Gratuity sued Toast in 2022, asserting infringement of U.S. Patent Nos. 9,741,050 and 10,726,436 and breach of non-disclosure agreements. The patents cover gratuity distribution and management software. Toast moved to dismiss, asserting that the patents claim ineligible subject matter.
Judge Saris initially determined that an expert declaration submitted by Gratuity in response to the motion to dismiss should be stricken. The report argued that the claimed technology constituted an improvement to computer systems, which would thus render the claims eligible under the Supreme Court’s Alice decision. Judge Saris noted that, at the motion to dismiss stage, the only things to be considered are the complaint and any attachments thereto as well as material of which a court could take judicial notice, such as the file histories of the patents. She further noted that patent eligibility is a matter of law, which does not require reference to factual matters found in the declaration.
Judge Saris, applying the two-step Alice test, found that the claims of both patents were directed to abstract ideas – the extracting, receiving and storing of transaction and employee information followed by the execution of gratuity distribution rules and returning of gratuity allocations to client business systems, which she analogized to the “collection, analysis, and display of available information in a particular field” that the Federal Circuit had deemed abstract in prior cases.
Looking to step 2 of the Alice test, Judge Saris determined that the claims of the ‘050 patent included an inventive concept that rendered them eligible. Claim 1 of the ‘050 patent recited a “cloud computing [gratuity management] system remote from” the generic computer components recited in the claim. The patent stated that this allowed establishments to execute the distribution calculations without the need for additional on-site hardware. Taking these factual allegations as true, which is the standard for analyzing a motion to dismiss, Judge Saris found that the claims of this patent survived the Alice challenge. I would note that, while storing and manipulating information on the cloud now seems rather mundane, the subject patents claim priority to a 2012 provisional application. At that time, cloud computing was much less wide-spread.
Judge Saris took a different view with respect to the ‘436 patent, finding it to be “toast.” The claims of the ‘436 patent did not recite the remote, cloud-based system, and instead recited only conventional computer equipment. The rest of the claims recite only functional steps of receiving information, calculating gratuity allocations based on that information, and reporting and distributing the results to payroll systems, which are not “inventive” steps.
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