PTP OneClick asserted its ’915 patent against Avalara in the Western District of Washington; the court quickly dismissed those claims and held that the asserted claims were directed to “the abstract concept of calculating and filling business tax returns” with no inventive concept to be found.

The Asserted Patent

PTP’s ’915 patent was directed to a "system and method for automatically preparing state and local sales and use taxes." The claimed systems and methods "determine the appropriate tax return forms that are required based on the zip code of the location of the business and fills in the appropriate data into the appropriate places in those tax forms thus greatly facilitating the preparation of tax returns."

The patent acknowledged that the steps it recites—calculating taxes and preparing and filing tax returns—have been accomplished by accountants for generations, but in addition to the tax preparation steps, the claims included a computer, a database, and a computer network.

The Court’s Analysis

The court first noted that methods that can be performed entirely in the human mind are abstract and non-patentable because they are basic tools "that are free to all men and reserved exclusively to none." With software patent claims, the court set to determine whether the claims focus on an asserted improvement in computer capabilities or, instead, on a process that qualifies as an abstract idea for which computers are invoked merely as a tool. The court decided it was the latter: the claims “are directed to a long-known, human-performed process: calculating and filing business tax returns."

The claims fared no better at step two of the Alice inquiry: the claims fail "to transform the abstract concept of calculating and filing business tax returns—activities that tax-preparers and business people have been engaged in for decades or more—into a patentable idea." The court found that the claims added nothing more than a generic “computer” and “computer network” to the abstract concept.

PTP invoked Berkheimer and Aatrix in an attempt to survive an early decision, but the court found this unpersuasive because the improvements described in the patent related to speed and accuracy. This is merely “automating the tax preparation practice through the use of a generic computer or computer components performing routine functions.” PTP pointed to nothing in the patent directed to the improvement of the computer itself.

PTP also urged the court to defer to an earlier PTAB decision, where the PTAB reversed the patent examiner’s determination that the patent’s claims were not directed to patent-eligible subject matter. The court again found this unpersuasive. First, the court noted that the PTAB decision was not binding on the court, even though "district courts generally give deference to PTAB inter partes review decisions based on the PTAB’s specialized knowledge and expertise." Second, the court corrected PTP’s argument and stated that the PTAB did not consider whether the patent claims were eligible subject matter. Instead, the PTAB found the examiner’s summary to be inadequate without weighing the merits. For this reason, the PTAB decision did not even warrant deference.

The court granted Avalara’s motion to dismiss the patent claims without leave to amend and with prejudice. PTP’s claims for misappropriation of trade secrets, however, did survive the motion to dismiss.