More Business Method Patents Broken

In Content Extraction & Transmission LLC v. Wells Fargo Bank, Nat'l Ass'n, Appeal No. 2013-1588 (Dec. 23, 2014), the appellant, CET, appealed the district court's grant of a motion to dismiss holding that the claims of CET's four patents are invalid as patent-ineligible under 35 U.S.C. § 101. The four patents at issue contain a total of 242 claims. The claims generally recite a method of 1) extracting data from hard copy documents using an automated digitizing unit such as a scanner, 2) recognizing specific information from the extracted data, and 3) storing that information in a memory. The method can be performed by software on an automated teller machine (ATM) that recognizes information written on a scanned check, such as the check's amount, and populates certain data fields with that information in a computer's memory.

The Federal Circuit affirmed the district court's dismissal. In an opinion authored by Circuit Judge Chen, the panel applied step one of the Mayo/Alice test and concluded that the claims of the asserted patents are drawn to the abstract idea of 1) collecting data, 2) recognizing certain data within the collected data set, and 3) storing the recognized data in a memory. The concept of data collection, recognition, and storage is undisputedly well known. Indeed, the Court explained, "humans have always performed these functions. And banks have, for some time, reviewed checks, recognized relevant data such as the amount, account number, and identity of account holder, and stored that information in their records."

CET attempted to distinguish its claims from those found to be abstract in Alice Corp. Pty Ltd. v. CLS Bank Int'l, 573 U.S. __, 134 S. Ct. 2347, 2354 (2014) and other cases by asserting that its claims require not only a computer but also an additional machine—a scanner. CET argued that its claims are not drawn to an abstract idea because human minds are unable to process and recognize the stream of bits output by a scanner. This argument failed to move the Court: "the claims in Alice also required a computer that processed streams of bits, but nonetheless were found to be abstract." The Court went on to explain that CET's claims are drawn to the basic concept of data recognition and storage and were therefore no different from the invalid computer-implemented claims in Alice directed to "the concept of intermediated settlement," and the claims in Dealertrack, Inc. v. Huber, 674 F.3d 1315, 1333 (Fed. Cir. 2012) directed to the concept of "processing information through a clearinghouse."

Applying Mayo/Alice step two, the Court concluded that the asserted patents contain no limitations—either individually or as an ordered combination—that transform the claims into a patent-eligible application of the abstract idea. There is no "inventive concept" in CET's use of a generic scanner and computer to perform well-understood, routine, and conventional activities commonly used in industry. At most, the Court explained, "CET's claims attempt to limit the abstract idea of recognizing and storing information from hard copy documents using a scanner and a computer to a particular technological environment." But such a limitation, according to the Court, is insufficient to save a claim in this context. See Alice, 134 S. Ct. at 2358; Ultramercial, Inc. v. Hulu, LLC, 772 F.3d 709, 715–16 (Fed Cir. 2014); buySAFE, 765 F.3d at 1355.

Two weeks earlier, in DDR Holdings, LLC v. National Leisure Group, Inc., No. 2013-1505 (Dec. 5, 2014), the Federal Circuit reached a different conclusion finding claims patent-eligible and explaining that although a claimed invention addressed a business challenge, it was a challenge unique to the Internet and therefore not directed to an abstract idea: "the claimed solution is necessarily rooted in computer technology in order to overcome a problem specifically arising in the realm of computer networks." One could conclude from the DDR Holdings decision that, if the problem solved by the invention is rooted in technology, then the claims directed to such an invention are patent eligible under § 101.

The Federal Circuit's decision in DDR Holdings may have been too late to help CET with its strategy. But the DDR Holdings decision is extremely helpful to inventors and prosecutors of software inventions as they position their patents to pass the substantial § 101 hurdle that the courts have erected over the past six months since the Supreme Court's decision in Alice.