Adaptive Streaming Inc. v. Netflix, Inc.

Case: 20-1310 Document: 35 Page: 1 Filed: 12/14/2020

NOTE: This disposition is nonprecedential.

United States Court of Appeals
for the Federal Circuit
______________________

ADAPTIVE STREAMING INC., A DELAWARE
CORPORATION,
Plaintiff-Appellant

v.

NETFLIX, INC., A DELAWARE CORPORATION,
Defendant-Appellee
______________________

2020-1310
______________________

Appeal from the United States District Court for the
Central District of California in No. 8:19-cv-01450-DOC-
KES, Judge David O. Carter.
______________________

Decided: December 14, 2020
______________________

PAUL SKIERMONT, Skiermont Derby LLP, Dallas, TX,
for plaintiff-appellant. Also represented by ALEXANDER
EDWARD GASSER; MIEKE K. MALMBERG, Los Angeles, CA.

MICHAEL SOONUK KWUN, Kwun Bhansali Lazarus LLP,
San Francisco, CA, for defendant-appellee.
______________________
Case: 20-1310 Document: 35 Page: 2 Filed: 12/14/2020

2 ADAPTIVE STREAMING INC. v. NETFLIX, INC.

Before PROST, Chief Judge, CLEVENGER and TARANTO,
Circuit Judges.
TARANTO, Circuit Judge.
Adaptive Streaming, Inc., owns U.S. Patent No.
7,047,305, which claims systems that can receive a video
signal in one format and broadcast it to at least one device
calling for a different format. Adaptive sued Netflix, Inc.,
in the United States District Court for the Central District
of California, alleging that Netflix infringed the ’305 pa-
tent. The district court held that the asserted claims of the
’305 patent are invalid under 35 U.S.C. § 101. Adaptive
Streaming Inc. v. Netflix, Inc., No. SA CV 19-1450-DOC
(KESx), 2019 WL 7841923 (C.D. Cal. Nov. 19, 2019) (Merits
Opinion). We affirm.
I
A
The ’305 patent is titled “Personal Broadcasting Sys-
tem for Audio and Video Data Using a Wide Area Network”
and “relates generally to digital video processing tech-
niques.” ’305 patent, col. 1, lines 21–22. As background,
the ’305 patent states that communication devices like ra-
dio, cellphones, and televisions replaced “primitive tech-
niques” of communicating, yet communication between
devices of different types is hindered by the fact that de-
vices use different formats. Id., col. 2, lines 7–34. The ’305
patent states that it “provides a technique including a sys-
tem for capturing audio and video information from a first
source and displaying such video and audio information at
a second source, where the format of the first source and
the format of the second source are different from each
other.” Id., col. 1, lines 22–27
It is undisputed that claims 39, 40, and 42 are at least
representative of all, and may be the only, claims at issue
in the case. Limited to a video signal, they recite:
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ADAPTIVE STREAMING INC. v. NETFLIX, INC. 3

39. A system to broadcast to at least one client
device, the system comprising:
a processor; and
a broadcasting server coupled to the pro-
cessor, the broadcasting server including:
an image retrieval portion to retrieve
at least one incoming video signal having a
first format;
a data structure usable to determine
parameters for second compression formats
for the at least one incoming video signal;
and
at least one transcoding module cou-
pled to the image retrieval portion and
which has access to the data structure, the
transcoding module being capable to trans-
code the at least one incoming video signal
from the first format into multiple com-
pressed output video signals having respec-
tive second compression formats based at
least in part on the parameters;
wherein at least one of the second compres-
sion formats is more suitable for the at least
one client device than the first format; and
wherein the multiple compressed output
video signals having the at least one second
compression format more suitable for the at
least one client device can be provided by the
broadcasting server, wherein any one of the
multiple compressed output video signals can
be selected to be presented at the at least one
client device.
40. The system of claim 39 wherein the at least
one client device can select which of the compressed
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4 ADAPTIVE STREAMING INC. v. NETFLIX, INC.

output video signals to present and may access the
selected compressed video signals from multiple
devices, including access of compressed output
video signals having different second compression
formats from different devices.
42. The system of claim 39 wherein a different
compressed output video signal can be dynamically
selected to be presented at the at least one client
device, instead of a current compressed output
video signal, in response to a change in a band-
width condition.
’305 patent, col. 27, lines 8–39, 44–48.
B
In July 2019, Adaptive sued Netflix for infringement of
the ’305 patent. Netflix moved to dismiss the complaint
under Federal Rule of Civil Procedure 12(b)(6), arguing
that the ’305 patent claims subject matter not eligible for
patenting under 35 U.S.C. § 101. The district court agreed
with Netflix and dismissed Adaptive’s complaint, without
leave to amend. Merits Opinion, 2019 WL 7841923, at *6.
Adaptive timely appealed. We have jurisdiction under
28 U.S.C. § 1295(a)(1).
II
On appeal, Adaptive argues that the asserted claims of
the ’305 patent are not directed to an abstract idea and
that, in any event, they include inventive concepts making
them patent eligible. We disagree.
Following Ninth Circuit law in this case, we review the
Rule 12(b)(6) dismissal de novo. Manzarek v. St. Paul Fire
& Marine Ins. Co., 519 F.3d 1025, 1030 (9th Cir. 2008).
Like the district court, we must accept all factual allega-
tions in the complaint, understood in the light most favor-
able to the plaintiff. Id. at 1031. Subject-matter eligibility
under § 101 is a question of law based on underlying facts.
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ADAPTIVE STREAMING INC. v. NETFLIX, INC. 5

See Aatrix Software, Inc. v. Green Shades Software, Inc.,
882 F.3d 1121, 1124–25 (Fed. Cir. 2018). “Like other legal
questions based on underlying facts, this question may be,
and frequently has been, resolved on a Rule 12(b)(6) . . .
motion where the undisputed facts, considered under the
standards required by that Rule, require a holding of inel-
igibility under the substantive standards of law.” SAP
America, Inc. v. InvestPic, LLC, 898 F.3d 1161, 1166 (Fed.
Cir. 2018).
Section 101 provides that “[w]hoever invents or discov-
ers 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 condi-
tions and requirements of this title.” 35 U.S.C. § 101. But
§ 101 “contains an important implicit exception: Laws of
nature, natural phenomena, and abstract ideas are not pa-
tentable.” Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 573 U.S.
208, 216 (2014) (internal quotation marks omitted). “A
claim falls outside § 101 where (1) it is directed to a patent-
ineligible concept, i.e., a law of nature, natural phenome-
non, or abstract idea, and (2), if so, the particular elements
of the claim, considered both individually and as an or-
dered combination, do not add enough to transform the na-
ture of the claim into a patent-eligible application.” SAP,
898 F.3d at 1166–67 (internal quotation marks omitted).
A
Under the first step of the Alice framework, the district
court concluded that the claims of the ’305 patent are di-
rected to the abstract idea of “collecting information and
transcoding it into multiple formats.” Merits Opinion, 2019
WL 7841923, at *3. That conclusion assumes for purposes
of eligibility analysis that, despite the “at least one client
device” language, which might suggest coverage of a sys-
tem limited to sending to a single device, the claims re-
quire, as suggested by at least the term “broadcast,” the
ability to send to multiple devices. We agree with the
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6 ADAPTIVE STREAMING INC. v. NETFLIX, INC.

district court’s characterization of what the claims are di-
rected to.
We consider “what the patent asserts to be the ‘focus of
the claimed advance over the prior art.’” Solutran, Inc. v.
Elavon, Inc., 931 F.3d 1161, 1168 (Fed. Cir. 2019) (quoting
Affinity Labs of Texas, LLC v. DIRECTV, LLC, 838 F.3d
1253, 1257 (Fed. Cir. 2016)). In this case, the claims and
written description make clear that the focus of the claimed
advance is the abstract idea of format conversion, from an
incoming signal’s format to a variety of formats suited to
different destination devices. The focus is not any specific
advance in coding or other techniques for implementing
that idea; no such specific technique is required.
The written description, through material incorporated
by reference, itself explains the familiarity of translation of
content—from a format (including a language) of a sender
to one suited to a recipient—as a fundamental communica-
tion practice in both the electronic and pre-electronic
worlds. J.A. 337–38. We have held that the ideas of encod-
ing and decoding image data and of converting formats, in-
cluding when data is received from one medium and sent
along through another, are by themselves abstract ideas,
and accordingly concluded that claims focused on those
general ideas governing basic communication practices,
not on any more specific purported advance in implemen-
tation, were directed to abstract ideas. See Two-Way Me-
dia Ltd. v. Comcast Cable Commc’ns, LLC, 874 F.3d 1329,
1338 (Fed. Cir. 2017); RecogniCorp, LLC v. Nintendo Co.,
Ltd., 855 F.3d 1322, 1326–27 (Fed. Cir. 2017); EasyWeb In-
novations, LLC v. Twitter, Inc., 689 F. App’x 969, 970 (Fed.
Cir. 2017) (holding ineligible claims to “a message publish-
ing system that accepts messages in multiple ways, such
as by fax, telephone, or email, verifies the message was
sent by an authorized sender, and converts and publishes
the message on the Internet,” requiring format change); see
also Voit Techns., LLC v. Del-Ton, Inc., 757 F. App’x 1000,
1003–04 (Fed. Cir. 2019) (holding ineligible claims
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ADAPTIVE STREAMING INC. v. NETFLIX, INC. 7

generally invoking use of compression techniques). We
conclude that the claims here are likewise directed to an
abstract idea.
B
The claims also flunk the second step of the Alice in-
quiry: They do not incorporate anything more that would
suffice to transform their subject matter into an eligible ap-
plication of the abstract idea. Claims 39, 40, and 42 recite
only generic computer hardware, such as a “processor” and
a “broadcasting server” with an “image retrieval portion,”
“a data structure,” and a “transcoding module,” ’305 pa-
tent, col. 27, lines 10–24, as performing the claimed func-
tions, which the ’305 patent’s specification states were
conventional, id., col. 10, lines 4–22 (describing elements of
diagrams, including compression components, and stating:
“Each of these blocks carry out functionality common[ly]
known in the art as well as described above and throughout
the present specification.”). “Nothing in the claims, under-
stood in light of the specification, requires anything other
than off-the-shelf, conventional computer, network, and
display technology for gathering, sending, and presenting
the desired information.” Electric Power Group, LLC v. Al-
stom S.A., 830 F.3d 1350, 1355 (Fed. Cir. 2016). In partic-
ular, there is no identification in the claims or written
description of specific, unconventional encoding, decoding,
compression, or broadcasting techniques. 1
Adaptive suggests that the Patent and Trademark Of-
fice’s novelty and non-obviousness determinations, ren-
dered in issuing the patent, undermine our conclusion.
Adaptive’s Op. Br. 53–55. They do not. We have explained
that satisfying the requirements of novelty and non-

1 Adaptive made no separate argument in the district
court about the application of Alice’s second step to depend-
ent claims 40 and 42.
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8 ADAPTIVE STREAMING INC. v. NETFLIX, INC.

obviousness does not imply eligibility under § 101, includ-
ing under the second step of the Alice inquiry, because
what may be novel and non-obvious may still be abstract.
See Chamberlain Group, Inc. v. Techtronic Indus. Co., 935
F.3d 1341, 1348–49 (Fed. Cir. 2019).
C
In its reply brief in this court, Adaptive makes two ar-
guments that it did not raise and develop as challenges in
the argument section of its opening brief in this court,
merely mentioning each point in passing in the statement-
of-the-case portion of the opening brief. One argument is
that the district court erred by not construing certain claim
terms before deciding the § 101 issue. Adaptive’s Reply Br.
28. The other is that industry recognition and commercial
success establish that the claims are to patent-eligible sub-
ject matter. Id. at 24–25. Because neither argument was
developed in the argument section of Adaptive’s opening
brief, Adaptive has forfeited both arguments. See, e.g.,
SmithKline Beecham Corp. v. Apotex Corp., 439 F.3d 1312,
1319–20 (Fed. Cir. 2006) (argument not developed in open-
ing brief’s argument section is forfeited); Martinez-Serrano
v. I.N.S., 94 F.3d 1256, 1259 (9th Cir. 1996) (same).
III
For those reasons, we affirm the district court’s judg-
ment.
Each party shall bear its own costs.
AFFIRMED