April 18, 2021

Volume XI, Number 108

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Redemption of Loyalty Points is a Patent-Ineligible Abstract Idea, Federal Circuit Holds

In cxLoyalty, Inc. v. Maritz Holdings Inc., Nos. 2020-1307, 1309 (February 8, 2021), the Federal Circuit found both original and substitute claims in a covered business method review ineligible for patent protection under 35 U.S.C. § 101.

cxLoyalty filed a petition for covered business method review, challenging claims 1–15 of U.S. Patent No. 7,134,087, owned by Maritz. The ’087 patent claimed a system and method that automates the process of redeeming credit card loyalty points for rewards. Instead of requiring human participation, as in traditional systems, the ’087’s system uses computer-based interfaces to streamline the process.

The Board found all challenged claims were patent ineligible because they related to an abstract idea under 35 U.S.C. § 101. But the Board found no such issue with Maritz’s substitute claims, 16–23, deeming them patent-eligible. cxLoyalty appealed the Board’s ruling on the substitute claims; Maritz cross-appealed the Board’s ruling on the original claims and the Board’s institution of CBM review.

The Federal Circuit began its analysis by noting that under 35 U.S.C. § 324(e), it does not have authority to rule on Maritz’s challenge to the institution of CBM review. SIPCO, LLC v. Emerson Electric Co., 980 F.3d 865 (Fed. Cir. 2020).

The Court then analyzed whether the original and substitute claims satisfied the requirements of § 101.  The Court began by noting that patent protection is not available for claims directed to an abstract idea. Alice Corp. v. CLS Bank International, 573 U.S. 208, 217. But those claims may still be eligible if they include an “inventive concept” that “transforms the nature of the claim.” Id.

Applying § 101, the Court identified the transactions in the original claims of the ’087 patent as customary. The claimed system, the court held, related to a longstanding commercial practice and amounted to a mere abstract idea. Further, the court held that the claims lacked an “inventive concept,” because the claims simply applied the abstract idea on a computer, replacing traditional human intervention with well-understood and conventional technology.  The Court thus affirmed the Board’s determination that the original claims did not meet the § 101 requirements.

Finding that the substitute claims related to the same abstract idea—and similarly lacked an “inventive concept”—the Court reversed the Board’s ruling on claims 16–23.  On appeal, Maritz argued that the substitute claims recite a novel combination of technical elements that amount to an unconventional technological solution to the problem addressed by the claims, rendering them subject matter eligible. But the Court disagreed, noting that “a patent claim is not eligible under § 101 merely because it recites novel subject matter.” Thus, the Court concluded that neither the original nor substitute claims were patent-eligible.

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© 2021 Finnegan, Henderson, Farabow, Garrett & Dunner, LLPNational Law Review, Volume XI, Number 57
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Alexander (Zan) Newkirk’s practice encompasses patent litigation, prosecution, and client counseling in the chemical, pharmaceutical, and medical device areas. He has industry experience with pulmonary and nasal medical devices, drug formulation, and vaccine formulation development.

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