patent eligibility
may be resolved at the Rule 12 stage only if there are no
plausible factual disputes after drawing all reasonable in-
ferences from the intrinsic and Rule 12 record in favor of
the non-movant. Visual Memory LLC v. NVIDIA Corp.,
867 F.3d 1253, 1261–62 (Fed. Cir. 2017); CardioNet, LLC
v. InfoBionic, Inc., 955 F.3d 1358, 1369 (Fed. Cir. 2020);
Nat. Alternatives Int’l, Inc. v. Creative Compounds, LLC,
918 F.3d 1338, 1349 (Fed. Cir. 2019); Data Engine Techs.
LLC v. Google LLC, 906 F.3d 999, 1008 & n.2 (Fed. Cir.
2018); Aatrix Software, Inc. v. Green Shades Software, Inc.,
882 F.3d 1121, 1125–27 (Fed. Cir. 2018); Cellspin Soft, Inc.
v. Fitbit, Inc., 927 F.3d 1306, 1316–18 (Fed. Cir. 2019);
Berkheimer, 881 F.3d at 1368–70.
II
The district court held at Alice step one the “focus of
the ’452 patent” is the abstract idea of “the preparation and
transmission of content to peers through a computer net-
work.” Kollective, 544 F. Supp. 3d at 896. We need not
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address the parties’ dispute regarding the application of Al-
ice step one because, as explained below, the claims contain
alleged inventive concepts not limited to the abstract idea,
which defeat Kollective’s Rule 12 motion. See Aatrix, 882
F.3d at 1129 (addressing only Alice step two). At Alice step
two, the district court characterized the ’452 patent as
“merely implement[ing] the abstract idea of preparing and
transmitting data over a computer network with generic
computer components using conventional technology.”
Kollective, 544 F. Supp. 3d at 900. Cooperative argues the
district court erred because, inter alia, its amended com-
plaint plausibly alleges that the ’452 patent claims recite
inventive concepts at Alice step two, precluding dismissal.
See Appellant’s Br. 3–17, 38–46. We agree. Claim 1 con-
tains several alleged inventive concepts which the specifi-
cation touts as specific improvements in the distribution of
data compared to the prior art. The amended complaint
plausibly alleges these inventive concepts, and this should
have defeated Kollective’s Rule 12(b)(6) motion in this case.
There are at least two alleged inventive concepts in
claim 1 which should have precluded the district court’s
holding on ineligibility. The first is the required dynamic
P2P network wherein multiple peer nodes consume the
same content and are configured to communicate outside
the CDNs. ’452 patent at claim 1 (“at least one peer-to-peer
(P2P) dynamic network including a multiplicity of peer
nodes, wherein the multiplicity of peer nodes consume the
same content within a predetermined time, . . . wherein the
multiplicity of peer nodes is distributed outside controlled
networks and/or content distribution networks (CDNs)”).
The second requires trace routes be used in content seg-
mentation. Id. at claim 1 (“wherein content segmentation
is based on CDN address resolution, trace route to CDN
and P2P server manager, dynamic feedback from peers re-
porting traffic rates between individual peer and its neigh-
bors, round-robin and other server side
scheduling/resource allocation techniques”). Because
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Cooperative plausibly alleged that both of these concepts
were inventive, we reverse the district court’s dismissal.
A
Claim 1 recites the allegedly inventive concept of a par-
ticular network structure for sharing content through a dy-
namic P2P network. ’452 patent at claim 1. The written
description and Cooperative’s amended complaint plausi-
bly tout this as an improvement to content distribution sys-
tems. Accordingly, we hold the district court erred in
dismissing Cooperative’s complaint.
Claim 1 recites a specific type of content-sharing net-
work and delineates both the network’s structure and func-
tion. The claimed system must contain at least one P2P
dynamic network and one content delivery server. Id. The
dynamic P2P network must include at least one trace route
and a multiplicity of peer nodes, which the claim defines as
nodes “consum[ing] the same content within a predeter-
mined time” and configured to communicate within the dy-
namic P2P network. Id. Claim 1 further limits the
structural and functional relationship between the P2P
network and the content delivery server: the “multiplicity
of peer nodes is distributed outside controlled networks
and/or” CDNs. Id. And, as discussed further below, it de-
scribes how content is distributed within the P2P network
using content segmentation based on trace routes. Id. It
is this specific network structure required by claim 1 that
Cooperative alleges to be inventive.
The specification explains how claim 1’s dynamic P2P
network structure is different from and improves upon the
prior art, especially the structural limitation that the peer
nodes consuming the same content be distributed outside a
controlled network or a CDN: “The prior art fails to provide
video streaming over P2P networks outside the structure
and control of CDNs.” Id. at claim 1, 3:35–36. It describes
that, in “contrast to the prior art,” grouping peer nodes
based on their simultaneous consumption of common
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content, such as a video or a video game, allows the “groups
of peer nodes forming the dynamic P2P networks of the pre-
sent invention [to] provide for smooth playback and avoids
stuttering problems or delays or buffering problems.” Id.
at 7:29–38. The “need for peer nodes to share in real-time
or near-real-time all while the users are viewing the video
content via the remote, distributed peer nodes provides a
session constraint that does not exist with prior art gaming
or prior art audio sharing.” Id. at 7:46–50 (emphasis
added). As a result, claim 1 “by-pass[es] any established or
static content delivery network (CDN); advantageously,
this saves time, improves redundancy, and also reduces or
eliminates costs for content delivery over the CDN for the
peer nodes.” Id. at 5:41–44. This allegedly new claimed
P2P network “provide[s] more efficient and reduced cost of
delivery for the content,” id. at 4:49–50, and enables new
content-delivery system functionality by “providing live
streaming for video and/or audio content as well as data,
files, analytics, and combinations thereof,” id. at 4:50–52.
The amended complaint reiterates the benefits of claim
1’s “novel technique” of a dynamic P2P network for distrib-
uting content outside the control of a CDN. J.A. 46 ¶ 13
(quoting ’452 patent at 5:38–48). For example, it alleges
the prior art “failed to disclose . . . the multiplicity of peer
nodes of the dynamic peer-to-peer network consum[ing] the
same content within a predetermined time.” J.A. 46 ¶ 12
(quoting J.A. 245 (examiner’s statement of reason of allow-
ance)). It also alleges claim 1’s structure of sharing “com-
mon video content iteratively [] in segments throughout the
P2P network” is inventive because it “reversed the flow of
distributed digital content” compared to the prior art and
solved capacity problems related to content sharing. J.A.
47 ¶ 14 (quoting ’452 patent at 4:52–60). As a result, the
“problem that the ’452 patent addresses is capacity,” and
“[t]he patent claims are addressed to the solution—sharing
video content through a dynamic network . . . defined by
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the peer nodes consuming the same content.” J.A. 49 ¶ 24.
Specifically,
[t]he benefit of this “bottom up” approach is mani-
fold and generally directed to addressing the capac-
ity problem. If control is passed to the P2P
dynamic network, then capacity may be substan-
tially addressed—and in some cases exclusively ad-
dressed—by the P2P dynamic network. In other
words, the computing capacity of the client devices
consuming the video content is leveraged and used
to the maximum extent.
J.A. 49 ¶ 25. Contrary to the district court’s conclusion,
Kollective, 544 F. Supp. 3d at 897, Cooperative’s allegations
related to system capacity are plausibly tethered to claim
1’s distribution of content within its P2P network outside
the control of a CDN. ’452 patent at 9:54–60 (“The systems
and methods of the present invention provide for harness-
ing the content recipient devices to aggregate or assemble
intelligent functionality of the devices unassociated with
the content receipt, including but not limited to computa-
tional storage and processing capacity of the content recip-
ient devices in the P2P dynamic network . . . .” (emphasis
added)); see also J.A. 48 ¶ 19 (“Claim 1, like all the claims,
covers the virtual layer outside the control of the prior art
distribution scheme pushed from the CDN.”).
Drawing all inferences in favor of Cooperative, as we
must on a motion to dismiss, we conclude that claim 1 re-
cites a specific technical solution that is an inventive con-
cept: it recites a particular arrangement of peer nodes for
distributing content “outside controlled networks and/or
[CDNs],” ’452 patent at claim 1, which did not exist in the
prior art, ’452 patent at 3:35–36. This is not an “abstract
idea implemented on a generic computer,” and it is alleged
to improve the performance of the content delivery network
with reductions in costs and improvements in several as-
pects of system performance. See BASCOM Glob. Internet
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Servs., Inc. v. AT&T Mobility LLC, 827 F.3d 1341, 1352
(Fed. Cir. 2016); Amdocs (Israel) Ltd. v. Openet Telecom,
Inc., 841 F.3d 1288, 1299 (Fed. Cir. 2016) (citing BASCOM,
827 F.3d at 1351).
At a minimum, the district court should have denied
the motion to dismiss because Cooperative’s allegations in
the complaint regarding the claims and the ’452 patent’s
written description create a plausible factual issue regard-
ing the inventiveness of the dynamic P2P configuration of
claim 1. See Berkheimer, 881 F.3d at 1370 (holding mate-
rial dispute of fact regarding inventiveness created by im-
proved redundancy, efficiency, computer functionality, and
costs of operating a network or computer systems network
costs that are captured by claim elements precludes sum-
mary judgment). Claim 1 recites a specific network struc-
ture, the patent’s written description explains how it is
arranged, and the written description and amended com-
plaint explain the alleged benefits of sharing content using
a P2P network outside the control of a CDN using peer
nodes. Determining whether the claimed network is well-
understood, routine, or conventional is a question of fact
that cannot be resolved at the Rule 12(b)(6) stage, and the
district court erred in resolving this factual issue against
Cooperative. See Aatrix, 882 F.3d at 1128.
B
The district court held that Cooperative did not plausi-
bly allege that the second alleged inventive concept, seg-
menting content using trace routes, is inventive.
Kollective, 544 F. Supp. 3d at 899–900. We do not agree.
As an initial matter, the parties dispute whether claim
1 requires or merely permits the use of trace routes to seg-
ment content. See Appellant’s Br. 10–14, 21–23, 41–43;
Appellee’s Br. 16, 20–21, 34–35, 46–47, 50. Kollective does
not dispute on appeal that segmenting content based on
trace routes is inventive; rather, it contends only that the
use of trace routes is not required and thus irrelevant to
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eligibility. Appellee’s Br. 16, 20–21, 34–35, 46–47, 50. As
Kollective acknowledges, Cooperative asserted below and
on appeal that “[t]he ’452 patent claims all require seg-
menting the digital content according to the trace routes.”
Appellee’s Br. 17–20 (quoting J.A. 47 ¶ 18 (Cooperative’s
amended complaint)). The district court did not conduct
claim construction, J.A. 38–42 (docket sheet), or otherwise
resolve whether claim 1 requires segmenting content based
on a trace route. See Kollective, 544 F. Supp. 3d at 901
(noting only that claim 1 does not “rely solely on trace
routes” in segmenting content without resolving whether it
is required (emphasis in original)). Under these circum-
stances, we “proceed by adopting the non-moving party’s
construction[]” that claim 1 requires segmenting content
based on trace routes. See Aatrix, 882 F.3d at 1125 (inter-
nal citations omitted).2
In addition to claim 1’s structural limitations, claim 1
recites functional requirements of its claimed P2P dynamic
network. For example, distribution of the content in the
system must occur through content segmentation. ’452 pa-
tent at claim 1. Claim 1 requires the content segmentation
to be “based on . . . trace route to CDN and P2P server man-
ager” among other segmentation techniques. Id.; see id. at
3:50–54, 4:65–5:1 (“[E]mbodiments of the present inven-
tion include dynamic networks base[d] upon at least one
trace route, e.g., CDN internet protocol (IP) addresses.”),
5:49–56.
The specification explains segmenting using trace
routes is one “[f]actor[] for balancing or managing distribu-
tion of the P2P content delivery.” Id. at 5:49–53. Figures
2–9 demonstrate content segmentation outside the CDN
using trace routes according to claim 1. Id. at 8:6–32; see
J.A. 47 ¶ 18. For example, viewer b in Figure 4 receives a
2 We leave it to the district court to conduct the claim
construction analysis in the first instance.
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content segment from the CDN and distributes that seg-
ment to other viewers viewing the same content. ’452 pa-
tent at 8:18–25, Figs. 4–6.
Viewer b also receives different segments of the same con-
tent from other viewers who have received the different
segments from the CDN, e.g., viewers c and d. Id. at 8:18–
25, Figs. 5–6.
The specification further explains that segmenting content
using trace routes has benefits over the prior art: “the pre-
sent invention systems and methods provide increased re-
liability, more redundancy, and more efficient delivery
than those of the prior art.” Id. at 5:28–30.
Similar to the P2P network structure discussed above,
Cooperative’s amended complaint alleges using trace
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routes to segment content in claim 1’s dynamic P2P net-
work was not well-understood, routine, or conventional. It
explains that the “prior art featured segmentation at a
macro level . . . to test pathways between and among the
various computing devices that comprise a given network’s
architecture.” J.A. 46 ¶ 11. And it alleges the specific ad-
vance over the prior art associated with the claimed use of
trace routes “was that the claims use these means of test-
ing to further segment the actual content being delivered.”
J.A. 46 ¶ 11. The prior art’s use of a trace route “as a type
of network traffic test . . . does not suggest or indicate using
[a] trace route to segment requested content.”3 J.A. 46 ¶
11. Indeed, the prior art allegedly did not deliver P2P con-
tent using content segmentation where “the content seg-
mentation is based on . . . trace route to CDN and P2P
server manager.” J.A. 46 ¶ 12 (quoting J.A. 245 (examiner’s
statement of reason of allowance)). These allegations mir-
ror the applicant’s statements in the prosecution history
and the patent’s specification that using trace routes in
segmenting content was inventive and improves efficiency,
redundancy, and reliability of content delivery computer
network systems. J.A. 262 (distinguishing prior art using
trace routes for “network traffic test” from “segmenting re-
quested content” using trace routes in claim 1); see ’452 pa-
tent at 5:28–30.
Cooperative’s allegations that claim 1’s use of trace
route segmentation is an inventive concept are sufficient to
preclude dismissal at the Rule 12 stage. Kollective argues
3 The district court faulted Cooperative for not
providing “any supporting evidence” with its allegations.
Kollective, 544 F. Supp. 3d at 897. While supporting evi-
dence, such as an expert declaration or research articles,
would further support the existence of an inventive con-
cept, such evidence is not always necessary to defeat a Rule
12 motion. See Nat. Alternatives, 918 F.3d at 1349.
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only that the ’452 patent does not claim anything inventive
because P2P networks and CDNs are conventional. Appel-
lee’s Br. 51–52. This argument misses the point—useful
improvements to computer networks are patentable re-
gardless of whether the network is comprised of standard
computing equipment. See Thales Visionix Inc. v. United
States, 850 F.3d 1343, 1349 (Fed. Cir. 2017) (citing Enfish,
LLC v. Microsoft Corp., 822 F.3d 1327, 1337–38 (Fed. Cir.
2016)). And, notably, Kollective does not argue that the
use of trace routes to segment content in claim 1’s dynamic
P2P network structure is not inventive. See Appellee’s Br.
45–52. The record here contains concrete allegations in the
complaint and the specification that the segmentation lim-
itation was not well-understood, routine, or conventional
and “recit[es] a specific technique for improving computer
network” functioning. SRI Int’l, Inc. v. Cisco Sys., Inc., 930
F.3d 1295, 1304 (Fed. Cir. 2019); see Aatrix, 882 F.3d at
1128. It follows the district court erred in discounting Co-
operative’s plausible allegations consistent with the ’452
patent’s specification and dismissing its amended com-
plaint.
C
In sum, the district court erred in dismissing the com-
plaint. The claim language, the written description, and
the amended complaint “describe[] how [the ’452 patent’s]
particular arrangements of elements is a technical im-
provement over prior art ways of” arranging networks for
distributing video content. BASCOM, 827 F.3d at 1350; see
Cellspin, 927 F.3d at 1316 (reversing district court for fail-
ing to weigh allegations in complaint and statements in pa-
tent specification in favor of patentee at Rule 12 stage). We
do not decide today that the claims are patent eligible un-
der § 101. We hold only that there are plausible factual
allegations that the claims include inventive concepts, and
that is enough to preclude dismissal.
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CONCLUSION
The district court erred in granting Kollective’s motion
to dismiss. We therefore reverse and remand for further
proceedings.
REVERSED AND REMANDED
COSTS
Kollective shall bear costs.
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