To salvage an otherwise patent-ineligible process, a computer must be integral to the claimed invention, facilitating the process in a way that a person making calculations or computations could not.

On July 26, 2012, in Bancorp Servs., L.L.C. v. Sun Life Assurance Co., the U.S. Court of Appeals for the Federal Circuit (Lourie,* Prost, Wallach) affirmed the district court's summary judgment that U.S. Patents No. 5,926,792 and No. 7,249,037, which related to systems for managing a stable value protected investment plan, were invalid under 35 U.S.C. § 101. The Federal Circuit stated:

"[A] process is not unpatentable simply because it contains a law of nature or a mathematical algorithm," and "an application of a law of nature or mathematical formula to a known structure or process may well be deserving of patent protection." However, "limiting an abstract idea to one field of use or adding token postsolution components d[oes] not make the concept patentable." In other words, a recitation of ineligible subject matter does not become patent-eligible merely by adding the words "apply it."

Bancorp argues that its system and medium claims cover tangible machines and manufactures and therefore cannot be considered patent-ineligible abstract ideas under § 101. According to Bancorp, the district court ignored the computer and hardware limitations in those claims when performing its § 101 analysis. . . . Bancorp contends that its process claims have specific applications to the marketplace and require complex computer programming. Bancorp also contends that the district court placed improper weight on the machine-or-transformation test, which, according to Bancorp, its process claims nonetheless satisfy.

Sun Life, in response, [argues] that the process claims fail the machine-or-transformation test because the claim steps do not require a computer to be [implemented]. Even if those claims required a computer, Sun Life contends, the claims are unpatentable, because the routine use of a computer to perform calculations cannot turn an otherwise ineligible mathematical formula or law of nature into patentable subject matter. Finally, Sun Life argues that the system and medium claims merely paraphrase the unpatentable method claims, and as a result they are not patent eligible for the same reasons as the method claims.

[A] machine, system, medium, or the like may in some cases be equivalent to an abstract mental process for purposes of patent ineligibility. . . . On the facts of this case, we hold that the district court correctly treated the asserted system and medium claims as no different from the asserted method claims for patent eligibility purposes. . . . The only difference between the claims is the form in which they were drafted. The district court correctly treated the system and method claims at issue in this case as equivalent for purposes of patent eligibility under § 101.

[W]e conclude that the claims cover no more than abstract ideas and therefore do not recite patent-eligible subject matter. Bancorp's primary argument boils down to the contention that because its claims are limited to being performed on a computer, they cannot claim only an abstract idea. Even aside from the fact, explained above, that Bancorp's independent method claims do not require a computer, Bancorp's position is untenable.

Modern computer technology offers immense capabilities and a broad range of utilities, much of which embodies significant advances that reside firmly in the category of patent-eligible subject matter. At its most basic, however, a "computer" is "an automatic electronic device for performing mathematical or logical operations." As the Supreme Court has explained, "[a] digital computer . . . operates on data expressed in digits, solving a problem by doing arithmetic as a person would do it by head and hand." Indeed, prior to the information age, a "computer" was not a machine at all; rather, it was a job title: "a person employed to make calculations." Those meanings conveniently illustrate the interchangeability of certain mental processes and basic digital computation, and help explain why the use of a computer in an otherwise patent-ineligible process for no more than its most basic function -- making calculations or computations -- fails to circumvent the prohibition against patenting abstract ideas and mental processes. As we have explained, "[s]imply adding a 'computer aided' limitation to a claim covering an abstract concept, without more, is insufficient to render the claim patent eligible."

To salvage an otherwise patent-ineligible process, a computer must be integral to the claimed invention, facilitating the process in a way that a person making calculations or computations could not. . . . The computer required by some of Bancorp's claims is employed only for its most basic function, the performance of repetitive calculations, and as such does not impose meaningful limits on the scope of those claims. . . . Here, Bancorp's patents "attempt to patent the use of the abstract idea of [managing a stable value protected life insurance policy] and then instruct the use of well-known [calculations] to help establish some of the inputs into the equation." [T]he claims do not effect a transformation, and the fact that the required calculations could be performed more efficiently via a computer does not materially alter the patent eligibility of the claimed subject matter. We discern no fault in the conclusion of the district court that the asserted claims do not meet either prong of the machine-or-transformation test -- which, while "not the sole test for deciding whether an invention is a patent-eligible 'process,'" remains "a useful and important clue, an investigative tool, for determining whether some claimed inventions are processes under § 101."

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 asserted claims require determining values-for example, "an initial value based on a value of underlying securities," "fee units," "surrender value protected investment credits," "an investment value and a value of the underlying securities for the current day," and "a policy value and a policy unit value for the current day" -- and then "storing," "removing," and/or "accumulating" some of those values. As the formulae in the specification indicate, the determination of those values, and their subsequent manipulation, is a matter of mere mathematical computation.

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. Bancorp's claimed abstract idea impermissibly "preempt[s]" the mathematical concept of managing a stable value protected life insurance policy. Bancorp further contends that its claims cannot be preemptive because Sun Life alleged that its stable value protected products do not infringe Bancorp's claims. That argument, while creative, is unpersuasive. The Federal Rules permit a party to plead in the alternative. Sun Life's alternative assertion of noninfringement does not detract from its affirmative defense of invalidity under § 101. . . . Because Bancorp's asserted claims are directed to no more than a patent-ineligible abstract idea, we affirm the district court's holding of invalidity under § 101.