The Software IP Report

Computerized Method of Managing Financial Instruments Not Patent Eligible

By Charles Bieneman

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

Yet another district court has invalidated patent claims under 35 U.S.C. § 101.  In Digitech Information Systems, Inc. v. BMW Financial Services NA, LLC, No. 6:10-cv-1373 (M.D. Fla. March 30, 3012), the court held that a “method for selecting leases to optimize an investment portfolio,” implemented in a computer, did not recite patentable subject matter and was invalid under Section 101.  The representative claim of U.S. Patent No. 7,739,180 is reproduced below.

The plaintiff responded to the defendant’s motion for summary judgment by arguing that the motion was not ripe because claim construction had not yet occurred, and because, as suggested by the majority of the Federal Circuit panel in the MySpace case, other bases of invalidity should be considered before Section 101.  The court disagreed that claim construction was necessarily a prerequisite to a Section 101 analysis.  Moreover, without discussing the Supreme Court’s recent reaffirmation in Prometheus of Section 101 as a threshold test, the court noted that here, unlike other cases, there were no pending motions for invalidity on other grounds.  The court declined to require the defendant to move for summary judgment of invalidity on grounds other than Section 101 before deciding the Section 101 issue.

The court then applied the machine-or-transformation test to the claim, which did recite use of a computer.  The plaintiff argued that the recited calculations were so complex that they necessitated a computer, and could not be performed in the human mind.  The court disagreed, noting that the claimed calculations could be performed with pencil and paper, even if not easily.  Thus, the court distinguished SiRF Tech., Inc. v. Int’l Trade Comm’n, 601 F.3d 1319, 1332 (Fed. Cir. 2010), where the claim at issue did in fact require use of a GPS device.  The claims here did not meet the machine prong of the machine-or-transformation test, nor did calculations relating to financial instruments meet the transformation prong.

Acknowledging that the machine-or-transformation test was not the exclusive test for patent eligible subject matter, the court concluded that the claims at issue here recited an unpatentable abstract idea. Reviewing various Section 101 precedent, the court noted that the claims here, like those at issue in Bilski v. Kappos, recited mathematical formulae and decisions based thereon, which were unpatentable steps.  The claims here “seek to preempt the use of the formulas in all fields like the claims in Bilski,” and are therefore unpatentable.

Claim 1 of U.S. 7,739,180

1. A method for selecting leases to optimize an investment portfolio comprising the steps of:
receiving data regarding an equipment purchase price, an equipment sale price, a number of units, a lease purchase price, a life of lease, a lease acquisition fee, an accelerated depreciation of change, and a yearly payment;
calculating by computer a total purchase price by adding the lease purchase price to the lease acquisition fee;
calculating by computer an accelerated depreciation result by multiplying the equipment purchase price by the number of units;
calculating by computer a rate of return by subtracting from the yearly payment the total purchase price and the accelerated depreciation result and dividing by the lease purchase price; and
selecting a lease based on the rate of return being greater or equal to a predetermined value and using the selected lease to create lease backed financial instrument derivatives and optimize the investment portfolio.

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