First Application of Alice Corp. Decision to Covered Business Method Patent Review
Stewart Title Guaranty Co. v. Segin Software, LLC
In determining whether a Covered Business Method (CBM) patent review should be instituted, the Patent Trial and Appeal Board (Board) referred to the Supreme Court’s recent decision in Alice Corporation Pty, Ltd. v. CLS Bank International (IP Update, Vol. 17, No. 7) and instituted a review on the basis that it was more likely than not that at least one of the challenged claims was unpatentable under 35 U.S.C. § 101. Stewart Title Guaranty Co. v. Segin Software, LLC, CBM2014-00051 (PTAB, July 8, 2014). (Schiender, APJ).
The patent is directed to ensuring the integrity of financial transactions, and reducing the potential for innocent error and opportunities for fraud. Segin had previously sued Stewart for infringement of the patent. In response, Stewart filed a petition for the CBM review, challenging the validity of certain claims. One of the issues raised by Stewart was whether the challenged claims were directed to patent-ineligible subject matter under 35 U.S.C. § 101.
In considering whether the challenged claims were more likely than not unpatentable under § 101, the Board applied the two-step patent-eligibility test from Prometheus Laboratories (IP Update, Vol. 15, No. 3), as reiterated in Alice Corp. The first part of the test is whether the claims are directed to an abstract idea.
The Board then examined the disclosure of the challenged patent, which explained that, “tools (including software or other computer based tools) exist to help perform individual settlement steps, [but] many manual operations such as data entry leave numerous possibilities for innocent errors.” The patent proposes to solve this problem by providing an integrated method for processing all financial details of a real estate settlement without need for multiple, stand-alone software tools or systems. In instituting a CBM review, the Board concluded that the concept described in the patent is (like the intermediated settlement concept at issue in Alice Corp.) a fundamental economic practice long prevalent in our system of commerce.
The second part of the test looks to whether the claims (if directed to an abstract idea) are nevertheless limited to an inventive concept. In considering that issue, the Board looked to whether the claims recited additional elements that would transform the nature of the claimed invention into patent-eligible subject matter.
Citing to the Supreme Court ruling in Alice Corp., the Board noted that the mere recitation of a generic computer cannot transform a patent-ineligible abstract idea into a patent-eligible invention. On the other hand, using the mathematical equation that solves a technological problem can transform an abstract idea into an inventive application.
Although the patent owner contended that the challenged claims recite limitations that tie the performance of the steps to the settlement financial tracking and verifying computer system, the Board concluded that the claimed steps recite activities that were previously known to the real property settlement industry, and the functions performed by the computer were well-understood, routine and conventional;i.e., each step involved no more than using a generic computer to perform a generic computer functions.
The patent owner further argued that the settlement financial tracking and verifying computer system was a special-purpose computer that requires specific, complex, non-trivial programming to perform the steps of the claimed method. However, the Board found no such programming disclosed in the patent.
The Board, therefore, determined to institute a CBM review, concluding that it was more likely than not that the challenged claims were unpatentable under § 101.