The Software IP Report

Another Rule 12 Holding that Patent Claims Are Invalid Under Section 101

A district court has held invalid patent claims directed to “facilitating evaluation, in connection with the procurement or delivery of products or services, in a context of at least one of (i) a financial transaction and (ii) operation of an enterprise.”  Lumen View Technology LLC v., Inc., No. 13 CIV. 3599 (DLC) (S.D.N.Y. Nov. 22, 2013).

The court characterized the claims of U.S. Patent No. 8,069,073 as directed to “a method of matchmaking whereby one or more parties on each side input attribute preferences and intensity of preference data,” where “then a computer matches the parties on each side by a ‘closeness-of-fit’ process and produces a list.”  The court held that these claims were directed to an “abstract idea” and thus failed to recite patent-eligible subject matter under 35 U.S.C. § 101.

The court began by citing the Federal Circuit’s first decision in In re Bilski, 545 F.3d 943 (Fed. Cir. 2008), for the proposition that the Section 101 patent-eligibility determination was “a threshold inquiry.”  Following that decision from the Federal Circuit, the U.S. Supreme Court in Bilski v. Kappos, 130 S. Ct. 3218 (2010), “recognized . . . ‘three specific exceptions to [Section 101’s] broad patent-eligibility principles: laws of nature, physical phenomena, and abstract ideas.’”

After a detailed review of Supreme Court cases leading up to Bilski, the court turned to the Federal Circuit cases coming after, spending considerable time parsing the various opinions in the recent case of CLS Bank Int’l v. Alice Corp. Pty. Ltd., 717 F.3d 1269 (Fed. Cir. 2013).  The court acknowledged that CLS Bank “did not produce controlling reasoning,” but nonetheless thought that “its holding that the method claim patents were invalid has precedential weight and must be followed by lower courts to the extent that the facts regarding any patents challenged in those courts are similar.”

Further, applying principles of applicable Supreme Court precedent, including Bilski, in light of “what guidance can be wrought from [CLS Bank], it is evident that” the independent patent claim at issue was directed to “an abstract idea and does not qualify as a ‘process’ under Section 101.”  That is, a claim to “the idea of bilateral and multilateral matchmaking using a computer in the context of a financial transaction or an enterprise” was “preemptive in the broadest sense.”  The “use of a computer,” the “only real limitation” of the claim, was “mere post-solution application of an abstract idea to a common context,” and therefore the “machine-or-transformation” test could not save the claims.  In sum, the present patent was invalid under a variety of Supreme Court precedent “as well as under either the Judge Lourie or the Judge Rader methodology in [CLS Bank].”

The eight dependent claims in the ’073 patent were also held invalid.  The dependent claims “simply add[ed] broad, non-value added limitations to Claim 1’s process of computerized matchmaking.”  The court thought that the dependent claims’ mere dependence from claim 1, which was invalid, also rendered the dependent claims invalid under Section 101.  (Query whether this is an accurate statement of the law when it comes to Section 101 invalidity, as opposed to prior art invalidity under Sections 102 and 103, or invalidity under Section 112.)  A further independent reason for invalidating the dependent claims was that “none of the limitations materially limit Claim 1 such that they could survive independently even if Claim 1 were not invalidated.”  The independent claims were “all even more abstract than the processes invalidated in” applicable Section 101 precedent.

Finally, the court rejected the plaintiff’s argument “that a motion to invalidate a patent based on Section 101 is premature at the motion to dismiss stage.”  First, the fact that the plaintiff had complied with the notice pleading standard established by Form 18 of the Federal Rules of Civil Procedure did not preclude motion for judgment on the pleadings.  Second, invalidating a patent on the pleadings was not precluded by the fact that invalidity must be shown by clear and convincing evidence.  Third, claim construction was not necessary to resolve the present motion because “the claimed process elements of Claim 1 are straightforward.”