A new decision of the Federal Circuit (Lourie, Prost and Wallach) concerning a business-method invention — Bancorp Services LLC v. Sun Life Assurance of Canada — was handed down on 26th July and provides a companion case to CLS Bank v Alice.
The inventions described in Bancorp’s US Patents 5,926,792 and 7,249,037 concerned methods, media and systems for administering and tracking the value of life insurance policies. A representative claim reads:
A life insurance policy management system comprising:
a policy generator for generating a life insurance policy including a stable value protected investment with an initial value based on a value of underlying securities of the stable value protected investment;
a fee calculator for calculating fees for members of a management group which manage the life insurance policy;
a credit calculator for calculating credits for the stable value protected investment of the life insurance policy;
an investment calculator for determining an investment value and a value of the underlying securities of the stable value protected investment for the current day;
a policy calculator for calculating a policy value and a policy unit value for the current day;
digital storage for storing the policy unit value for the current day; and
a debitor for removing a value of the fees for members of the management group which manages the life insurance policy.
The need for claim construction was a preliminary issue. The Court held that there was no requirement that claim construction be completed before examining patentability. For example in Bilski the Supreme Court found the claimed subject matter ineligible for patent protection without claim construction. However, it would ordinarily be desirable—and often necessary— to resolve claim construction disputes prior to § 101 analysis because the determination of patent eligibility required a full understanding of the basic character of the claimed subject matter. In the present case, construction of the claims lead to the conclusion that although most claims required implementation on a computer, certain of the method claims did not.
On the facts, it was found that asserted system and medium claims were no different for patent-eligibility purposes from method claims. Mere implementation on a computer did not suffice for patentability, and to salvage an otherwise patent-ineligible process, a computer must be integral to the claimed process, facilitating that process in a way that a person making calculations or computations could not. The claims in the present case were not materially different from those in Bilski and did not meet either prong of the machine or transformation test. There was a significant difference from Research Corp v Microsoft where in rendering a halftone image the inventive mask produced higher quality images while using less processor power and memory space (compare the classic EPO Appeal Board decision in Vicom). Here the computer was simply performing more efficiently what would otherwise be accomplished manually.
Sometimes a decision is as important for what it does not do than for what it does. No criticism was made of the views expressed by the majority (Judges Linn and O’Malley) in CLS of the respective roles played by §§101, 102, 103, and 112 nor was there criticism of the holding in CLS that the abstract ideas exception under § 101 should be given a narrow interpretation and a “manifestly evident” standard should be applied before claimed subject-matter should be held patent-ineligible. The EPO applies what might be referred to as a “subtraction” test for claims containing a mixture of patent-eligible and patent-ineligible features, those features that are patent-ineligible being disregarded and novelty and obviousness under aa. 54 and 56 EPC being evaluated on the basis of the remaining features. Judge Lourie suggested a somewhat similar “subtraction” test here:
“When the insignificant computer-based limitations are set aside from those claims that contain such limitations, the question under § 101 reduces to an analysis of what additional features remain in the claims… The district court correctly held that without the computer limitations nothing remains in the claims but the abstract idea of managing a stable value protected life insurance policy by performing calculations and manipulating the results.”
In relation to possible inconsistency with CLS, Judge Lourie explained:
“In faulting the district court for “ignoring claim limitations in order to abstract a process down to a fundamental truth,” … we explained that the asserted claims in CLS were patent eligible because “it [wa]s difficult to conclude that the computer limitations . . . d[id] not play a significant part in the performance of the invention or that the claims [we]re not limited to a very specific application of the [inventive] concept,” … Here, in contrast, the district court evaluated the limitations of the claims as a whole before concluding that they were invalid under § 101 … As we explained above, the computer limitations do not play a “significant part” in the performance of the claimed invention. And unlike in CLS, the claims here are not directed to a “very specific application” of the inventive concept; as noted, Bancorp seeks to broadly claim the unpatentable abstract concept of managing a stable value protected life insurance policy.”
Two conclusions may be drawn from the opinion in Bancorp. Firstly, in business method cases the outcome is highly fact-sensitive and cases involving similar-looking claims can easily have opposite outcomes. And secondly in business method cases it may not be enough to provide a full description of the method itself: saving features may be found in the practical implementation of the method using the available hardware and software. It is therefore vital at the initial drafting stage to drill down into the details of implementation to find out if and how the computer plays a significant part in the implementation of the business method because that is where the patentable subject-matter is likely to be found.
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2 comments so far.
EGJuly 27, 2012 12:22 pm
“The EPO applies what might be referred to as a ‘subtraction’ test for claims containing a mixture of patent-eligible and patent-ineligible features, those features that are patent-ineligible being disregarded and novelty and obviousness under aa. 54 and 56 EPC being evaluated on the basis of the remaining features.”
Nice EPO counterpoint to my article on this case. The “subtraction test” employed by the EPO is supposedly “verboten” in view of Diamond v. Diehr (and CLS Bank International definitely follows the Diehr rule), but you would never believe it after Mayo Collaborative Services or Bancorp Services. That’s one reason why determinations of patent-eligibility of busness methods and systesm under 35 USC 101 are in chaos here in the States. As I’ve said before, I could do better using a Ouija Board.
Mark NowotarskiJuly 27, 2012 11:56 am
It is therefore vital at the initial drafting stage to drill down into the details of implementation to find out if and how the computer plays a significant part in the implementation of the business method because that is where the patentable subject-matter is likely to be found.(emphasis added)
As someone that specializes in insurance patents (and writes a bimontly newsletter on the subject), I completely agree.