REPORT AND RECOMMENDATION

SHERRY R. FALLON, Magistrate Judge.

I. INTRODUCTION

Presently before the court in this patent infringement action is the motion for summary judgment of defendants Plusgrade S.E.C. a/k/a Plusgrade L.P. and Plusgrade U.S. LLC (together, "Plusgrade"). (D.I. 20) Plaintiffs Tenon & Groove, LLC and Optiontown (together, "Tenon & Groove") oppose Plusgrade's motion. (D.I. 24) For the following reasons, I recommend that the court grant Plusgrade's motion for summary judgment and dismiss the action.

II. BACKGROUND

Tenon & Groove initiated the present case on September 10, 2012, alleging infringement of U.S. Patent Nos. 7,418,409 ("the '409 patent") and 8,145,536 ("the '536 patent"). The '409 patent discloses methods for the concurrent optimization of value in various types of transactions between sellers and buyers, with applications in the context of the airline industry. The '409 patent contains independent claims 1, 2, and 31. Claim 2 is a process claim. Claim 1 requires a "computer-implemented system" capable of performing the process of claim 2. The parties appear to agree that, for purposes of the summary judgment, there are no material differences between claims 1 and 2. Claim 31 corresponds with the language of claim 2, but recites a particular application for seat upgrades. Claim 2 is reproduced below:

('409 patent, claim 2)

The' 536 patent is a continuation-in-part of the '409 patent, and discloses computerized applications for generating revenue based on conditional options for products, particularly in the context of the airline industry. The '536 patent contains independent claims 1 and 3. Claim 3 is a process claim. Claim 1 requires a "computer-implemented system" capable of performing the process of claim 3. The parties agree that, for purposes of summary judgment, there are no material differences between claims 1 and 3. Claim 3 is reproduced below:

('536 patent, claim 3)

Tenon & Groove accuses Plusgrade's computerized "Plusgrade Platform" and "One-Up" systems of infringing certain claims in the asserted patents by making, selling, using, or offering to sell the accused systems to airline customers that offer upgrade options to ticketed airline customers. (D.I. 1 at ¶¶ 14-24) Specifically, Tenon & Groove alleges that Plusgrade's accused systems infringe claims 1-2, 4, 6-7, 10-11, 14-16, 22, 26, and 30 of the '409 patent, and claims 1, 3, 5, 9, 12, 14, 18-19, and 21-22 of the '536 patent.

III. LEGAL STANDARD

"The court shall grant summary judgment ifthe movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter oflaw." Fed. R. Civ. P. 56(a). Material facts are those that could affect the outcome of the proceeding, and "a dispute about a material fact is `genuine' ifthe evidence is sufficient to permit a reasonable jury to return a verdict for the nonmoving party." Lamont v. New Jersey, 637 F.3d 177, 181 (3d Cir. 2011) (quoting Anderson v. Liberty Lobby Inc., 477 U.S. 242, 248 (1986)). Pursuant to Rule 56(c)(1), a party asserting that a fact is genuinely disputed must support its contention either by citing to "particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for the purposes of the motion only), admissions, interrogatory answers, or other materials," or by "showing that the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact." Fed. R. Civ. P. 56(c)(l)(A) & (B).

The moving party bears the initial burden of proving the absence of a genuinely disputed material fact. See Celotex Corp. v. Catrett, 477 U.S. 317 (1986). The burden then shifts to the non-movant to demonstrate the existence of a genuine issue for trial. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (1986); Williams v. Borough a/West Chester, Pa., 891 F.2d 458, 460-61 (3d Cir.1989). When determining whether a genuine issue of material fact exists, the court must view the evidence in the light most favorable to the nonmoving party and draw all reasonable inferences in that party's favor. See Scott v. Harris, 550 U.S. 372, 380 (2007); Wishkin v. Potter, 476 F.3d 180, 184 (3d Cir. 2007). However, the existence of some evidence in support of the nonmoving party may not be sufficient to deny a motion for summary judgment. Rather, there must be enough evidence to enable a jury reasonably to find for the nonmoving party on the issue. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). If the nonmoving party fails to make a sufficient showing on an essential element of its case on which it bears the burden of proof, the moving party is entitled to judgment as a matter of law. See Celotex Corp. v. Catrett, 477 U.S. at 322.

IV. DISCUSSION

By way of its motion for summary judgment, Plus grade alleges that the '409 patent and the '536 patent are invalid because they fail to meet the subject matter eligibility requirements of 35 U.S.C. § 101. (D.I. 21) The court analyzes § 101 issues in view of the well-established principle that all issued patent claims receive a statutory presumption of validity. See 35 U.S.C. § 282; Microsoft Corp. v. i4i Ltd P'ship, 131 S.Ct. 2238 (2011). The standard of proof to establish the invalidity of a patent is clear and convincing evidence. See WMS Gaming Inc. v. Int'l Game Tech., 184 F.3d 1339, 1355 (Fed. Cir. 1999). "Whether a claim is drawn to patent-eligible subject matter under 35 U.S.C. § 101 is a threshold inquiry to be determined as a matter of law in establishing the validity of a patent." Cloud Satchel, LLC v. Amazon. com, Inc., ___ F. Supp. 3d ___, 2014 WL 7227942, at *3 (D. Del. Dec. 18, 2014) (citing CLS Bank Int'l v. Alice Corp. Pty. Ltd, 717 F.3d 1269, 1277 (Fed. Cir. 2013), aff'd, Alice Corp. Pty. Ltd v. CLS Bank Int'l, ___ U.S. ___, 134 S.Ct. 2347, 189 L. Ed. 2d 296 (2014); In re Bilski, 545 F.3d 943, 950 (Fed. Cir. 2008)).

Section 101 provides that "[w]hoever 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 therefore, subject to the conditions and requirements of this title." 35 U.S.C. § 101. There are three judicially created exceptions to the four statutory categories of patent eligibility set forth in § 101 — "laws of nature, physical phenomena, and abstract ideas."1 Bilski v. Kappas, 561 U.S. 593, 594 (2010); see also Alice Corp. Pty. Ltd v. CLS Bank Int'l, 134 S.Ct. 2347, 2354 (2014). A claim directed to one of these exceptions is not eligible for patent protection because "they are the basic tools of scientific and technological work." Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S.Ct. 1289, 1293 (2012) (quoting Gottschalk v. Benson, 409 U.S. 63, 67 (1972)); see also Assoc. for Molecular Pathology v. Myriad Genetics, Inc., 133 S.Ct. 2107, 2116 (2013). The Supreme Court has recognized that too broad an interpretation of this exclusionary principle could eviscerate patent law because "all inventions at some level embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas." Mayo, 132 S. Ct. at 1293; see also Alice, 134 S. Ct. at 2354. For this reason, the Supreme Court recognizes that "`an application of a law of nature ... to a known structure or process may well be deserving of patent protection.'" Mayo, 132 S. Ct. at 1293-94 (emphasis in original)(quoting Diamond v. Diehr, 450 U.S. 175, 187 (1981)).

If the court determines that a patent claims an abstract idea, the court must then look to the rest of the claim to see ifthere is an `"inventive concept' — i.e., an element or combination of elements that is `sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself."' Alice, 134 S. Ct. at 2355 (quoting Mayo, 132 S. Ct. at 1298); see also Accenture Global Servs., GmbH v. Guidewire Software, Inc., 728 F.3d 1336, 1341 (Fed. Cir. 2013). "This two-stage inquiry requires examination of claim elements `both individually and as an ordered combination.'" buySAFE, Inc. v. Google, Inc., 765 F.3d 1350, 1353 (Fed. Cir. 2014) (quoting Alice, 134 S. Ct. at 2355). The Supreme Court has held that "[s]imply appending conventional steps, specified at a high level of generality, [is] not enough to supply an inventive concept." Alice, 134 S. Ct. at 2357 (holding that the abstract idea of "intermediated settlement" was a "fundamental economic process" and therefore was not patent-eligible); see also Bilski, 561 U.S. at 611 (holding that the patent-ineligible abstract idea of "hedging, or protecting against risk" was a "fundamental economic practice"). Furthermore, "the prohibition against patenting abstract ideas cannot be circumvented by attempting to limit the use of the formula to a particular technological environment or adding insignificant postsolution activity." Bilski, 561 U.S. at 610-11 (internal quotation marks omitted).

To determine whether a patent claims an abstract idea, courts frequently apply the machine-or-transformation test. See Bilski, 561 U.S. 593; Ultramercial, Inc. v. Hulu, LLC, 772 F.3d 709, 716 (Fed. Cir. Nov. 14, 2014). The Supreme Court has cautioned, however, that the machine-or-transformation test is not the sole test for patent eligibility. See id Accordingly, courts must also examine the abstract nature of the claims more generally:

Alice, 134 S. Ct. at 2354-55; see also CyberSource Corp. v. Retail Decisions, Inc., 654 F.3d 1366, 1371 (Fed. Cir. 2011). Plusgrade contends that the asserted claims are not patent-eligible because they: (1) fail the machine-or-transformation test; and (2) are more generally directed to an abstract idea. (D.I. 21 at 9-20)

A. Machine-or-Transformation2

Under the machine-or-transformation test, a process claim is patent eligible if: "(1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing." Bilski, 561 U.S. at 600 (internal citations omitted). The parties do not dispute the transformation prong; therefore, the court's analysis is limited to the machine prong of the test.

"[T]o impart patent-eligibility to an otherwise unpatentable process under the theory that the process is linked to a machine, the use of the machine must impose meaningful limits on the claim's scope." CyberSource, 654 F.3d at 1375 (internal quotation marks omitted). The Federal Circuit has stated that a machine will only impose a meaningful limit on the scope of a claim when it plays a significant part in "permitting the claimed method to be performed, rather than function[ing] solely as an obvious mechanism for permitting a solution to be achieved more quickly, i.e., through the utilization of a computer for performing calculations." SiRF Tech., Inc. v. ITC, 601 F.3d 1319, 1333 (Fed. Cir. 2010). A computer is not a significant part of the process ifthat process can be performed without a computer. See CyberSource, 654 F.3d at 1375 ("[M]erely claiming a software implementation of a purely mental process that could otherwise be performed without the use of a computer does not satisfy the machine prong of the machine-or-transformation test.").

The Federal Circuit has explained that, "[t]o salvage an otherwise patent-ineligible process, a computer must be integral to the claimed invention, facilitating the process in a way that a person making calculations or computations could not." Bancorp Servs., L.L.C. v. Sun Life Assur. Co. of Can., 687 F.3d 1266, 1278. Cf SiRF Tech., 601 F.3d at 1332 (concluding that a GPS receiver was integral to the claims at issue and the machine-or-transformation test was therefore met). Computer components employed for basic functions, such as storage, transmitting and receiving information, only allow an abstract idea to be performed more quickly and do not impose a meaningful limit on the scope of the claim. Joao Bock Transaction Sys., LLC v. Jack Henry & Assocs., Inc., C.A. No. 12-1138-SLR, 2014 WL 7149400, at *7 (D. Del. Dec. 15, 2014) (citing Bancorp, 687 F.3d at 1278); see also IPLearn, LLC v. Kl 2 Inc., C.A. No. 11-1026-RGA, ___ F. Supp. 3d ___, 2014 WL 7206380, at *7 (D. Del. Dec. 17, 2014) ("Merely because calculations are more efficient on a computer is not enough.").

The patents-in-suit do not pass the machine-or-transformation test. Tenon & Groove alleges that Plusgrade has failed to come forward with any evidence showing that a human can perform the steps in the asserted claims. (D.I. 24 at 20) However, the specifications themselves reveal that the processes may be performed mentally by a human, expressly stating that the inventions "eliminate[] manual, time-consuming processes and replace[] those with an efficient, automatic process."3 ('409 patent at col. 25:29-30; '536 patent at col. 45:61-62) The Federal Circuit has stressed that "[m]erely using a computer to perform more efficiently what could otherwise be accomplished manually does not confer patent-eligibility." See buySAFE, Inc. v. Google, Inc., 964 F.Supp.2d 331, 336 (D. Del. 2013) (citing Bancorp Servs., L.L.C. v. Sun Life Assur. Co. ofCan., 687 F.3d 1266, 1279 (Fed. Cir. 2012)), ajf'd, 765 F.3d 1350 (Fed. Cir. 2014). The specifications provide that achieving an optimal upgrade for customers and the airline, which is a primary purpose of the invention, requires the use of human judgment. (' 409 patent at col. 10:6-7; '536 patent at col. 29:63-64) The Federal Circuit has held that "the patent statute does not allow patents on particular systems that depend for their operation on human intelligence alone." In re Comiskey, 554 F.3d 967, 980 (Fed. Cir. 2009); see also IPLearn, 2014 WL 7206380, at *5 (concluding that the patent-in-suit described an unpatentable abstract idea because the Background section identified educational practices that were "decades" old and stated that "[t]he present invention relates generally to learning and more particularly to using a computer to enhance learning.").

The specifications also indicate that the collection of customer preference information may be performed over the Internet,4 but note that "other communication media may be used, as well, for all or part of the system or steps. For example, customer information may be taken over the phone or in person or via any other means. And a sale can similarly be completed by telephone or in person." ('409 patent, col. 3:47-51; '536 patent, col. 5:8-12) Data-gathering steps alone cannot bring a claim into compliance with § 101, because humans have historically gathered and stored data mentally or with pen and paper. See Jn re Grams, 888 F.2d 835, 840 (Fed. Cir. 1989); see also Accenture Global Servs., GmbH v. Guidewire Software, Inc., 800 F.Supp.2d 613, 619 (D. Del. 2011) (holding that claims which are directed to concepts for organizing data fail the machine-or-transformation test).

Nor do the patents-in-suit become patent-eligible because they recite a general purpose computer. The '409 patent recites a "data store," an "output device," an "optimizer system," and "servers," which are employed for basic computer functions such as receiving, storing, and outputting data, and performing calculations. ('409 patent, col. 37:38-38:13; 39:26-40:25) The '536 patent similarly recites a "computer system," a "data store," and "data processors" used to receive inputs, process information, provide customer options, and record data. ('536 patent, col. 226:36-227:6) These patent claims "implicate the use of a machine, but a machine does not impose any limit on the claimed methods themselves." Accenture Global Servs., GmbH v. Guidewire Software, Inc., 691 F.Supp.2d 577, 596-97 (D. Del. 2010) (concluding that terms such as data processing system, searchable claim database, and storage means "do not imply a specific computer having any particular programming — they are descriptive of a general computer system at best."); see also DealerTrack, Inc. v. Huber, 674 F.3d 1315, 1333 (Fed. Cir. 2012) (noting that patent-in-suit failed to specify how the computer hardware and database were "specifically programmed" to perform the claimed steps); Joao Bock, 2014 WL 7149400, at *7 ("The computer components are being employed for basic functions, including storage, transmitting and receiving information, and, the court concludes that such components are not `specific' or `special purpose' computers."). The concept of applying a series of conditions for purposes of optimizing a transaction is well-known, and implementing this concept with the generalized computer recited in the patents-in-suit is insufficient to establish patent eligibility. For these reasons, the '409 and '536 patents fail the machine-or-transformation test.

B. Abstract Idea

The Supreme Court has cautioned that the machine-or-transformation test is not dispositive in a § 101 inquiry. Bilski, 561 U.S. at 603. Therefore, the court proceeds to examine more generally the abstract nature of the claims. See CyberSource, 654 F.3d at 1371. To distinguish "patents that claim laws of nature, natural phenomena, and abstract ideas from those that claim patent-eligible applications of those concepts," the court must first determine whether the claims are drawn to a patent-ineligible concept. Alice, 134 S. Ct. at 2355. If so, the court must then search for an "inventive concept," taking into consideration the "elements of each claim both individually and `as an ordered combination' to determine whether the additional elements `transform the nature of the claim' into a patent-eligible application." Id (quoting Mayo, 132 S. Ct. at 1297).

Applying the framework set forth in Alice, it is apparent that the claims of the patents-in-suit are drawn to unpatentable subject matter. With respect to the first step of the analysis, the '409 and '536 patents are directed to the unpatentable fundamental concept of using a computer to facilitate negotiations between an airline and its customer that results in a contract for a product upgrade.5 The specifications state that the inventions "eliminate[] manual, timeconsuming processes and replace[] those with an efficient, automatic process." ('409 patent at col. 25:29-30; '536 patent at col. 45:61-62) However, "neither the limitation nor anything in the specification provides any detail as to how that function is performed." Loyalty Conversion Sys. Corp. v. Am. Airlines, Inc., ___ F. Supp. 2d ___, 2014 WL 4364848, at *7 (E.D. Tex. Sept. 3, 2014) (holding that two patents directed to the conversion of loyalty award points of one vendor into loyalty award points of another vendor were not patentable under section 101). Moreover, Tenon & Groove's letter submission dated July 11, 2014 states that "the Asserted Claims are directed toward improvements on computer systems and processes to optimize revenue generation based on interactions between air carriers and their customers that result in conditional agreements ..." which means implementing on a generic computer the abstract concept of optimizing transactions based on certain conditions. (D.I. 54 at 2-3)

The concept of using a computer to "optimize revenue generation based on interactions between air carriers and their customers based on their relative perception of value regarding certain product enhancement options that are based on and dictated by unknown future events," has no concrete or tangible form. (D.I. 54 at 2-3); See Ultramercial, 772 F.3d at 715 (concluding that certain additional limitations added a degree of particularity, but the concept described by the majority of the limitations described only an abstract idea of showing an advertisement before delivering free content). Although certain dependent claims restrict the field of use to the airline industry, this limitation is insufficient to establish patent eligibility under § 101. See Parker v. Flook, 437 U.S. 584, 589-90 (1978) (limiting an abstract idea to one field of use or adding token postsolution components does not make a concept patentable).

At the second step of the analysis, the court considers whether the '409 and '536 patents embody an inventive concept. An airline's capacity to track variables, including the preferences of multiple passengers, flight availability, and the perceived value for an upgrade option, is not an inventive concept. Like the risk hedging in Bilski, and the concept of intermediated settlement in Alice, the concept of using a computer to optimize negotiations between an airline and its customer, to each obtain the best economic results given certain conditions, is "a fundamental economic practice long prevalent in our system of commerce." Alice, 134 S. Ct. at 2356 (internal quotation marks omitted); see also Content Extraction & Transmission LLC v. Wells Fargo Bank, Nat'l Assoc., ___ F.3d ___, 2014 WL 7272219, at *3 (Fed. Cir. Dec. 23, 2014) (concluding that the concept of collecting data, recognizing certain data within the collected data set, and storing the recognized data in a memory was well-known); buySAFE, 765 F.3d at 1354-55 ("The claims in this case do not push or even test the boundaries of the Supreme Court precedents under section 101. The claims are squarely about creating a contractual relationship — a `transaction performance guaranty' — that is beyond question of ancient lineage.").

Moreover, the claimed concept is not directed to any specific device or system, nor is it limited to a concrete application. See buySAFE, 964 F. Supp. 2d at 337, ajj"d, 765 F.3d 1350, 1355 (Fed. Cir. 2014) ("The claims' invocation of computers adds no inventive concept. The computer functionality is generic — indeed, quite limited ... That a computer receives and sends the information over a network — with no further specification — is not even arguably inventive."). As instructed by the Federal Circuit in DDR Holdings, (1) "recitation of generic computer limitations does not make an otherwise ineligible claim patent-eligible; (2) "mathematical algorithms, including those executed on a generic computer, are abstract ideas;" (3) "some fundamental economic and conventional business practices are also abstract ideas;" and (4) general use of the Internet "to perform an abstract business practice (with insignificant added activity)" does not pass muster under § 101. DDR Holdings, 2014 WL 6845152, at **9, 12. The computers recited in the patents-in-suit do not "play a significant part in permitting the claimed method to be performed." Fort Props., Inc. v. Am. Master Lease LLC, 671F.3d1317, 1323 (Fed. Cir. 2012) (internal quotations omitted). As previously stated at § IV.A, supra, the claims recite only a general purpose computer performing "purely conventional" functions. Alice, 134 S. Ct. at 2359 (quoting Mayo, 132 S. Ct. at 1298). "Given the ubiquity of computers, wholly generic computer implementation is not generally the sort of `additional featur[e]' that provides any `practical assurance that the process is more than a drafting effort designed to monopolize the [abstract idea] itself.'" Id. at 2358 (quoting Mayo, 132 S. Ct. at 1297).

The '409 patent recites a "data store," an "output device," an "optimizer system," and "servers," which are employed for basic computer functions such as receiving, storing, and outputting data, and performing calculations. ('409 patent, col. 37:38-38:13; 39:26-40:25) The '536 patent similarly recites a "computer system," a "data store," and "data processors" used to receive inputs, process information, provide customer options, and record data. ('536 patent, col. 226:36-227:6) However, the recitation of specific hardware elements is insufficient to confer specificity. See Alice, 134 S. Ct. at 2360 (concluding that the recitation of "specific hardware" consisting of a "data processing system," a "communications controller," and a "data storage unit" were "purely functional and generic."); see also Cloud Satchel, 2014 WL 7227942, at *8; Content Extraction & Transmission, 2014 WL 7272219, at *4 (holding that the use of existing scanning and processing technology did not transform the claims into a patent-eligible application). "Nothing in the claims purports to improve the functioning of the computer itself, and the computer components of the claims add nothing that is not already present in the steps of the claimed methods, other than the speed and convenience of basic computer functions such as calculation, communication, and the display of information." Loyalty Conversion, 2014 WL 4364848, at *9 (citing Dealertrack, Inc. v. Huber, 674 F.3d 1315, 1333 (Fed. Cir. 2012)). In light of the foregoing authorities, it is not necessary for the court to give weight to the parties' submissions regarding the status of Tenon & Groove's continuation applications before the United States Patent & Trademark Office. (D.I. 58; D.I. 59) For these reasons, I recommend that the court grant Plusgrade's motion for summary judgment.

V. CONCLUSION

For the foregoing reasons, I recommend that the court grant Plusgrade's motion for summary judgment. (D.I. 20)

This Report and Recommendation is filed pursuant to 28 U.S.C. § 636(b)(l)(B), Fed. R. Civ. P. 72(b)(1), and D. Del. LR 72.1. The parties may serve and file specific written objections within fourteen (14) days after being served with a copy of this Report and Recommendation. Fed. R. Civ. P. 72(b). The failure of a party to object to legal conclusions may result in the loss of the right to de novo review in the district court. See Henderson v. Carlson, 812 F.2d 874, 878-79 (3d Cir. 1987); Sincavage v. Barnhart, 171 F. App'x 924, 925 n.1 (3d Cir. 2006). The parties are directed to the Court's Standing Order For Objections Filed Under Fed. R. Civ. P. 72, dated October 9, 2013, a copy of which is available at http://www.ded.uscourts.gov/court-info/local-rules-and-orders/general-orders.