Intellectual Ventures I LLC v. Capital One Financial

Again addressing the issue of subject-matter eligibility of computer-implemented claims, the U.S. Court of Appeals for the Federal Circuit found two patents to be directed to non-eligible subject matter, concluding that the invention merely applied abstract ideas using generic computer elements. Intellectual Ventures I LLC v. Capital One Financial, Case No. 14-1506 (Fed. Cir., July 6, 2015) (Dyk, J.).

Intellectual Ventures (IV) sued Capital One Financial on patents related to internet-based budget tracking, web page customization and scanning hard-copy images. IV stipulated to non-infringement for the hard-copy scanning patent after the district court’s claim construction required the recited machine-readable instruction form to be a physical document. After the district court held the claims of the other two patents were directed to ineligible subject matter and additionally that the claims of one of the two patents were indefinite, IV appealed.

On appeal, the Federal Circuit first addressed the budget tracking patent and agreed with the district court that it was directed to the abstract idea of tracking financial transactions to determine whether they exceeded a pre-set spending limit. The Court noted that while IV argued the claims were not directed to an abstract idea, it apparently conceded that budgeting itself is indeed an abstract idea. Turning to the second step of the Alice analysis looking for an “inventive concept,” the Federal Circuit found the recited database, user profile and communication medium elements to be merely generic computer elements, making the claims nothing more than instructions to apply the abstract idea on a generic computer. The Court also found it notable that the budgeting calculations of the claims could be made using pencil and paper.

As for the web page customization patent, rather than spell out the abstract idea, the Court instead looked to whether the claims covered a fundamental and long prevalent practice. It concluded that they covered the longstanding practice of customizing information based on information known about a user and tailoring delivered content based on navigation data. As examples of such tailoring, the Court cited newspaper inserts based on the recipient’s location and television commercials that were tailored to the time of day they were broadcast. With regard to the second step of the Alice analysis, recitation of a technological solution, IV argued that the claims were directed to a specific application of the idea. The Federal Circuit disagreed, noting IV’s successful urging of a broad claim construction for the claimed interactive interface that effectively covered a generic web server running software. The Court further concluded that the claims do nothing more than map out how to apply the application on a computer and therefore do not confer patent eligibility. In doing so, the Federal Circuit distinguished the patent upheld in DDR Holdings as addressing a problem unique to the internet and solved by a solution that departed from the conventional methods.

Finally, the Federal Circuit affirmed the district court’s construction of recorded “machine readable instruction form” as requiring a physical document. It upheld the construction, noting that the claimed step of separating hard-copy prints from the form before scanning and also based on prosecution history arguments emphasizing the physical nature of the claimed step.