Meanwhile, back at the ranch

Speculation about the dim future of patents on computer based inventions in the US following the Supreme Court’s recent decision in Alice Corp. v. CLS Bank Int’l  seems to be well founded judging by the way that the PTAB is interpreting the law in the context of covered business methods (CBM).

Specifically, my own speculation that “…a vast number of granted US patents on computer implemented inventions will turn out to be invalid if they are ever litigated…” (June 29 posting ; last paragraph) may prove to be accurate.

On July 8 the PTAB ruled that US 8,165,939 is not patent eligible subject matter according to §101. The PTAB heard the case in the framework of “transitional program for Covered Business Method patents” established by AIA. The patentee (Segin Software) filed an infringement suit against Stewart Title et al. and the accused infringers responded by filing a petition to the PTAB for post grant review as part of the CBM program.

A complete copy of the PTAB decision is available here if you enter 8165939 as the patent number.

Claim 1 of the patent at issue recites (emphases added):

A method of tracking and verifying in real time financial transactions defined at a real estate settlement, the steps comprising:

a) storing, in a database of a settlement financial tracking and verifying computer system, data that includes at least data enumerated on a completed HUD-1 (Housing and Urban Development-1) form associated with a closing upon a piece of real property, wherein said settlement financial tracking and verifying computer system operates automatically and in real time;

b) selecting from said database, by said settlement financial tracking and verifying computer system, data defining at least one anticipated financial transaction enumerated on said completed HUD-1 form, whereby said anticipated financial transaction represents a transfer of funds to be made;

c) automatically initiating in real time a fund transferring action defined by said at least one anticipated transaction selected from the group: disbursing funds, and expecting payments; d) storing data representative of said initiated fund transferring action in said database as an initiated fund transferring action;

e) automatically tracking in real time each of said initiated fund transferring actions;

 f) detecting, by said settlement financial tracking and verifying computer system, completion of each of said initiated fund transferring actions whereby a tracked result is generated; g) storing in said database, each of said tracked results;

h) automatically comparing in real time said tracked result with said data representative of an associated one of said at least one anticipated transaction stored in said database; and

i) automatically alerting in real time a user of said settlement financial tracking and verifying computer system selected from the group comprising a bank, a settlement agent, an attorney, and an auditor when said tracked result differs from said data representative of an associated one of said at least one anticipated transaction.

For those of you that do not want to wade through the whole decision, here are a few highlights:

“As evident from the disclosure above, the individual steps of claim 1 previously were known to the real property settlement industry, and software and other computer-based tools were available to help perform them. Thus, on this record, the individual functions performed by the settlement financial tracking and verifying computer—e.g., storing, selecting, tracking, and comparing data—appear to be “‘well-understood, routine, conventional activit[ies]’ previously known to the industry,” and previously performed, at least in part, by computer. See Alice, 2014 WL 2765283, at *11; Mayo, 132 S. Ct. at 1294. The same is true of the steps of tracking financial transactions and automatically issuing instructions and disbursements. “In short, each step does no more than require a generic computer to perform generic computer functions.” Alice, 2014 WL 2765283, at *11.

Claim 1 fares no better when the steps are considered “as an ordered combination.” The Specification of the ’939 patent indicates that this combination of steps is conventional, but implementing the steps on a “settlement financial tracking and verifying computer system” allows them to be performed faster and more efficiently, with fewer opportunities for fraud or innocent error, than if the steps were performed manually or piecemeal. Ex. 1001, 1:28–45. Nevertheless, we note that simply implementing an abstract concept faster and more efficiently on a computer is not sufficient to transform a patent-ineligible claim into a patent eligible one. See Bancorp Servs., LLC v. Sun Life Assurance Co. of Can.,687 F.3d 1266, 1279, 1280 (Fed. Cir. 2012) (“Here . . . the computer merely permits one to manage a stable value protected life insurance policy more efficiently than one could mentally. Using a computer to accelerate an ineligible mental process does not make that process eligible subject matter.”).

On this record, we are not persuaded by Patent Owner’s argument that the “settlement financial tracking and verifying computer system” is a “special purpose” computer (Prelim. Resp. 29), which requires specific, complex, nontrivial programming to perform the steps of the claimed method (id.at 21, 24). We note that no such programming is disclosed in the ’939 patent. Rather, the Specification of the ’939 patent merely indicates that interactive financial management software tools (e.g., RynohLive ^TM web-based software) suitable for performing the claimed method were commercially available, as were several automated “production systems” for performing detailed financial transactions, and such tools and systems were “well known to those of skill in the art.” Ex. 1011, 4:45–46, 6:14–20. It follows, then, that merely labeling the computer system of claim 1 a “settlement financial tracking and verifying computer system” does nothing to convert the generic computer to a specific computer, when the functions performed by the computer—individually and in combination—are generic and conventional. As in Alice, “[t]he method claims do not . . . purport to improve the functioning of the computer itself” (Alice, 2014 WL 2765283, at *11), “[n]or do they effect an improvement in any other technology or technical field.” Id.

In summary, the types of data, and the speed with which they are handled by the various “modules” do not convince the PTAB that the computer recited in claim 1 is anything other than a general purpose computer. This is hardly surprising. All software developers are constrained by the need to write code that will run in one or more standard operating systems. Indeed if the patentee had developed a stand-alone dedicated device that only performed the claimed methods, it is unlikely that they would have had a sale-able product (although they may have been eligible for a patent)

Where does that leave us in terms of patenting new technology which adds a new function to an existing  machine? Perhaps Bob Dylan was prophesying the post-Alice judicial landscape when he wrote “Beyond here lies nothing”; at least for business method patents.