The Software IP Report

Federal Circuit Invalidates Business Method Patent (Yawn)

By Charles Bieneman

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

The Federal Circuit has upheld the invalidity of a patent whose claims recite “[a] computer-implemented method for providing certified financial data indicating financial risk about an individual.”  Clarilogic, Inc. v. FormFree Holdings Corp., No. 2016-1781 (March 5, 2017) (opinion by Judge Reyna, joined by Judges Lourie and Chen) (non-precedential).  The court affirmed the lower court’s summary judgment of invalidity under 35 U.S.C. § 101 because – all together now – the claims of U.S. Patent No. 8,762,243 “are directed to an abstract idea and the claims contain no additional elements that transform the nature of the claims into a patent-eligible application of the abstract idea.”

Representative claim 1 of the ’243 patent recites:

A computer-implemented method for providing certified financial data indicating financial risk about an individual, comprising:

(a) receiving a request for the certified financial data;

(b) electronically collecting financial account data about the individual from at least one financial source,

(c) transforming the financial account data into a desired format;

(d) validating the financial account data by applying an algorithm engine to the financial account data to identify exceptions, wherein the exceptions indicate incorrect data or financial risk;

(e) confirming the exceptions by collecting additional data and applying the algorithm engine to the additional data,

(f) marking the exceptions as valid exceptions when output of the algorithm engine validates the exceptions; and

(g) generating, using a computer, a report from the financial account data and the valid exceptions,

wherein the financial account data comprises at least one of real-time transaction data, real time balance data, historical transaction data, or historical balance data; and the algorithm engine identifies a pattern of financial risk; the method is computer implemented, and steps (c), (e), and (f) are executed via the computer or a series of computers.

Step 1 of the two-part Mayo/Alice test was easily satisfied by the court’s finding “that claim 1 of the ’243 patent is directed to the abstract idea of gathering financial information of potential borrowers.”  In fact, the court added insult to the patent owner’s injury by explaining that claiming a “method for collection, analysis, and generation of information reports, where the claims are not limited to how the collected information is analyzed or reformed, is the height of abstraction.”

Further, it can be no surprise that the claims failed step 2 of the Mayo/Alice test – there were no additional elements rendering the abstract idea patent-eligible.  The patent owner tried to “invoke[] Diamond v. Diehr, 450 U.S. 175 (1981), to argue that its invention is “transformative,” and thus eligible for patent protection.  But unlike that case’s method for curing rubber, “claim 1 recites a method that changes the way electronic information is displayed via an unknown and unclaimed process.”  There was no “limitation to how the data are changed,” and therefore “little, if any, transformative effect.”

To be fair, the court did offer perhaps a hint that business method claims could be patent-eligible.  In comparing the present case to another in which claims were invalidated, Elec. Power Grp., LLC v. Alstom S.A., 830 F.3d 1350 (Fed. Cir. 2016),” the court explained that simply using the Internet to make a system faster did not make it patent-eligible.  The ‘243 patent failed to “claim the technical manner in which financial data is gathered, analyzed, or output,” nor did it “claim any proprietary risk-assessment algorithm.”


As this blog has said before, business method patents are all but dead.  I think it fair to call this case a yawn.  And yet, did the court leave the door open for business methods – e.g., a “proprietary risk-assessment algorithm” – to survive  a patent-eligibility challenge?