The Software IP Report

Check Processing Claims Fail Alice Test at Federal Circuit

By Charles Bieneman

Categories: Patent Eligibility, Software Patents, The Software IP Report

Patent claims directed to a “method for processing paper checks” are invalid under 35 U.S.C. § 101 and the Mayo/Alice abstract idea test, the Federal Circuit held in Solutran, Inc. v. Elavon, Inc., Nos. 2019, 1345, 2019-1460 (July 30, 2019) (opinion by Judge Chen; joined by Judges Hughes and Stoll) (precedential). The court reversed a denial a motion for summary judgment of invalidity under 35 U.S.C. § 101, which had accompanied a grant of summary judgment of infringement.

Independent claim 1 of U.S. Patent No. 8,311,945 recites:

1. A method for processing paper checks, comprising:

a) electronically receiving a data file containing data captured at a merchant’s point of purchase, said data including an amount of a transaction associated with MICR information for each paper check, and said data file not including images of said checks;

b) after step a), crediting an account for the merchant;

c) after step b), receiving said paper checks and scanning said checks with a digital image scanner thereby creating digital images of said checks and, for each said check, associating said digital image with said check’s MICR information; and

d) comparing by a computer said digital images, with said data in the data file to find matches.

The defendant had argued that “the claims were directed to the ‘abstract idea of delaying and outsourcing the scanning of paper checks.” The Federal Circuit agreed that the claims were “directed to an abstract idea, although we articulate it a bit differently.” The abstract idea of these patent claims, said the court, is “crediting a merchant’s account as early as possible while electronically processing a check.

This case was like Ultramercial, LLC, et al. v. WildTangent, Inc. (Fed. Cir. 2014), in that it depending simply on rerdering steps of a transactions. It was even more like Content Extraction & Transmission Llc v. Wells Fargo Bank, N.A. (Fed. Cir 2014), where the court held that “extracting and then processing information from hard copy documents, including paper checks, was drawn to the abstract idea of collecting data, recognizing certain data within the collected data set, and storing that recognized data.” And there was no improvement to how computers operate, so under the second prong of the § 101 test, there was not a significant additional innovation beyond the abstract idea.

Editorial Comment

At one level, this seems like an easy case. The PatentlyO blog challenges you to read claim 1 of the ’945 patent and then predict the outcome of this case. I went ahead and gave away the answer at the top of this post. I really don’t think the exercise has much rhetorical value, especially when you consider that the opinion here was written by Judge Chen, author of the infamous 2014 opinion in DDR Holdings, LLC v., L.P.  Which is to say, sure, the claim looks like it is implementing a business method with known technology, i.e., without a technical improvement, and therefore must be patent-ineligible. And yet, the claim recites enough use of technology in, one supposes, arguably novel ways, that a district judge was persuaded of its patent-eligibility – after the PTAB, two months after the Supreme Court’s Alice decision, denied a petition challenging the ’945 patent as to § 101 grounds.

So to my mind, what this case really illustrates is that regardless of where you come down in the recent debate about legislative fixes to the mud soup that is our current law of patent-eligibility, something needs to be done.