CAFC provides guidance for patent eligibility of computer aided methods

Andrew Melick | February 1, 2012

Dealertrack v. Huber

January 20, 2012

Panel:  Linn, Plager Dyk. Opinion by Linn.  Dissent by Plager.

Summary

The CAFC affirmed the district court’s grant of summary judgment of invalidity for patent ineligibility under § 101.  The CAFC stated that the claim at issue recited a “computer aided method” without reciting how the computer aids the method, the extent to which a computer aids the method, or the significance of a computer to the performance of the method.  The claims are invalid as being directed to an abstract idea preemptive of a fundamental concept or idea that would foreclose innovation in this area.  Other issues were addressed in the opinion; however, this discussion only addresses the issue of patent eligibility under § 101.

Details

Dealertrack owns U.S. Patent No. 7,181,427 (“the ‘427 patent”) directed to a computer-aided method and system for processing credit applications over electronic networks.  The idea of the patent is to automate the process of car dealers seeking car loans on behalf of their customers.  The process includes receiving credit application data from dealers, processing the data to conform to individual application forms of different banks, forwarding the completed applications to banks selected by the dealer, receiving answers from the banks and forwarding those answers back to the dealer.

Dealertrack sued for infringement of the ‘427 patent (and additional patents not discussed in this summary).  Huber et al. filed a summary judgment motion for invalidity of the claims of the ‘427 patent for failure to claim patent eligible subject matter under 35 U.S.C. § 101.  The district court granted the summary judgment of invalidity under § 101.  Dealertrack appealed the summary judgment of invalidity of claims 1, 3 and 4 of the ‘427 patent.

Claim 1 of the ‘427 patent is provided:

1. A computer aided method of managing a credit application, the method comprising the steps of:

[A] receiving credit application data from a remote application entry and display device;

[B] selectively forwarding the credit application data to remote funding source terminal devices;

[C] forwarding funding decision data from at least one of the remote funding source terminal devices to the remote application entry and display device;

[D] wherein the selectively forwarding the credit application data step further comprises:

[D1] sending at least a portion of a credit application to more than one of said remote funding sources substantially at the same time;

[D2] sending at least a portion of a credit application to more than one of said remote funding sources sequentially until a finding [sic, funding] source returns a positive funding decision;

[D3] sending at least a portion of a credit application to a first one of said remote funding sources, and then, after a predetermined time, sending to at least one other remote funding source, until one of the finding [sic, funding] sources returns a positive funding decision or until all funding sources have been exhausted; or,

[D4] sending the credit application from a first remote funding source to a second remote finding [sic, funding] source if the first funding source de-clines to approve the credit application.

Dealertrack did not argue that the claims effected a transformation, so the court applied only the machine prong of the “machine or transformation” test.  The district court determined that because the computer implicated was not “specially programmed” and was “nothing more than a general purpose computer that has been programmed in some unspecified manner,” it could not constitute the “particular machine” required to confer patent eligibility under the machine prong of Bilski.

Dealertrack argued that for patent eligibility, the claims need not be tied to a “special purpose” computer, i.e., a programmed computer, but rather it is sufficient that they be tied to a “general purpose” computer, and in this case the claims are tied to a central processor, a remote application entry and display device, and a funding source terminal device.

The CAFC characterized the claim as “the basic concept of processing information through a clearinghouse” analogous to “explaining the basic concept of hedging” in Bilski, and that the steps that constitute the method do not impose meaningful limits on the claim’s scope.  CAFC said that Dealertrack is not entitled “to wholly preempt the clearinghouse concept.”

Dealertrack argued that the “computer-aided” limitation in the preamble sufficiently limits the claim to an application of the idea.  The CAFC said that the claims are silent as to how a computer aids the method, the extent to which a computer aids the method, or the significance of a computer to the performance of the method.  “The undefined phrase ‘computer aided’ is no less abstract than the idea of a clearinghouse itself.”  The computer does not play a significant part in permitting the claimed method to be performed.  Simply adding a “computer aided” limitation to a claim covering an abstract concept, without more, is insufficient to render the claim patent eligible.

Citing Gottschalk v. Benson, the CAFC said that the claims do not require a specific application, nor are they tied to a particular machine.  The claims cover a clearinghouse process using any existing or future-devised machinery.

In distinguishing Ultramercial v. Hulu, the CAFC stated:

Unlike in Ultramercial, where this court found that the patent claimed a practical application with concrete steps requiring an extensive computer interface, the claims here recite only that the method is “computer aided” without specifying any level of involvement or detail.

The court further stated that the fact that certain algorithms are disclosed in the specification does not change the outcome.  “A claim may ‘preempt’ only that which the claims encompass, not what is disclosed but left unclaimed.”  The court noted that the claim was construed not to be limited to any particular algorithm and Dealertrack did not appeal the claim construction.

Dealertrack tried to argue that the claim covers the use of a clearinghouse only in the car loan application process, and not all uses thereof.  But the CAFC compared the argument in Bilski stating that the notion of using a clearinghouse generally and using a clearinghouse specifically to apply for car loans, like the relationship between hedging and hedging in the energy market in Bilski, is of no consequence without more.

Dissent (Plager):  It is better to initially address the issues in terms of defenses provided in the statute (35 U.S.C. § 282): “conditions of patentability” under §§ 102, 103, and in addition §§ 112 and 251, instead of “foray[ing] into the jurisprudential morass of § 101 unless absolutely necessary.” 

Comments/Tips

In a computer aided method, the claims should be drafted to clearly tie the steps to the computer or recite more concrete steps that would require a computer interface.  Applicants may also want to consider reciting more explicit details about algorithms performed by the computer, i.e., recite the computer more as a “special purpose” computer.

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