Patents & the Financial Services Industry

Blackboard Inc. v. Desire2Learn Inc., Fed. Cir., No. 2008-1368, 7/27/09).

Earlier this week the Federal Circuit invalidated all of the claims in Blackboard Inc.’s patent for conducting online courses, determining that all claims were either anticipated or inadequately disclosed.  This case is particularly relevant for computer-implemented processes as the court again revisited the requirements for reciting means-plus-function language to perform algorithm-based functions in a computer system.

Blackboard and Desire2Learn are competitors in online educational courseware.  Blackboard owns U.S. Patent No. 6,988,138, which covers systems and methods for Internet-based education, and asserted the patent against Desire2Learn in 2006.  Independent Claim 1 invoked 35 U.S.C. §112, ¶6 as follows:

1. A course-based system for providing to an educational community of users access to a plurality of online courses, comprising:

a) a plurality of user computers, with each user computer being associated with a user of the system and with each user being capable of having predefined characteristics indicative of multiple predetermined roles in the system, each role providing a level of access to a plurality of data files associated with a particular course and a level of control over the data files associated with the course with the multiple predetermined user roles comprising at least two user’s predetermined roles selected from the group consisting of a student role in one or more course associated with a student user, an instructor role in one or more courses associated with an instructor user and an administrator role associated with an administrator user, and

b) a server computer in communication with each of the user computers over a network, the server computer comprising:

means for storing a plurality of data files associated with a course,

means for assigning a level of access to and control of each data file based on a user of the system’s predetermined role in a course;

means for determining whether access to a data file associated with the course is authorized;

means for allowing access to and control of the data file associated with the course if authorization is granted based on the access level of the user of the system.

The District Court found, inter alia, that independent claim 1 and dependent claims 2-35, which depend from claim 1, were invalid for indefiniteness.  Specifically, the district court held that the specification contained insufficient structure to support one of the means-plus-function limitations found in claim 1 and, by incorporation, in dependent claims 2-35.

On appeal, the particular “means” clause at issue was the “means for assigning a level of access to and control of each data file based on a user of the system’s predetermined role in a course.”  An “access control manager” is briefly mentioned in the Specification, and according to Blackboard the “access control manager” performs the “assigning” function (“means for assigning”) and could be either software or hardware.  Blackboard argued that the “means for assigning” function is “a server computer with an access control manager and equivalents thereof.” The specification describes the “access control manager” as follows:

Access control manager 151 creates an access control list (ACL) for one or more subsystems in response to a request from a subsystem to have its resources protected through adherence to an ACL. Education support system 100 provides multiple levels of access restrictions to enable different types of users to effectively interact with the system (e.g., access web pages, upload or download files, view grade information) while preserving confidentiality of information.

The Federal Circuit determined that the access control manager “is not a description of structure; what the patent calls the ‘access control manager’ is simply an abstraction that describes the function of controlling access to course materials, which is performed by some undefined component of the system. The ACM is essentially a black box that performs a recited function. But how it does so is left undisclosed.”  The Court held that “The specification contains no description of the structure or the process that the access control manager uses to perform the ‘assigning’ function” and affirmed the lower court’s judgment on indefiniteness.

In making this finding, the relevant cases relied upon by the Federal Circuit were:

Aristocrat Technologies Australia Pty Ltd. v. International Game Technology, 521 F.3d 1328, 1331 (Fed. Cir. 2008): The Blackboard Court noted that in Aristocrat the Federal Circuit “addressed the question whether a general reference to ‘a standard microprocessor-based gaming machine with appropriate programming’ constituted a sufficient disclosure of structure to support a claimed function in a means-plus-function claim. We concluded that it did not. First, we explained that ‘[t]he point of the requirement that the patentee disclose particular structure in the specification and that the scope of the patent claims be limited to that structure and its equivalents is to avoid pure functional claiming.’ Without so limiting a claim, we noted, ‘the patentee has not paid the price but is attempting to claim in functional terms unbounded by any reference to structure in the specification.’ We then applied those teachings to the patentee’s assertion that a reference to a general purpose computer could satisfy that standard. We noted that ‘any general purpose computer must be programmed’ and pointed out that relying on such general structure is equivalent to saying ‘that the function is performed by a computer that is capable of performing the function.’ We also considered and rejected the patentee’s assertion that language describing when the computer would perform the function at issue constituted a sufficient description of the structure for performing the function. Such language, we explained, ‘describes an outcome, not a means for achieving that outcome.’ (citations omitted)

Net MoneyIN, Inc. v. VeriSign, Inc., 545 F.3d 1359 (Fed. Cir. 2008): The Blackboard Court further noted that in Net MoneyIN the Federal Circuit “again addressed a patentee’s argument that reference to a computer provides sufficient structure for a claim drafted in means-plus-function form. In Net MoneyIN, the computer was not a general purpose computer; the patentee contended that the reference to a ‘bank computer’ provided sufficient structure to support the function of ‘generating an authorization indicia in response to queries containing a customer account number and amount.’  The patentee argued that ‘a person skilled in the art would know that such a computer would be programmed to compare account data and amount data to those data structures and generate an authorization indicia if credit were available.’ We rejected that argument and explained that when a computer is referenced as support for a function in a means-plus-function claim, there must be some explanation of how the computer performs the claimed function:

To avoid purely functional claiming in cases involving computer-implemented inventions, we have consistently required that the structure disclosed in the specification be more than simply a general purpose computer or microprocessor. Because general purpose computers can be programmed to perform very different tasks in very different ways, simply disclosing a computer as the structure designated to perform a particular function does not limit the scope of the claim to the corresponding structure, material, or acts that perform the function, as required by section 112 paragraph 6. Thus, in a means-plus-function claim in which the disclosed structure is a computer, or microprocessor, programmed to carry out an algorithm, the disclosed structure is not the general purpose computer, but rather the special purpose computer programmed to perform the disclosed algorithm. Consequently, a means-plus-function claim element for which the only disclosed structure is a general purpose computer is invalid if the specification fails to disclose an algorithm for performing the claimed function.

Because there was no disclosed algorithm in that case, we held that the claims were invalid for lack of a sufficient recitation of structure. (citations omitted)

Drafting Tips: The key to drafting 35 U.S.C. § 112 ¶ 6 claims for computer-related inventions that disclose sufficient structure to perform the claimed functions, requires (a) sufficient detail to transform a general purpose microprocessor to a special purpose computer, while remaining cognizant that (b)  § 112 ¶ 6 means-plus-function claims are limited to the structure, material, or acts disclosed in the specification and their equivalents.  This can end up being a balancing act of including enough detail in the specification to provide sufficient structure for the “means” clause but doing so without unduly narrowing the claim scope of the “means” clause, which may be reduced with additional disclosure of the structure in the specification.

Moreover, it is critical to recognize the distinction between the level of detail that would enable ordinarily skilled artisans to make the invention (which goes to § 112 ¶ 1 enablement) and the level of detail to disclose sufficient structure (which goes to § 112 ¶ 6).  This may appear obvious, but numerous plaintiffs have muddled this distinction in recent years when arguing before the Federal Circuit.  “A patentee cannot avoid providing specificity as to structure simply because someone of ordinary skill in the art would be able to devise a means to perform the claimed function. To allow that form of claiming under section 112, paragraph 6, would allow the patentee to claim all possible means of achieving a function.” Blackboard.

The Federal Circuit has consistently held that claims invoking means-plus-function language for computer-implemented inventions require a specification that discloses a structure more than simply a general purpose computer or microprocessor.  Although not reiterated by the Blackboard Court, in Aristocrat the Federal Circuit explicitly stated that the patentee:

. . . was not required to produce a listing of source code or a highly detailed description of the algorithm to be used to achieve the claimed functions in order to satisfy 35 U.S.C. § 112 ¶ 6.  It was required, however, to at least disclose the algorithm that transforms the general purpose microprocessor to a ‘special purpose computer programmed to perform the disclosed algorithm.

This standard cited WMS Gaming, Inc. v. International Game Technology, 184 F.3d 1339 (Fed.Cir.1999), which held:

A general purpose computer, or microprocessor, programmed to carry out an algorithm creates “a new machine, because a general purpose computer in effect becomes a special purpose computer once it is programmed to perform particular functions pursuant to instructions from program software.”

. . .

In a means-plus-function claim in which the disclosed structure is a computer, or microprocessor, programmed to carry out an algorithm, the disclosed structure is not the general purpose computer, but rather the special purpose computer programmed to perform the disclosed algorithm.

Merely including language in the Specification that the function may be achieved through “any standard microprocessor” machine having “appropriate programming” is insufficient. Aristocrat.

More here on the RealTime Data lawsuit against Goldman Sachs, Thomson Reuters, Nyse Euronext, et al.

RealTime Data LLC (d/b/a IXO) sued numerous financial services defendants alleging infringement of four of RealTime’s patents relating to data compression.  RealTime filed the complaint on July 22, 2009, in the U.S. District Court for the Eastern District of Texas, and the four asserted encryption and compression patents are:

1. U.S. Patent No. 6,624,761, entitled “Content Independent Data Compression Method and System”
2. U.S. Patent No. 7,161,506, entitled “Systems and Methods for Data Compression Such As Content Dependent Data Compression”
3. U.S. Patent No. 7,400,274, entitled “System and Method for Data Feed Acceleration and Encryption”
4. U.S. Patent No. 7,417,568, entitled “System and Method for Data Feed Acceleration and Encryption”

 The defendants include Morgan Stanley, Bank of America Corporation, The Bank of New York Mellon Corporation, Credit Suisse Holdings, The Goldman Sachs Group, HSBC Bank USA, JPMorgan Chase & Co., and SWS Group.  Inc.

Realtime Data is a developer of software and hardware based data compression products, ranging from data compression cards to rack-mounted storage servers.

The USPTO issued U.S. Patent No. 7,567,937 entitled “System and method for automatically effecting payment for a user of an electronic auction system,” which is assigned to XPRT Ventures, LLC.

As the title suggests, the patent broadly covers a system and method for making automatic payments upon the conclusion of an auction.  The invention operates in a computerized electronic auction payment environment and makes a real-time payment for an item won in the electronic auction.

Claim 1:

A method for automatically effecting payment for a user of an electronic auction web site maintained by an electronic auction system, said method comprising the steps of:

maintaining a plurality of electronic payment accounts by an electronic auction payment system integrated with said electronic auction system, each of said plurality of electronic payment accounts storing funds therein and each being used for user transactions in the electronic auction system;

receiving authorization from the user prior to the beginning of an electronic auction provided by the electronic auction web site to execute an automatic payment method after the conclusion of the electronic auction, wherein the automatic payment method includes at least automatically deducting funds from one of the electronic payment accounts corresponding to the user of the electronic auction web site; and

executing the automatic payment method for the user after the conclusion of the electronic auction, if the user has provided authorization prior to the beginning of the electronic auction for executing the automatic payment method, the executing step being performed by at least one processor and comprising the steps of:

automatically deducting funds from the payment account corresponding to the user of the electronic auction web site; and

automatically transferring at least a portion of the deducted funds into at least one account for automatically effecting payment for the user of the electronic auction web site, wherein at least one payment source corresponding to the user of the electronic auction web site is used to obtain funds for storing within the payment account prior to deducting funds from the payment account.

Roger Russell is a tax attorney and a legal and accounting journalist with expertise across a wide spectrum of tax, legal and accounting issues.  In his article “The fight against tax patents: Profession, institute rally behind bill to block tax strategy patents,” appearing in a recent edition of Accounting Today he provides and update on tax method patents, including a discussion of recent case law and efforts on Capital Hill to pass legislation.

DealerTrack, a provider of on-demand software and data solutions for the U.S. automotive retail industry, had it’s patent (U.S. Patent No. 7,181,427) for credit application processing invalidated in light of the Bilski test.

A district court judge (C.D. Cal.) ruled this month that claims for a computer-aided method of managing a credit application are invalid under 35 U.S.C. § 101 because DealerTrack conceded that the claims do not meet the “transformation” prong of the Bilski test and the court determined that they also fail the “machine” prong of the Bilski test.

Specifically, DealerTrack argued that the asserted claims (see Claim 1 below) are tied to a central processor “consisting of a specially programmed computer hardware database,” a “remote application entry and display device,” and a “remote funding source terminal device.” (emphasis added)  The Court found that the patent does not specify how the computer hardware and database are “specially programmed” to perform the claimed steps.  The Court also construed that the “remote application entry and display device” could be “any device, e.g., personal computer or dumb terminal, remote from the central processor, for application entry and display,” and that the “terminal device” could be “any device, e.g., personal computer or dumb terminal, located at a logical or physical terminus of the system.

Accordingly, the Court found that none of these devices constitutes a “particular machine” within the meaning of Bilski, and therefore the claims are invalid under § 101.

DealerTrack indicated that it will appeal the decision.

Claim 1, an independent claim, recites a “computer aided method” of managing a credit application, consisting of the following steps:

[A] receiving credit application data from a remote application entry and display device;

[B] selectively forwarding the credit application data to remote funding source terminal devices;

[C] forwarding funding decision data from at least one of the remote funding source terminal devices to the remote application entry and display device;

[D] wherein the selectively forwarding the credit application data step further comprises:

[E] sending at least a portion of a credit application to more than one of said remote funding sources substantially at the same time;

[F] sending at least a portion of a credit application to more than one of said remote funding sources sequentially until a finding [sic] source returns a positive funding decision;

[G] sending . . . a credit application . . . after a predetermined time . . . ; or;

[H] sending the credit application from a first remote funding source to a second remote finding [sic] source . . . .

Today the USPTO issued U.S. Patent No. 7,565,307 to TC License Ltd., entitled “Automatic payment method using RF ID tags.”  The invention is directed towards cashless fueling transactions by using a vehicle-based decal sticker RFID tags that are associated with a unique customer identification number.  When fuel dispenser senses a tag, the tag information is sent to a network host via the POS where it is linked to a customer’s account for transaction processing and subsequent activation of the fuel dispenser.

Claim 1 reads:

A system for conducting cashless business transactions, comprising:

a plurality of fuel dispensers, each dispenser having at least one antenna and at least one vehicle presence detector,

said at least one vehicle presence detector determining presence of a stationary vehicle by:

(i) setting a stationary vehicle timer,

(ii) detecting the vehicle while said timer is running,

(iii) determining whether the timer has exceeded a predetermined threshold while the vehicle is detected, and

(iv) if the threshold has been exceeded, determining that the vehicle is stationary;

a controller having a tag reader for reading information from a tag connected to the vehicle when the vehicle is detected by said at least one vehicle presence detector,

the controller receiving information by:

(i) attempting to read the tag of the stationary vehicle,

(ii) setting a tag read timer,

(iii) determining whether a wait time for the tag reader has been exceeded,

(iv) if the wait time for the tag reader has not been exceeded, determining the tag reader was able to read the tag,

(v) determining whether the number of readings of the tag has exceeded a predetermined threshold,

(vi) if the threshold has been exceeded, determining whether the tag is a valid tag,

(vii) extracting data from the tag; and

a point of sale computer receiving tag information from the controller and processing the tag information to conduct a cashless business transaction.

Ex Parte Dickerson, Appeal 2009-001172 (BPAI 2009)

For anyone trying to discern best practices for drafting and prosecuting computer-related claims after In re Bilski, the Board of Patent Appeals and Interferences is making it difficult to find consistent trends.  In this case, the Examiner rejected the claims under 35 U.S.C. § 101 as being directed to non-statutory subject matter.  The claims recited an invention for a method and system for increasing the business value of a company in an industry by identifying a solution based upon its impact and the company’s performance gaps.  The Board reversed all of the § 101 rejections as follows:

The Board found that claims 32 and 33 recite articles of manufacture, which fall into one of the four categories of patent-eligible subject matter.

Claim 32 recites a program product stored on a recordable medium including:

program code configured to receive operational metrics and a set of solutions for application by the industry, wherein the operational metrics include a factor used to measure health or viability of a generic company in the specific industry, wherein the set includes one of a decision, an action, a product, and a service, wherein the specific industry is a grocery store.

 

Claim 33 recites a program product stored on a recordable medium including:

program code configured to receive operational metrics, a set of solutions for application by the industry, operational performance data of the company, and average operational performance data of companies within the industry, wherein the operational metrics include a factor used to measure health or viability of a generic company in the specific industry, wherein the set includes one of a decision, anaction, a product, and a service, wherein the specific industry is a grocery store.

That Board also found that claim 31 recites an apparatus, which is likewise statutory subject matter.

Claim 31 recites a computer system including:

an information system for receiving operational metrics, a set of solutions for application by the specific industry, operational performance data of the company, and average operational performance data of companies within the specific industry, wherein the operational metrics include a factor used to measure health or viability of a generic company in the specific industry, wherein the set includes one of a decision, an auction, a product, and a service, wherein the specific industry is a grocery store industry.

Finally, the Board found that claims 23, 29, and 30 recite a computerized method which includes a step of outputting information from a computer and, therefore, are tied to a particular machine or apparatus.

23. A computerized method for identifying a solution to address exposed performance gaps of a company in a specific industry, comprising:

first identifying a plurality of operational metrics for the specific industry, wherein the operational metrics includes a factor used to measure health or viability of a generic company in the specific industry, wherein the specific industry is a grocery store industry, wherein the operational metrics include at least one of a rate of inventory turnover and a number of customers per day;

assembling a set of solutions for application by the specific industry, wherein the set includes one of a decision, an action, a product, and a service;

assessing impacts of application of the set of solutions on the operational metrics for the specific industry, wherein the assessing includes determining which of the set of solutions has a negative impact on an operational metric and determining which of the set of solutions has a positive impact on the operational metric;

after identifying, assembling, and assessing, then comparing a current operational performance of the company to an operational performance of another company within the specific industry to obtain at least one performance gap, wherein the operational performance includes a performance of a company based upon the operational metric for the specific industry;

identifying a solution based upon the impacts to address the exposed performance gaps, wherein the solution is at least one of a decision, an action, a product, and a service that impacts a problem in a positive manner; and outputting the solution from the computer system.

Judge Paul A. Magnuson of the U.S. District Court for the Middle District of Florida ruled on Summary Judgment back in May that Every Penny Counts’ patent is invalid in light of In re Bilski.  EPC’s patent 6,112,191 is directed to a system that allows consumers to save a portion of a credit or debit transaction.

Now that the Supreme Court agreed to review In re Bilski, which occurred after Judge Magnuson’s ruling, EPC filed a motion on July 7, 2009 to stay execution of costs pending the Supreme Court’s review of Bilski.  The District Court granted the defendant’s motion for Summary Judgment based solely upon the Federal Circuit’s decision in Bilski, and EPC believes the Supreme Court’s review of Bilski is likely to have a significant impact on its action.

Because we are in a period of uncertainty until the Supreme Court renders its decision on Bilski, which may not happen for a year, we are likely to see more and more plaintiffs and applicants requesting similar stays or other delays until the Supreme Court speaks.

Ex Parte Guler, Appeal 2009-000415 (BPAI 2009)

The claimed invention is directed towards providing automated decision support for designing auctions and includes a structure extractor using historical auctions for similar items, a bidding behavior predictor based on estimated unknown elements of the auction, and an optimizer.  The Examiner rejected claim 1 as obvious under 35 U.S.C. §103 based on various references.

Claim 1:

A computer-implemented automated decision support system for designing an auction for a given item, comprising:

a structure extractor that estimates unknown elements of market structure of the auction based on auction characteristics data extracted from historical auctions for similar items and a bidding model matching the extracted auction characteristics data;

a bidding behavior predictor that predicts bidding behaviors of bidders in the auction based on the estimated unknown elements of market structure and characteristics of the auction;

an optimizer that employs an evaluation criterion to generate an evaluation of the auction based on (1) the estimated unknown elements of market structure and (2) the predicted bidding behavior of bidders.

The decision turned on whether the one of the cited references disclosed “a bidding model matching the extracted auction characteristics data.”  The Appellant asserted that the reference relied upon by the Examiner for this recitation is not based on a bidding model but instead based on recent trades and/or quotations, and that the reference failed to disclose a bidding behavior predictor that predicts based on “estimated unknown elements of market structure and characteristics of the auction.”  The Examiner asserted that the reference disclosed the claimed “bidding model” and that it would be implicit in the reference because there would be no basis for making any assumptions without a model.

The Board agreed with the Appellants, based largely on a definition in the specification:

We agree with the Appellants. Here, the Specification states that the term “market structure” means substantially the same as “auction environment.” Examples of “market structure” in the auction context are recited in the Specification as “environmental factors or conditions that may affect potential bidders in the actual bidding during the auction” (Spec. 9). Claim 1 requires:

a structure extractor that estimates unknown elements of market structure of the auction based on auction characteristics data extracted from historical auctions for similar items and a bidding model matching the extracted auction characteristics data;

a bidding behavior predictor that predicts bidding behaviors of bidders in the auction based on the estimated unknown elements of market structure and characteristics of the auction; . . . .

(Emphasis added.)

Thus claim 1 requires both: 1) a structure extractor that estimates unknown elements of the market structure based in part on a bidding model, and 2) a bidding behavior predictor that predicts bidding behaviors of bidders based on the estimated unknown elements of market structure (which is based on the bidding model). Thus, the claim requires that the “bidding behavior predictor” must 1) predict bidding behaviors of bidders and 2) be based on a bidding model. The Examiner has determined that Lupien does disclose a bidding model as claimed (Ans. 28). The Examiner has also determined that a bidding model would be implicit in Lupien since there would be no basis for making any assumptions without a model (Ans. 28). However even if such a “bidding model” was implicit in Lupien, it could not also function as the separately claimed limitation of a “bidding behavior predictor.”