Patented method for analyzing borrower financial data invalidated under Alice


March 15, 2017

The federal district court in San Diego did not err in ruling on summary judgment that a patent claiming a method for electronically certifying a potential borrower’s financial account data and providing a credit report was invalid because the claims were directed to a patent-ineligible abstract idea and offered no additional elements to make the invention patentable, the U.S. Court of Appeals for the Federal Circuit has held (Clarilogic, Inc. v. FormFree Holdings Corp., March 15, 2017, Reyna, J.).

FormFree Holdings Corporation owned U.S. Patent No. 8,762,243 (the ’243 patent), entitled "Systems and Methods for Electronic Account Certification and Enhanced Credit Reporting." The patent generally related to a method for electronically certifying a potential borrower’s financial account data and providing a credit report.

Clarilogic, Inc. filed suit against FormFree Holdings, and moved for summary judgment that all 18 claims of the ’243 patent were invalid for failure to claim patentable subject matter under 35 U.S.C. §101. The district court granted the motion, finding that "[a]t best, the claims describe using generic, multi- purpose computer functions to automate the fundamental economic process of financial risk assessment." Clairlogic appealed.

The Federal Circuit, applying the Supreme Court’s two-step Alice framework, affirmed the district court’s judgment.

Alice step one. Under Alice step one, a court examines patent claims in their entirety to ascertain whether their character as a whole is directed to an abstract idea or other excluded subject matter. Independent claim 1 of the ’243 patent was representative. Claim 1 recited a method for "providing certified financial data indicating financial risk about an individual," comprising the steps of (1) receiving a request, (2) electronically collecting financial data, (3) transforming the data into a desired format, (4) validating the data by "applying an algorithm engine," (5) analyzing certain exceptions, and (6) generating a report. The court noted that the algorithm engine itself was not claimed.

The court found that claim 1 of the ’243 patent was directed to the abstract idea of gathering financial information of potential borrowers. "[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, the court said.

Alice step two. In step two of the Alice test, a court considers the elements of the claims, both individually and as an ordered combination, to assess whether the additional elements transform the nature of the claims into a patent-eligible application of the abstract idea. However, merely reciting the use of a generic computer is not transformative.

FormFree argued that its invention was transformative because it took in financial data and output a report. The court disagreed. The claims of the ’243 patent required only off-the-shelf, conventional computer technology for gathering, analyzing, and displaying the desired information. The ’243 patent did not claim the technical manner in which financial data is gathered, analyzed, or output; nor did it claim any proprietary risk-assessment algorithm, the court observed. Even if the ’243 patent invoked internet-based systems to increase speed, as FormFree argued, this was insufficient to make the invention patent-eligible.

The Federal Circuit accordingly affirmed the district court’s judgment that the claims of the ’243 patent were ineligible under Section 101.

The case is No. 2016-1781.

Attorneys: Arthur Albert Wellman, Jr., for Clarilogic, Inc. Nigamnarayan Acharya (Baker Donelson Bearman Caldwell & Berkowitz, P.C.) for FormFree Holdings Corp.

Companies: Clarilogic, Inc.; FormFree Holdings Corp.

MainStory: TopStory Patent FedCirNews

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