Financial Process Claims Held Not Patent Eligible

Patent claims directed to performing financial transactions and financial analysis have been invalidated by a D.C. District Court in two recent, and related, cases. Graff/Ross Holdings v. Fed. Home Loan Mortg. Corp., No. 07-796 (RJL) (D. D.C. Sept. 24, 2012); Fed. Home Loan Mortg. Corp. v. Graff/Ross Holdings, No. 10-1948 (RJL) (D. D.C. Sept. 26, 2012).

In the first case, Freddie Mac had made a motion to dismiss, alleging invalidity of a patent directed to “System and Methods for Computing to Support Decomposing Property into Value Components” (U.S. Patent No. 6,192,347).  In that case, the court affirmed a magistrate's 2010 opinion holding the patent claims invalid under 35 U.S.C. § 101, and granted the motion.

In the other case, Freddie Mac had moved for summary judgment of invalidity, while Graff/Ross, the patent owner, had moved for summary judgment of validity.  The court agreed with Freddie Mac, invalidating, under Section 101, claims directed to a "Bidder System Using Multiple Computers Communicating Data to Carry Out Selling Fixed Income Instruments" (U.S. Patent No. 7,685,053) and a "Computer System to Generate Financial Analysis Output" (U.S. Patent No. 7,908,202).

Patent prosecutors in the business methods area often speak of drafting claims with a technical gloss in hopes of providing a defense to assertions that the claims recite patent ineligible subject matter.  Interestingly, the patent drafters here appear to have attempted to do that, but to no avail.  For example, asserted independent claim 101 in the '347 patent recited:

101. A method for making financial analysis output having a system-determined purchase price for at least one component from property in consummating a sale, the financial analysis output being made by steps including:

converting input data, representing at least one component from property, wherein the property is a fixed-income asset, into input digital electrical signals representing the input data;

providing a digital electrical computer system controlled by a processor electrically connected to receive said input digital electrical signals and electrically connected to an output means;

controlling a digital electrical computer processor to manipulate electrical signals to compute a system-determined purchase price for the at least one component from property in consummating a sale and corresponding purchase of the component; and

generating the financial analysis output at said output means.

The court explained that although the claims of the '347 patent recited a machine, the machine did not impose a meaningful limit on claim scope.  In fact, the claims could be performed with no machine at all.  The court compared claim 101 to the claims held invalid by the Federal Circuit in its recent Bancorp Services opinion, and distinguished this case from the Federal Circuit's recent CLS Bank decision.

In its decision on the '053 and '202 patents, the court followed Freddie Mac in classifying the various patent claims at issue into nine different groups, depending on whether the claims recited a system or method, were limited to a particular field of use, etc. However, the court's analysis reached the same result for all claim groups (and as for the '347 patent): the claims recited an abstract idea, and thus were unpatentable under the line of cases represented by Bilski v. Kappos.

For example, claim 104 of the '202 patent recited:

A computer system to make financial analysis output having a system-determined purchase price for at least one component from property in consummating a sale, the system comprising:

an input device converting input data, representing at least one component from property, wherein the property is a fixed-income asset, into input digital electrical signals representing the input data;

a digital electrical computer system controlled by a processor electrically connected to receive said input digital electrical signals and electrically connected to an output means, the processor controlled to manipulate electrical signals to compute a system-determined purchase price for at least one component from property in consummating a sale and corresponding purchase of the component, and to generate financial analysis output at said output means.

The court noted that this claim was “nearly identical” to claim 101 of the '347 patent.  Adding a computer to the claim simply allowed the subject matter of the claim to be performed more quickly, but did not impose meaningful limits on the claim scope.  Further, dependent claims in a second claim group simply recited limited fields of use, which did not render the claims patent-eligible.  A third claim group included method claims that were no more patentable than the computer system claims of claim group 1.  Unsurprisingly, the court found that all other claim groups recited abstract ideas, and thus were unpatentable.