Rady v. Boston Consulting Group, LLC

Background

Max A. Rady sued Boston Consulting Group, LLC (BCG), and De Beers UK Limited for patent infringement and misappropriation of trade secrets. He also asserted a breach-of-contract claim against BCG. Rady alleged that he developed a method for identifying physical items with unique random properties by using three-dimensional spatial mapping and spectral analysis, recording the resulting identification signatures in a blockchain, and tracking an item’s authenticity and provenance through a supply chain.

Rady alleged that BCG contacted him after working with De Beers on a method for identifying and insuring gemstone provenance. He claimed that he disclosed technology and trade secrets from an unpublished patent application to BCG after BCG agreed to keep the information confidential and not use it without his consent. Rady further alleged that BCG later publicized TRACR, a gemstone-provenance and authentication method developed for De Beers, and that the method was substantially similar to his disclosed technology. He also alleged that BCG did not compensate him and terminated his employment.

The motions addressed only Count I, Rady’s patent-infringement claim. The opinion states that Rady sought damages and injunctive relief on four counts, but it does not decide the other counts.

Motion and legal standard

The defendants moved under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not state a legally sufficient claim for relief. The court generally had to accept the complaint’s factual allegations as true and draw reasonable inferences for Rady, but it did not have to accept conclusory statements unsupported by facts.

De Beers argued that Rady’s patent-infringement claim failed because the patent covered subject matter that cannot be patented under 35 U.S.C. § 101. BCG joined De Beers’s motion and separately argued that the complaint did not adequately plead direct, induced, or willful infringement. Because the court dismissed the claim under the ground raised by De Beers, it did not address BCG’s separate arguments.

The court’s analysis

The court applied the two-step test from Alice Corporation Pty. Ltd. v. CLS Bank International. First, the court asks whether the patent claims are directed to a patent-ineligible concept, such as an abstract idea. Second, it asks whether the claims contain an additional element or combination of elements that transforms the abstract idea into a patent-eligible application. This additional feature is sometimes called an inventive concept.

At the first step, the court concluded that Rady’s patent claims were directed to the abstract idea of collecting, analyzing, and storing data. The court compared the patent’s references to network nodes, processing devices, storage devices, communication systems, three-dimensional scanning and spatial devices, and blockchains to computer hardware discussed in Alice. It also concluded that tracking physical objects did not make the claims less abstract.

At the second step, the court found that the claims did not add an inventive concept. The court was not persuaded that recording a gemstone’s identifying data in a peer-to-peer blockchain network improved the functioning of computers or blockchains. It also found that the claimed cabinet, light source, calibration, target, movement mechanism, physical features, and blockchain network were hardware or techniques already known in the industry, as alleged in the briefing before the court.

Disposition

The court held that the claims of Rady’s ’250 patent failed both steps of the Alice test. It granted the defendants’ motions and dismissed Plaintiff’s infringement claim, Count I. The clerk was directed to terminate the motions at ECF Nos. 37 and 40, and the parties were directed to file a joint status letter no later than 14 days after the decision.