Digest of MORTGAGE GRADER, INC. V. FIRST CHOICE LOAN SERVICES INC., NYLX, INC., No. 2015-1415 (Fed. Cir. Jan. 20, 2016). On appeal from C.D. Cal. Before O’Malley, Taranto, and Stark (by designation).

Procedural Posture: Plaintiff appealed the district court’s denial of its motion to strike defendants’ patent-ineligibility defense and grant of defendants’ motion for summary judgment that the asserted claims are patent-ineligible under 35 U.S.C. § 101. CAFC affirmed.

  • Motion to Strike Patent Ineligibility Defense: The CAFC held that the district court did not abuse its discretion in finding that, under the “standing patent rules” of the district court judge, the decision in Alice Corp. Pty., Ltd. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014) is a basis for good cause to amend invalidity contentions and that appellees acted diligently in adding the § 101 defense two months after the Alice opinion issued. The lower court also did not abuse its discretion in failing to consider prejudice where the applicable standing patent rule did not require consideration of prejudice, and appellant waived this argument by not presenting it at the lower court.
  • Patent-ineligible Subject Matter: The patents-in-suit are directed to systems and methods of financial transactions including a method for a borrower to evaluate and/or obtain financing. The CAFC agreed with the district court that the claims are drawn to patent-ineligible subject matter, finding that the lower court correctly applied the two-part test set forth in Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289 (2012), as clarified by Alice. Regarding the first step, the CAFC held that the claim limitations, analyzed individually and as a whole, recite nothing more than the collection of information to generate a credit grading and to facilitate anonymous loan shopping¬¬, an abstract idea. In analyzing the steps covered by the claims, the CAFC determined that they could all be performed by humans without a computer. Regarding the second step of the Mayo/Alice test, the CAFC reasoned that the claims add only generic computer components that do not satisfy the inventive concept requirement. The claims did not purport to improve the functioning of the computer itself or effect an improvement in any other technology or technical field, and the CAFC further ruled that the claims did not solve a problem unique to the Internet and were not adequately tied to a particular machine or apparatus.

Appellant also contended that the district court improperly resolved material factual disputes in connection with granting defendants’ summary judgment motion. The CAFC disagreed, recognizing that the § 101 analysis may be undertaken without resolving any fact issues. In making its patent-eligibility determination, the district court looked only to the claims and specifications of the patents-in-suit. The CAFC noted that although there were expert declarations in the record, the “mere existence in the record of dueling expert testimony does not necessarily raise a genuine issue of material fact.”