The Software IP Report

Alice Was a Game-Changer, Federal Circuit Affirms

By Charles Bieneman

Categories: Patent Eligibility, The Software IP Report

The Supreme Court’s decision in Alice Corp. Pty., Ltd. v. CLS Bank Int’l. did indeed change the scope of patent-eligibility under 35 U.S.C. § 101, the Federal Circuit explained – just in case anyone in the patent community had any doubts – in Mortgage Grader, Inc. v. First Choice Loan Services Inc., No. 2015-1415 (Fed. Cir. Jan. 20, 2016). Considering patent claims directed to a computer-implemented system to provide anonymous loan shopping, the court explained that:

a § 101 defense previously lacking in merit may be meritorious after Alice. This scenario is most likely to occur with respect to patent claims that involve implementations of economic arrangements using generic computer technology, as the claims do here.

The opinion by Chief Judge Stark of the District of Delaware (sitting by designation) was joined by Judges O’Malley and Taranto.

The court offered this dicta in response to the patent owner’s argument that summary judgment was improperly granted. The defendant, prior to Alice, withdrew its allegation of Section 101 invalidity, but then re-added this defense to its invalidity contentions after Alice was decided. The patent owner argued that this gyration violated the district judge’s Standing Patent Rules.  The district court disagreed, finding that Alice gave the defendant good cause to reassert its Section 101 defense. The district court then granted summary judgment on the patent-eligibility issue.

The Federal Circuit, noting that district courts have discretion to manage their own dockets, thought that the district court here had followed its own rules. After Alice, “even an ‘old’ § 101 defense may enjoy renewed vigor.” The defendant had “acted diligently by adding the § 101 defense just two months after Alice came down, satisfying the ‘good cause’ standard imposed by” the district court’s Standing Patent Rules.

Turning to the merits of the patent-eligibility question, the court agreed that claims of U.S. Patent Nos. 7,366,694 and 7,680,728 were “directed to the abstract idea of ‘anonymous loan shopping.’” The claims, the court explained, “recite nothing more than the collection of information to generate a ‘credit grading’ and to facilitate anonymous loan shopping.” The recited steps “could all be performed by humans without a computer.” Concerning the second step of the Alice/Mayo test, there was no “inventive concept because the claims simply incorporated generic computer technology.

Finally, the Federal Circuit rejected the patent owner’s argument that expert declarations had raised questions of fact that the district court had improperly ignored in granting summary judgement of invalidity under Section 101. Dueling expert declarations do not necessarily foreclose summary judgment. Patent-eligibility determinations are generally made based on the face of a patent specification and claims. Here, “given the intrinsic evidence, and Alice’s clarification that use of a generic computer to implement a ‘fundamental economic practice’ cannot provide an inventive concept sufficient to save claims from patent ineligibility, 134 S. Ct. at 2356–57, this opinion [of the patent owner’s expert] does not create a genuine dispute of material fact.”