Intellectual Property

Alice At The Movies: The MoviePass Patents

Alice’s starring role in patent cases is as important as ever.

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(Image via Shutterstock)

One of the more interesting  stories of 2018 was the rapid rise and (nearly as fast) fall of MoviePass. Early on, the hype was immense. Pay one monthly price, or better yet, buy a yearly subscription, and enjoy unlimited movies. Have a few free hours after a case settles? Go to the movies. Need a break from too many nights hitting the bar after work? See a movie instead, on MoviePass’s dime. As with all “killer deals,” however, two things quickly happened that dampened the MoviePass mojo. First, competitors cropped up, led by a Turkish startup called Sinemia, while eventually growing to include unlimited movie subscriptions offered directly by theater chains. Second, and worse, the MoviePass ponzi scheme started to unravel when money in lagged behind money out. Put another way, MoviePass stopped working as promised, for lack of funds.

Before things got desperate for MoviePass, however, it decided to take action against its main competitor Sinemia by wielding two patents in a February 2018 case (CV 2:18-1517 SJO) filed in the Central District of California. Both asserted patents address one of the key issues facing a company hoping to sustain a subscription-based movie-ticketing business — how to make sure that the company is only paying for tickets for people who are subscribers and are actually at a movie theater. The patented solutions centered on using the subscriber’s phone as a way of tracking the location of the subscriber, while simultaneously authenticating the subscriber. Now could gaming of the system occur even with this patented technology? Of course. But normal people would not let a friend borrow their phone for two hours just to save the friend some money on a movie ticket, making the patented technology effective enough.

As with many patent cases nowadays, Sinemia responded by doing two things. In full disclosure first, however, I must admit that I am a former Sinemia member, who was recently given the option of either paying double what I had been paying to stay on my plan, or leaving the service after a profitable eight-month run — profitable for me, that is. Did my wife and I see more movies while we were subscribers? You bet, even if it meant enduring such fodder as “Serenity” when there was nothing good playing and we still had a “free” movie to use on our plan. (Never heard of “Serenity”? Be thankful, and clean your closet before wasting a second watching it.) At least the popcorn and cold soda never disappointed, and going to a movie without having to pay for tickets made for a much cheaper date than a dinner out. But that run is over, a probable victim of Sinemia’s algorithm deciding we were exactly the kind of subscribers they literally couldn’t afford to keep around. Now back to the patents.

Step one for Sinemia as a defendant was apparently to string along the possibility of a quick settlement. You can imagine that neither MoviePass nor Sinemia really wanted to waste money on patent litigation of all things, and as such it was not unusual to see numerous extension requests — culminating in a request for a stay of the case — while the parties explored settlement. But stays can’t stay forever, and the court eventually lifted the stay in October 2018. So Sinemia immediately went to step two of the patent litigation defense checklist in cases of this type, and filed an Alice motion seeking dismissal of the case. Remember that the main attraction of Alice motions for defendants are that they are relatively cheap to file, and when successful, are perhaps the quickest way to get a win on the merits in a patent case.

Last week, in a well-reasoned and informative decision, Judge S. James Otero denied Sinemia’s motion to dismiss. What makes his decision interesting, other than my personal experience with the accused product, is his stepwise analysis of Alice issues, from both a substantive and procedural angle. Starting with the latter, Judge Otero first determined that he could determine the motion at the pleadings stage, as long as he construed the patent claims in a manner most favorable to MoviePass. This finding is consistent with those of many other district court judges, who by and large remain very willing to entertain Alice motions at the pleadings stage, even as they sometimes later determine that reserving a decision on the merits after considering the papers is advisable.

Next, Judge Otero went through the now famous two-step analysis (otherwise known as the Alice/Mayo test) in order to determine whether MoviePass’s patents were patent-eligible. In step one, Judge Otero searched for and found an “abstract idea” — namely, that the patents were directed to “a process for confirming the identity of a user before providing them with money” to use to buy movie tickets. In doing so, Judge Otero also found that the inventions were designed to run on generic hardware — typical smartphones — and as such did not claim or teach any true technological improvement.

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But MoviePass found its saving grace in the court’s step two “inventive concept” analysis. There, the court — while skeptical — found that Sinemia’s motion could not be granted because of a fact question of whether MoviePass’s substitution of an identification check by a box-office attendant to authentication by smartphone was truly a novel development. Because the court could not decide that question as a matter of law, Sinemia’s motion was dismissed.

Ultimately, neither Sinemia or MoviePass appear to have much to gain if this case continues. As such, I would expect it to settle, consistent with nearly all other patent infringement cases. At the same time, Judge Otero’s decision points out to us as IP lawyers the need to constantly review how legal issues such as Alice are being handled by trial courts, both procedurally and substantively. As for the “free movie” business, we already know that there is a market for services that let customers save money on their moviegoing. We also know the challenges that business model creates for those offering such subscriptions. While they search for the right formula to build a sustainable business, we can count on Alice to continue having her say in patent cases. Put another way, keeping track of Alice’s starring role in patent cases is as important as ever.

Please feel free to send comments or questions to me at gkroub@kskiplaw.com or via Twitter: @gkroub. Any topic suggestions or thoughts are most welcome.

Gaston Kroub lives in Brooklyn and is a founding partner of Kroub, Silbersher & Kolmykov PLLC, an intellectual property litigation boutique, and Markman Advisors LLC, a leading consultancy on patent issues for the investment community. Gaston’s practice focuses on intellectual property litigation and related counseling, with a strong focus on patent matters. You can reach him at gkroub@kskiplaw.com or follow him on Twitter: @gkroub.

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