The Software IP Report

E.D. Texas Judge Gilstrap Holds “Computerized Discount Redemption System” Patent-Ineligible

By Charles Bieneman

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

No one will be surprised that a court has held that patent claims directed to a “discount redemption system” are not patent-eligible under 35 U.S.C. § 101.  Worth noting, however, is that this determination comes from Judge Gilstrap’s court in the Eastern District of Texas, that court’s patent-friendly reputation notwithstanding.  In NexusCard, Inc. v. The Kroger Co., No. 2:15-cv-968-JRG-RSP (E.D. Texas; March 24, 2016), the court granted the defendant’s motion to dismiss under FRCP 12(b)(6) based on Section 101 invalidity of U.S. Patent No. 5,924,080.

Applying the two-part patent-eligibility test of Alice Corp. Pty. Ltd. v. CLS Bank Int’l., and Mayo Collaborative Servs. v. Prometheus Labs., Inc., the court found that the eighteen steps of independent claim 11 of the ’080 patent were “directed to the abstract idea of a ‘membership discount program’ on a network.”  All of the steps were “ubiquitous to creating a ‘membership discount program,’” “common to the check-out process,” or “generic functions that occur after a computer has received a data input.”  The court rejected the patent-owner’s argument that the patent claims were not directed to an abstract idea based on alleged distinctions from the prior art.

Further, the claim had no “inventive step” to make the abstract idea patent-eligible.  The claims steps either recited functional results or simply recited limitations to a technical environment, or “insignificant post-solution activity.”

Judge Gilstrap did take pains to state that not all business methods were patent-ineligible, despite his holding with respect to the ’080 patent.  The court concluded by recognizing

that some business methods like “membership discount programs” can be patent-eligible because the words of § 101 “preclude[] the broad contention that the term ‘process’ categorically excludes business methods.” [Citation omitted.]  However, the Court finds that the “membership discount program” in claim 11 is not patent-eligible because: (1) it claims the abstract idea of a “membership discount program” where members have to register and (2) then it limits the implementation of that abstract idea to a network of connected computers.