Section 101 Invalidates Another Financial Services Patent

In what is beginning to look like a deluge, another district court has invalidated a set of asserted patents as lacking eligible subject matter under 35 U.S.C. 101 as interpreted by the Supreme Court in Alice Corp. (2014).

Every Penny Counts (EPC) v. Wells Fargo Bank (M.D. Fla. September 2014) EveryPennyCounts101

EPC’s invention is a computerized method for rounding-up credit and debit transactions to the nearest dollar and then putting the extra money to a special use. See U.S. Patent Nos. 8,025,217 and 7,571,849.

Claim 1 of the ‘217 patent is listed as follows:

1. A system for accumulating credits from a customer account belonging to the customer and managed by an institution and placing the credits into a provider account, comprising:

an information processor; said information processor including a data store with data identifying the customer, the rounding determinant, the managed institution, and the account;

said data store including machine readable instructions authorizing the processor to access and read the customer account;

said data store including machine readable instructions to calculate rounders after receiving a plurality of payment transactions from the read customer account and to calculate an excess based on the rounders;

said data store including machine readable instructions to withdraw the excess from the customer account;

said data store including machine readable instructions to transfer the withdrawn excess to the provider account.

In a previous decision (pre-Nautilus), District Court Judge Merryday had found the claim to “lack definiteness” but yet not fall to the standard set by the Federal Circuit for a finding of invalid-as-indefinite.  Under the Supreme Court’s Nautilus decision the claim may in-fact be legally indefinite.  However, Judge Merryday shorted the invalidity decision by finding all of the claims of both asserted patents invalid as indefinite.

In judging this claim under the two-step Alice Corp approach, Judge Merryday first identified the abstract idea that the claims are “drawn to” as “the concept of routinely modifying transaction amounts and depositing the designated incremental differences into a recipient account.”  The court explained that this concept is an abstract idea because as in Alice and Bilski, it is a “basic concept” and a “fundamental economic practice long prevalent in our system of commerce.”  Judge Merryday took steps to provide a variety of examples of how the concept has been historically known and used. Since an abstract idea was identified within the claim, the court then moved to the second step of the Alice Corp analysis — determining whether the claim contains an ‘inventive concept’ sufficient to transform the claimed abstract idea into a patent eligible application.  On that point, the court found that each step in the method included “purely conventional” uses of a computer to do the type of tasks that you would expect a computer to be used for such as receiving data, rounding, adding, etc. As such, those steps were insufficient to overcome the step-two hurdle.

In sum, the ’849 patent, a method patent, is invalid under Section 101 because the patent claims an abstract idea that is implemented by “well-understood, routine, conventional activities previously known to the industry.” Alice (2014).  Similarly, the ’217 patent, a system patent, is invalid under Section 101 because the patent merely implements – on a generic, unspecified computer – the ’849 patent’s (unpatentable) method.

What we’re still looking for is a post-Alice court decision that upholds a computer-method patent under Section 101.

123 thoughts on “Section 101 Invalidates Another Financial Services Patent

  1. 15

    Ned Heller September 13, 2014 at 7:12 pm wrote:

    “The statute requires that a machine be new or improved, and useful. An economic principle is not a machine.”

    Yes, but an “economic principle” is a process. Therefore the statute requires that a “process” be new or improved, and useful. And when a “process” meets those conditions it is statutory.

    Ned then goes on to say: “Placing an economic principle on a machine does not improve the machine. Using a machine to assist in calculating economic principle improves the utility of the economic principle.”

    However “Integrating” a process, (be it economic or otherwise) with a machine does improve the utility of the process, and makes the “process” statutory. This was established as controlling case law in Diehr, explicitly upheld in Prometheus, and was not overturned in Alice. Your new found obsession with the old pre atomic age case of ” Hotel Security” is largely irrelevant to the Court’s modern “Integration Analysis”.

    Furthermore, your celebration of the overturning of software patents is vastly misplaced and will be short lived. As those cases are processes that can be performed independently of the technology of which they are being used on. Thus they are not legally “integrated”. However as we speak, astute Patent Attorneys and their clients are already filing new process inventions that are fully integrated with technology be it a pencil and paper, nail and hammer, or a complex information process system. This new crop of patent applications are untouchable at 101, ( although all will rise and fall on the merits of novelty and obviousness.) once a new “integrated” process application reaches the Supreme Court it will be upheld and a new floodgate of business methods, software, and computer system patents will be granted. And barring an act of congress there is nothing anyone can do to stop it.

    1. 15.1

      IA, “Your celebration of the overturning of software patents is vastly misplaced…”

      Obviously, you do not read my posts.

      My “celebration” is that State Street Bank is effectively overturned. This has something to do with what kind of patent, IA?

      IA, it appears you do not seem to understand Hotel Security. Just to make sure that you understand it, can you site or quote the passage that made it a landmark case?

    2. 15.2

      Also IA, you state that an economic principle is a process as if that were the complete answer to it eligiblity.

      Please then explain Bilski.

    3. 15.3

      Good post. Don’t let all the negativity get you down there is quite an anti-information processing crowd around here and no more anon to beat them back.

  2. 14

    Dennis: a few points

    1) the anti-software patent crowd’s celebration is going to be short lived, because it is still relatively easy in prosecution to finesse claims to pass 101

    2) once the new crop of cases is born immunized with the PTO “vaccination” they will be much harder to challenge in Court

    3) some of the recent Court cases don’t do a Markman before finding the claims invalid; I bet those cases get challenged on administrative/due process grounds, or, if they don’t, it will lead to an interesting scenario later on when patents falling under #2 above are challenged without undergoing an invalidity analysis that mirrors PTO procedures – if the patent is presumptively valid the Court must demonstrate that the entire underlying examination was wrong

    4) Clients want to avoid investing in a Markman so #3 is working in their favor now, and they are jumping on the bandwagon to get early dismissals… but paradoxically this works against defense bar interests who love to milk cases. As between the firm and the client you can guess who gets priority – I suspect the former won’t work ….too hard in favor of precedent that makes Markmans unnecessary as that will reduce their fees significantly.

    In closing, while it will come as a surprise to the NPEs in the game, I predict an another faux “scholarly” study from the Lemleys of the world, arguing that the expedited 101 procedures are (shock!) …unconstitutional. This little bit of chicanery will be used to adorn their “objective scholar” credentials in all things patent.

    Mark my words!

    1. 14.1

      Great post JNG. I still would like Mark Lemley to tell us how he protects IP at his startup. My guess: draconian employment contracts and trade secrets. Oh boy, just the kind of world we want.

    2. 14.2

      JNG – I think your post here is very important. The hardest lobbying in congress and pushes for reform are focused around already issued patents — either by folks who want to avoid those patents or by folks who want to enforce them. A much smaller number are working seriously on the long-game.

      That said, some will celebrate a reprieve even if only for a few years.

    3. 14.3

      As between the firm and the client you can guess who gets priority

      Please tell us “who gets priority,” JNG, when a decision needs to be made between “milking a client” and ending a case quickly in the client’s favor because it can be done quickly.

      If you believe the answer is “the firm”, can you tell everyone why that is the case? Otherwise it seems as though you are revealing only the choice that you would make if you were the attorney.

      Please, commenters, don’t forget that not every attorney out there is motivated by making tons of money off the backs of naive clients.

      1. 14.3.1

        “Please, commenters, don’t forget that not every attorney out there is motivated by making tons of money off the backs of naive clients.”

        I could not agree with you more. Most I believe are focused on doing good work and being handsomely and justly rewarded for it.

    4. 14.4

      JNG, 1) the anti-software patent crowd’s celebration is going to be short lived, because it is still relatively easy in prosecution to finesse claims to pass 101

      Can you give us an example?


          Dennis, ditto, Bilski.

          JNG, we, an I bet, 10,000 other attorneys, are looking forward to you reply.

  3. 13

    “circuits are just like those information”

    Just like is not the same. “Just like” is an abstraction.

    You seem to not understand the fundamentals.

    Without something to TRANSLATE reality into the abstract information, and something to TRANSLATE from the abstract information back into reality – you have nothing.

    And taking Mano out of context is just wrong.

    1. 13.1

      drat – Apologies, this is in the wrong place for some reason.

      It was supposed to be under

    2. 13.2

      I am not taking Mano out of context.

      And what abstraction are you talking about? I am talking real working software/hardware/firmware. Where is the abstraction?

      And, let’s talk about real abstraction as understood by engineers in the ladder of abstraction (and not this term used by SCOTUS to mean anything that we feel like shouldn’t be a patent.)

      1. 13.2.1

        Mathmematics is an abstract activity. Computers were created my mathematicians directing engineers.

        The mathematics is abstract, whether you like it or not. A “computer” can be human, or machine. There is no difference in the math, and no difference in the result.


          Jesse, all of engineering is working with abstractions. Read Newman’s dissent or concurrent can’t remember in Bilski en banc.

          This bizzarro use of “abstract” is so odd as to have no retort. You make up some noun and say that information processing is this noun and that things of this noun are not eligible for patentability.

          How about trying to functionally tell us why information processing isn’t eligible compared with say mechanical inventions.


            adjective: abstract

            existing in thought or as an idea but not having a physical or concrete existence.
            “abstract concepts such as love or beauty”
            synonyms: theoretical, conceptual, notional, intellectual, metaphysical, ideal, philosophical, academic;

    1. 12.1

      *Is the name of the game … no longer the claim?*

      That has always been an oversimplified bromide. The Supreme Court has always said that the meaning and validity of claims does not “depend on the draftsman’s art.”

      The actual substance and meaning of the claim taken as a whole in view of the disclosure in the specification and the state of the art … is the name of the game.

  4. 11

    Isn’t “purely conventional” a lot like obvious? Which is it? – subject matter eligibility or obviousness?

    1. 11.1

      Paul, it is Hotel Security Checking Co. v. Lorraine Co., 160 F. 467 (2d Cir. 1908), a case followed by every court in the U.S., including the CCPA/Federal Circuit, e.g., In re Huai-Hung Kao, 639 F.3d 1057 (Fed. Cir. 2011).

      The matter is handled under 101 if the statutory subject matter is known to be old.

      1. 11.1.1

        I have not read that case. But, from a simple perspective, (one of statue – not case law), it seems to me that subject matter eligibility should answer the question of what is a patentable thing… If the statute did not include anticipation or obviousness, the subject matter eligibility may relate to those things. However, the statute does provide for things done in the past and things that are obvious to do.

        With that perspective, how does one say that an invention is a “basic concept” and a “fundamental economic practice long prevalent in our system of commerce” and call it not subject matter eligible instead of obvious or anticipated with a straight face?


          Paul, when a claim includes both — the eligible and the ineligible, the statutory and the nonstatutory, the courts simply give the nonstatutory no weight.


            It apears they have given nonstatutory weight and the statutory no weight. The court called it a “fundamental economic practice long prevalent in our system of commerce”. “long prevalent” means to me that it was disclosed prior to the patent – anticipated. Perhaps obvious to put encapsulate it into software.

            So what does that have to do with 101? Putting it on a computer improves it. Is an economic practice not subject matter eligible?

            I’m not a lawyer, but the logic here is messed up.


              to me it would look the same as patenting “on a tractor”.

              Does attaching a plow “on a tractor” improve plowing? yes.

              But is it something patentable? NOPE.

              After all, a tractor is DESIGNED to have things attached.

              Do you patent the “configuration” of a plow “on a tractor”? nope.


                So a tracker is a Turing Machine? Or is it Jesse the truth that you really don’t understand information processing?

                My guess is that is the ladder. If you have a background in this stuff, what grade did you get in theoretical computer science?

                1. And if you haven’t figured it out yet Jesse software does make the GPC a new machine. That goes all the way back to the design of the GPC by von Neumann.

                  The best way to think about software is as a component.

                2. A TRACTOR is like a Turing machine…

                  It takes abstract directions (start, stop, change speed, change gears, change direction, raise attachments, lower attachments).

                  It is designed to carry out a LOT of operations depending on the configuration… It can plow snow, plow a field, tow a trailer, water a field, apply fertilizer, harvest crops, pull other vehicles out ditches, cut grass, dig ditches, …

                  But each configuration does not convert the tractor into a new machine…

                3. Jesse the tractor is not doing these things by itself. A human brain is doing this different things with the tractor.

                  You see that is why this line of cases the new use for an old machine rose as it is a back door to patenting a method the human brain is carrying out.

                4. Some tractors are self directed… There are driverless tractors going back to the 40s. Not necessarily successful, but they did exist.

                  And my grade? A.

                5. >some tractors are self-directed?

                  So, then the tractor is using information processing machine?

                  Please Jesse. Use your training to think.

                  What is the difference between a squirrel and human?

                6. The tractor IS the information processing machine.

                  In one case it is by means of a cable that wraps around a pole. In another it is following a cable buried underground.

                  In most modern cases, it is carrying out directions from a GPS receiver and usually attached to a general purpose computer.

                  As for the difference between a squirrel and a human – Not much.

                  All the squirrels I know carry out a fairly large amount of computation. They can solve 3D mazes better than humans even. Some seem to be even smarter than humans at times.

                7. I see so the tractor is self-propelled and able to do just a few things, but then when more hardware is added (or maybe software or firmware) the tractor is then able to plow snow.

                  So, a new component allows it to plough snow. Sounds like a great invention.

                8. Just like adding a new peripheral to a computer…

                  Yet you don’t patent the computer again…

                  And you don’t patent the tractor again.

                  Or patent the use of the attachment…

                  After all, the tractor can do a LOT of things. It is still just a tractor.


              The Nonstatutory is given No Patentable weight.

              The logic is not backwards if you think about it for a moment.


                The logic? What logic? According to you if it is a special purpose chip then it is eligible, but if it is a GPC + software it is not.

                Right! So, two things that are identical from a functional point of view in operation get different results. You have dig deep into the black box before you decide if it is eligible. That is not logical.

                1. Night, the circuit was in a larger machine, a graphic unit an oscilloscope. The machine was an oscilloscope.

                2. It doesn’t seem like it should be that hard…

                  If a device is interpreting instructions to emulate a real function…. then the emulation must be abstract.

                  If the device is actually DOING the function… it is a mechanism.

                  I realize there may be some odd corner cases… But all digital circuits are an emulation of boolean algebra.

                  I don’t see a problem patenting an arrangement of digital circuits… but I don’t accept patenting the boolean algebra, or algorithms based on boolean algebra.

                3. Jesse: there aren’t “odd corner cases.” What you say swallows almost all of electrical engineering. Why do people like you who are clearly ignorant of the technology feel like you understand computers?

                  I really don’t get it. I have been teaching computer science probably for more years than you are old. I have seen it go from people like J. Stevens having his eyes glaze over at the mere thought of a computer. Now, there are all these people that think that what you do is you just tell the computer what to do and it does it. And that’s it.

                  What ignorance. In fact, what is profound is how disappointed computer scientist are in themselves in how little progress they have made. WHY? Because it is so hard to get computers to do what we envision them to do.

                  But, here comes J. Stevens and Taranto. Oh no, the way it works is you just write down what you want and take it to a boy to program. Uh, no.

                  Ignorant. Ignorant. Ignorant.

                  Jesse: someone can put into almost any circuit a little loop to read from a ROM instructions rather than making a special purpose circuit. You see circuits are just like those information processing methods.

                  Ignorance. Ignorant.


                I’m either not understanding or not making my point clear.

                Statute says that something already done is anticipated or it is a obvious improvement.

                The court called it a “fundamental economic practice long prevalent in our system of commerce”.

                How can it be that something that existed is considered non-patentable subject matter instead of anticipated or obvious?

                1. We are not talking about the same thing are we?

                  The statute requires that a machine be new or improved, and useful.

                  An economic principle is not a machine.

                  Placing an economic principle on a machine does not improve the machine. Using a machine to assist in calculating economic principle improves the utility of the economic principle.

                  I do recommend that you read Hotel Security and its progeny that distinguish between the nonstatutory economic principles, printed matter, and the like from the underlying statutory subject matter such as articles manufacture or machines. The cases required a statutory part to be new or improved, and useful.

                  Trust me, if you listen to the oral argument in Alice, the Supreme Court fully understands that the hardware in these claims is old and generic and is not improved. The innovation, if anything, is in the software are in the business method and that is not statutory.

                2. >>An economic principle is not a machine.

                  The machine was working and useful. In all of these cases that is true. So there was a machine there doing useful work. So, according to you, it wasn’t an economic principle.

                  You are just a judicial activist Ned. Go to Congress.

  5. 10

    Yet another case that demonstrates the Alice standard is broken. One result only appears to possible when it is applied: patent ineligibility.

    Didn’t Our Judicial Mount Olympus scold the Federal Circuit for “inflexible tests.” What utter sophistry and hypocrisy from the Royal Nine.

  6. 9

    The patents in this action describe an abstract idea that lacks a convenient, catchy moniker, such as Bilski’s “risk hedging” or Alice’s “intermediated settlement.” Perhaps the moniker most precisely identifying the present patent is “salami slicing.” See Larios v. Nike Retail Servs., Inc., 2013 WL 4046680 (S.D. Cal. Aug. 9, 2013) (Curiel, J.) (defining “salami slicing” as the method of “remov[ing] something gradually by small amounts at a time”).

    That is the nut of the case. That is what we have devolved into. Can a judge capture your invention in what he/she thinks is a concept or abstract idea that they understand and believe is old, but as Dennis brought up is likely not a needed element. So, take away: watch out for those catchy monikers.

    Again, another 103 analysis done under Mayo. Conclusion Mayo has over ruled Graham. I don’t think Graham should be considered good law anymore.

    1. 9.1

      Night, the most important part of the case is the discussion of the hardware, part II. That part, the statutory part, was old.

      Hotel Security.

      1. 9.1.1

        So, if they make a special purpose chip that does EXACTLY the same thing then it is statutory?


          I would think so… after all, the patent would be on the chip, not the algorithm.

          Now in my opinion it should still have a problem if the chip is a SOC as it is still a mathematical algorithm being interpreted. An ASIC would seem to be direct implementation. Again, may be problem for FPGAs as the FPGA is already designed to handle anything (most even have a CPU builtin for doing interpretation, as do some ASICs). I still have qualms over patenting “configurations” of an existing patented device designed to handle any “configuration” of that device.


              Not exactly. It was using a general ALU for arithmetic… which in itself is the hardware, but not the algorithm directing the hardware… and the patent was on the algorithm.

              A separate item not pointed out is that using such a filter hides the actual signal – which has a much higher frequency than what the A/D converters could handle, thus the resulting “waveform” is inaccurate, but within the measuring limits of the hardware used.

              If they had used actual hardware implementation, it would have been using an op-amp to handle the arithmetic on the raw signal… Much faster than digital, and could be more accurate as well.


              BTW, it looks like the algorithm is also the same as what is used in CD players when converting digital audio stream back into analog…

              In both case, higher frequencies are lost, and not reproduced, which turns it into a low pass filter.


            Jesse, whether or not it is eligible should not depend on its form. Frankly, Ned’s analysis is right out of the iron age.


                jesse: software does physical exist. You see we are hitting here your ignorance. You think like someone from about 1900 like J. Stevens.

                Where is the software jesse if it does not have physical form? And it must have structure to have physical form.

                That is reality jesse. Ideas exist in your brain. They have physical form. J. Stevens doesn’t believe that. He believes his spirit thinks in the ether.

                1. There is no fixed form for information.

                  As for ideas in the brain – where. Even memories have not been identified yet – there is no molecule for memory. Even when parts of the brain are removed with people “forgetting”… it still isn’t gone, just made more difficult to recall.

                  You just don’t want to believe it. Memory appears to just be a state… If it existed in a structure in the brain, it would STILL exist when the brain is dead – yet it still can’t be identified or even located.

                  Abstract thought should not be patentable. It is a sure way to slavery.

                2. No fixed form? Yes it does have a fixed form. And as to your brain it must exist in your brain as structure or it wouldn’t exist.

                  Physical form means structure. No two ways about that.

                  And information processing methods have structure. Do you know how to make a chip?

                  Slavery? The opposite is true. The patents free up the worker by forcing the company to disclose and thus freeing the worker to be mobile and interact with others outside the company. The slavery comes from the company turning things into trade secrets.

                3. Yes, information in the brain is not in a fixed form. That is one of the reasons you FORGET things. And if you don’t USE THEM you also will forget them….

                  The living brain is constantly replacing itself… so any “fixed form” there is an illusion, not reality.

                4. Making a chip? In practice, no. But I do know that every computer chip emulates boolean operations. And boolean operations is the first level of abstraction.

                  The second level is using boolean operations to emulate the math based instruction cycle.

                  The third level is the instruction set of a given CPU.

                  The fourth level is the machine code program to direct the CPU.

                  And depending on higher level languages (such as C) is a fifth level abstraction.

                  Using other programs to write programs (such as Mathmatica, that read math formula for instance, and write C code) is yet another abstraction level.

                  There have even been experimental applications that read English text and write programs. (As I recall, they worked fairly well when the English was restricted to about an 8th grade level, but that was too restrictive for general use…).

                  So when they get better (hello Watson) I highly suspect that for most programs they will be using English to write programs. I think you will find it rather hard to patent English….

                5. Ideas do exist in my brain, but they don’t have any fixed structure. In a sense, they reside in the brain like a boat floating on water. The water supports the boat, but you can’t point to any specific water and say “that supports the boat” (I grant the possibility of frozen water supporting a boat though. So far, freezing a brain doesn’t work at keeping ideas…)

                  So far, mathematics has shown formula for what the neuron appears to do, but still no structure for a thought is shown (personally, I think the simulations are flawed – a single neuron has billions and billions of possible states – several states for every atom associated with a neuron… No simulation comes anywhere NEAR enough states. And then there is the problem that neurons will create and break additional inputs and outputs dynamically. )

                6. Jesse: just because you don’t know what their physical form is doesn’t mean they don’t have one.

                  And don’t be silly of course software has physical form and structure. Is there a difference between a parallel and serial resistor? Is that a structural difference?

                  Please. Equivalent to hardware the hardware has structure ergo the software must have structure.

                7. Night: just because you don’t know what their physical form is doesn’t mean they have one.

                  You totally miss the dynamic reconfiguration that goes on constantly… There is no molecule that carries human memory.

                  “Equivalent to hardware the hardware has structure ergo the software must have structure.”

                  really? what structure. The reference to electrical circuits? Same structure for all “software”… So what structure is the software? They are all just numbers….


          *if they make a special purpose chip that does EXACTLY the same thing then it is statutory?*

          Shouldn’t it be? That would be a machine. Likewise you could possibly — subject to §102 — patent a memory chip (firmware) that contained a specific program that implemented your method, but the patent would be on that exact program in that specific chip, not one the broad functionality. You’d be better off with the copyright, as is always the case with software.


            So according to you if we put a GPC there and software it would suddenly become ineligible. That is absurd.

  7. 8

    Even older prior art than the movie mentioned was a published report from England of someone who had likewise modified bank software to move rounded off pennies from numerous accounts into an account he set up for himself.

      1. 7.1.1

        Does Ultramercial go back to a panel of O’Malley and Laurie and one new judge to replace Rader? If it does, that should be exciting. O’Malley is reliably anti-software and will want to uphold the patent while Laurie is a radical for broad patentability of everything who has reluctantly acquiesced to Supreme Court rulings because he has sworn to uphold the law and honors precedent.

        Meanwhile Ultramercial is an even more clear cut case than Alice, but the patent makes much more effort to complicate matters with quality forward-thinking draftsmanship.

        Add one more at random to that crew and anything could happen.


          Owen, after twice being vacated (for misapplying the law one would think) it would be incredible if the Federal Circuit once again forced the Supreme Court to consider a cert. If the panel did not comply with the law, once again, the entire court would or should take the matter up en banc sua sponte.


            In fact Ned I think the opposite is true. It would be a craven act for the Fed. Cir. not to send Ultramercial to the SCOTUS.

            The SCOTUS doesn’t want the case because if they rule it ineligible then the Congress will have a clear signal that the SCOTUS has re-written the 1951 Patent Act with common law.

            That is why this is big. The SCOTUS needs to go on record for what they have done.

  8. 6

    This is another beautful well-reasoned opinion and kudos to Wells Fargo and its attorneys (and, of course, the Supreme Court) for helping the judge make the right decision here.

    Among many wry chestnuts in the opinion are this one:

    The patents in this action describe an abstract idea that lacks a convenient, catchy moniker, such as Bilski’s “risk hedging” or Alice’s “intermediated settlement.” Perhaps the moniker most precisely identifying the present patent is “salami slicing.” See Larios v. Nike Retail Servs., Inc., 2013 WL 4046680 (S.D. Cal. Aug. 9, 2013) (Curiel, J.) (defining “salami slicing” as the method of “remov[ing] something gradually by small amounts at a time”).

    1. 6.1

      Also this:

      As discussed above, economic actors of every description and every m 0tive, from the sc*am ar*tist to the frugal wage earner to the government, have understood and exploited the elemental notion of regularly and frequently capturing a small and inconspicuous quantity and segregating and retaining the captured quantities until the quantities accumulate into a large quantity, a program indebted only and entirely to the fundaments of elemental arithmetic: simple addition.

      This description of this “technology” is equally applicable to literally thousands of invalid patents and who knows how many applications in the appeal backlog.

    2. 6.2

      The judge’s description of this “technology” in the middle of page 9 is equally applicable to literally thousands of invalid patents and who knows how many applications in the appeal backlog. Goodbye to them.

    3. 6.3

      I thought it was called “skimming”, and was illegal…. 🙂

      I guess it is legal when the bank does it…

  9. 5

    Judge Merryday first identified the abstract idea that the claims are “drawn to” as “the concept of routinely modifying transaction amounts and depositing the designated incremental differences into a recipient account.”

    Michael Bolton: It’s pretty brilliant. What it does is every time there’s a bank transaction where interest is computed, you know, thousands a day, the computer ends up with these fractions of a cent, which it usually rounds off. What this does is it takes those remainders and puts it into an account.
    Peter Gibbons: This sounds familiar.
    Michael Bolton: Yeah. They did it in Superman III.

    Officespace, 1999

      1. 5.1.1

        Of course, a prior movie or newspaper report is a prior publication, and 103 prior art for whatever it teaches to a POSITA. Where a claim contains only an abstract concept or a purely functionally claimed intended result it risks prior public knowledge of the same or a very similar abstract concept or purely functionally claimed intended result being effective prior art.
        This should not be confused with prior art enablement requirements for 102 anticipation of chemical claims. E.g., Amgen Inc. v. Hoechst Marion Roussel Inc. 79 USPQ2d 1705 at 1714-15 “In order to anticipate, a prior art reference must not only disclose all of the limitations of the claims invention, but also be enabled. ” [BUT] …. “nonenablement does not preclude a finding of obviousness. 314 F.3d at 1357.”


          I’d argue that there’s actually a fairly good chance that Superman III or Office Space would be enabling prior art under 102 for this general invention, if it’s claimed sufficiently broadly. I mean, there’s not much more required to make/use the invention aside from writing the code that implements the algorithm that the characters describe, and programming is generally considered routine experimentation by a PHOSITA.

  10. 4

    There won’t be one forthcoming for some time, if ever. SCOTUS made the test too easy and flexible and there is no reasonable basis for appealing an invalidation under the current law.

    There is no turning back from here.

    1. 4.1

      Assuming the decision sets no discernibly principled guidelines for the courts below (other than you’ll “know it when you see it”), or equally the specific test is incredibly open to whim/subjectivity of the lower courts, could not the lower courts over time fill the vacuum of ambiguity and uncertainty with principled sensible decisions?

      Insofar as the lower courts now are setting precedent to “fill in the details” they can with time overturn their own decision, rework the details of the “no test” test.

      Is there not hope that the clear avoidance to provide detailed guidance by SCOTUS is, for all intents and purposes, a delegation to the lower courts to fill in such things as “how you know it” when you know it, what it means for something to be an abstract idea, what it means for something to be “substantially more”? Shouldn’t the patent savy Fed Circuit be trusted to inform that empty test… and re-form it as necessary?

    1. 2.1

      “More recently, in the 1983 film Superman III, Gus Gorman, played by Richard Pryor, utilizes the coin clipping concept after discovering that each of his co-worker’s earnings includes a fraction of a cent. Gorman programs a virus to round each paycheck down to the nearest cent and to deposit the fractional difference into a recipient account.”

      2 Similarly, in the 1999 film Office Space, three employees of Initech, a fictional company, steal several hundred thousand dollars after discovering that each of Initech’s countless business transactions includes a fraction of a cent. The employees program a virus to round each transaction down to the nearest cent and to deposit the fractional difference into a recipient account. The program works but contains a misplaced decimal that rounds each transaction down to the nearest dollar, not the nearest cent – with alarming results.

    1. 1.1

      The claim to fiber optic cable is invalid under this analysis.

      Please, NWPA, go ahead and do that analysis for us, because I’m not following you.

    2. 1.2

      You may well be right that a patent generally claiming a fiber optic cable would be ineligible under Section 101.

      Start with the general unpatentable principle that light can be guided by refraction. And, the exact working of any particular fiber-optic cable is certainly a law of nature. The only question then will be whether there is a patent worthy inventive concept found in the actual construction of the cable.

      1. 1.2.1

        The physical properties of steel are a law of nature; so are the properties of any gauge of steel wire, including deformability and elasticity.

        Does that mean the paper clip, if novel, would not be patentable? The only concepts found in the actual construction of a paper clip from US 64,088 (1867) are bending and twisting a wire.

        See US 64,088:
        link to


          The only concepts found in the actual construction of a paper clip from US 64,088 (1867) are bending and twisting a wire.

          Before I waste my time, can you confirm that the patent did not recite “A wire for bending and twisting”?

          I’m guessing it disclosed a structure that was not found in the prior art, probably even described in objective structural terms to distinguish it from bent wires in the prior art.

          Generally speaking, I don’t think it’s meaningful to point to some patent that issued 200 years ago as evidence that there is something fundamentally wrong with the Supreme Court’s current jurisprudence on eligibility of, e.g., computer-implemented information-processing claims. Among other facts we can all agree on, many patents issued 150+ years should never have been granted, just as is the case today.


          You can break practically any invention down into a general principle plus other stuff

          That may be. There’s more to the eligibility analysis of patent claims than that.

          In particular, if that “other stuff” is objective physical structure recited in the claim that distinguishes it from the prior art, then you are in pretty good shape.

          For example, if your application of the test set forth in Alice and Mayo is leading you to find non-obvious claims reciting objective physical structure distinct from that found in the prior art as ineligible, then you can be very confident that you are applying the test incorrectly.

          I have no doubt, by the way, that the Supreme Court fully understood that it’s decisions in Bilski, Prometheus and Alice were going to affect vast numbers of claims. If anything, they were surprised and dismayed by the Federal Circuit’s attempts to nullify the earlier decisions.


            >>if that “other stuff” is objective physical structure

            I disagree 100 percent that information processing methods do not require physical structure. They do. But, I think you have hit on how the judges are going to think about this. And what you said highlights how the new common law of the land operates under the fiction that information processing isn’t real structure. It is real structure. (Where is it? It can’t exist without structure. And GPCs are really special purpose computers. Alappat has the science right.)

            So, I think that both Graham and Alappat at this point were overruled by Mayo, Bilski, and Alice. Both should be marked as bad law.


              What physical structure is unique to the information?

              None that I know. Any structure for storage, retrieval, or processing… But each structure is independent of the information stored or processed.


              Night, I would appreciate you explaining how Graham is somehow affected by any these cases. I don’t get the relationship.

              Regarding Alappat, I do not think it is overruled. I think it is consistent with Alice. However, you and I will strongly disagree, I believe on what the holding of Alappat actually is. It is certainly not the dicta everybody quotes as its holding. Rather, the court specifically held that when substituting a programmed general-purpose digital computer for the disclosed and claimed circuits in the context of a rasterizer for a display, a specific machine, that the claim as a whole was statutory, a rasterizer.

              Taken out of that context, the court did not hold that, devoid of context, that a programmed general-purpose to the computer what statutory regardless of context. That, statement in Alappat is pure dicta. But I admit, it has led the patent office to issue patents that simply recite a programmed computer without more, and that dicta has led many to believe that the claims were otherwise statutory when they are in fact were not.

              From Alappat:

              “Alappat’s invention relates generally to a means for creating a smooth waveform display in a digital oscilloscope. ”

              “Each of claims 16-19 depends directly from claim 15 and more specifically defines an element of the rasterizer claimed therein. Claim 16 recites that means (a) for determining the vertical distance between the endpoints … comprises an arithmetic logic circuit…. Claim 17 recites that means (b) for determining the elevation of a row of pixels that is spanned by the vector … comprises an arithmetic logic circuit… Claim 18 recites that means (c) for normalizing the vertical distance and elevation comprises a pair of barrel shifters. Finally, claim 19 recites that means (d) for outputting comprises a read only memory (ROM)”

              “As discussed in section II.D.(1), supra, claim 15, properly construed, claims a machine, namely, a rasterizer “for converting vector list data representing sample magnitudes of an input waveform into anti-aliased pixel illumination intensity data to be displayed on a display means,” which machine is made up of, at the very least, the specific structures disclosed in Alappat’s specification corresponding to the means-plus-function elements (a)-(d) recited in the claim. ”

              “Although many, or arguably even all,[22] of the means elements recited in claim 15 represent circuitry elements that perform mathematical calculations, which is essentially true of all digital electrical circuits, the claimed invention as a whole is directed to a combination of interrelated elements which combine to form a machine for converting discrete waveform data samples into antialiased pixel illumination intensity data to be displayed on a display means.[23] This is not a disembodied mathematical concept which may be characterized as an “abstract idea,” but rather a specific machine to produce a useful, concrete, and tangible result.”


                You are wrong about Alappat. Read Rader’s various references to Alappat.

                The reason Graham is overturned is that the new 101 is really a 103 analysis.

                1. Why don’t we read its author’s views instead,

                  “Unpatentable mathematical algorithms are identifiable by showing they are merely abstract ideas constituting disembodied concepts or truths that are not “useful.” From a practical standpoint, this means that to be patentable an algorithm must be applied in a “useful” way. In Alappat, we held that data, transformed by a machine through a series of mathematical calculations to produce a smooth waveform display on a rasterizer monitor, constituted a practical application of an abstract idea (a mathematical algorithm, formula, or calculation), because it produced “a useful, concrete and tangible result” — the smooth waveform.”

                  State Street Bank & Trust Co. v. Signature Financial Group, 149 F.3d 1368, 1373 (Fed. Cir. 1998).

                  Key words:


                  Produced a Smooth Waveform

                  On a rasterized Monitor

                2. Ned, I am not sure what your point is. And I quoted from Ultramercial and Rader and not Rich in State Street.

                  Ned talking to you is just like talking to Richard Stern. (The author of Benson.) The fact is that processing information in of itself should be patent eligible. It takes time, space, and energy to transform represented information. The methods that perform those transformations are equivalent to hardware/software/firmware. Those are the scientific facts. You guys can bend and twist reality all you want, but any reasonable sanity check shows you guys are wrong.

                  For example, what is your brain Ned? What occurs in your brain? You are trying to say that what your brain does by a machine is not patent eligible. That is on its face absurd. Absurd.

                  And again what is the difference between a squirrel and a human?

                3. Night… did you forget about negative logic?

                  It can turn a 1 into a 0, or 0 into a 1 with zero time, zero space, and zero energy.

                  It is a mathematical method of optimizing the number gates necessary… and it eliminates the need for a LOT of gates to do the conversion, and speeds up the result.

                4. “The reason Graham is overturned is that the new 101 is really a 103 analysis.”

                  I honestly cannot tell if you’re just trolling with these sorts of statements NWPA.

                  This is supposed to be a new tomorrow around these parts.

                5. ” The fact is that processing information in of itself should be patent eligible. ”

                  NWPA, you tell us this a lot. Don’t man. Tell the congress. For god’s sake. Write your congresscritter and ask to be able to appear at one of their judiciary committee meetings or whatever.

                6. The problem with “processing information in of itself should be patent eligible” is that that is patenting thinking.

                  Which means you can infringe just by thinking…

                  And that is slavery.

                7. >infringe by thinking.

                  No Jesse because the information processing method are run by a machine. I am talking about machines performing the methods. Think whatever you want.

                8. That is the problem.

                  There is no measurable difference between the machine performing the processing and the person performing the processing – other than the person being a bit more error prone, but does have a tendency to self correction…

                9. Jesse “no difference …machine …person.”

                  Gee, so it is bad to create a machine that can do exactly what a person can do? I think that is absurd.

      2. 1.2.3

        Just so everybody is clear on Dennis’ point: it depends on how your cable is described in the claim.

        Recite the objective physical structure of your “new” cable so it can be distinguished from the structure of prior art cables and you shouldn’t have any problem.

        “A cable, wherein said cable is configured to blah blah blah” — you’re asking for trouble. Likewise with “A cable, wherein said cable operates according to the principle that blah blah blah”.

      3. 1.2.4

        Dennis, every invention can be abstracted into a principle just as much as a new law of nature can be discovered. The key to 101 is that the principle be applied to produce a new or improved machine, manufacture, composition or a process that passes the MOT.

        When the a claim simply says “apply it” as in Prometheus or as in Rubber-Tip Pencil, the claim is too abstract.

        I do not believe that a claim claiming a fiber-optic cable defined by its structure and materials would have any problems whatsoever under 101. That Night suggests that the analysis of Alice could produce such a result only means to me that Night does not understand Alice, or better, continues to willfully misunderstand Alice.

        As you can see by the comments here, Malcolm, RandomGuy, 6, and perhaps many others have no problem understanding these cases whatsoever. It cannot possibly be the case that we the only ones that understand them. The principles involved seem quite straightforward.


          That was not a substantive post Ned, but ad hominem which I am doing my best to ignore.


            Dennis it become simple if one focuses, as do the courts, on the “apply” part to determine whether the claimed subject matter is directed to an improvement in a machine, manufacture, composition, or conventional process. One can tell instantly that a claim is in trouble if all the hardware is generic and there is no improvement in that hardware.

            Also I find it puzzling why some, such as David, does not seem to get Funk Brothers which openly stated that the problem with the claims there was that they did not modify or improve in any respect the bacteria.

            What the courts are looking for is some improvement, some new functionality or improvement in functionality, with respect to statutory subject matter.

            What I see from many posters here is an undue focus on the Gist part of the analysis as if that were even important. It is not.

            There are many ways of stating this test. Hotel Security is another way of stating it. I think it is simple. If the statutory part of the claim is old, then the claim is directed to the nonstatutory, and the claim as a whole is not patentable. However we state the analysis, it all comes down to this.

            There may be a problem in the minds of many here that are confused by Alappat’s dicta that a programmed general purpose computer is per se statutory. It cannot be, for if it was, Benson would not be good law. As Rich said in his holding in Benson, if a programmed general purpose computer is statutory a process defining that program must also be statutory.

            There was obviously confusion in thinking at the Federal Circuit for a very long time – not by all the judges is true, but by most of them. Hopefully that era is gone. But we have yet to see the other shoe to drop. Ultramercial has yet to be decided.


              Ned in Ultramercial Rader said that Alappat held exactly what you say it does not.

              Citing to cases prior to 1952 is problematical. Benson was cabined by Diehr.

              Seriously, Ned, 1) the science is wrong, and 2) the case law is obviously unsettled, so your condescending tone is not called for.


                Ned, what you haven’t argued is the science. The science is clear. We have quoted Mano on this board before who unequivocally says that hardware/software/firmware are equivalent. That immediately leads to a programmed general purpose computer being equivalent to a special purpose chip or new computer, of if you like an improved computer.

                That is science. That is reality. You play bizarre word games from the iron age that have been so criticized prior to the rise of the Google dollar revolution of patent law.

                1. Science, Night?

                  You just give us you opinion that information processing is like a law of physics.

                  What you haven’t done is connect the dots.

                2. Not true Ned. I have connected the dots.

                  You just deny it over and over. Then I type it out and prove it and then a week later you deny it.

                  Just admit that you are a judicial activist. That is what you are. You are anti-information processing patents and want to change the law with common law.

                3. “That immediately leads to a programmed general purpose computer being equivalent to a special purpose chip or new computer, of if you like an improved computer.”

                  Let’s say we all believe you NWPA. In what way are they “equivalent” and how should that manner of being “equivalent” justify what you’re asking for?

                4. 6, let’s say we all believe me? You don’t have to believe me. I have cut and paste from Mano on this board.

                  The equivalence means 6 that Ned’s attempt at saying that hardware is fine but hardware plus software is not makes no sense.

                  It would mean that a box is sitting there and you say: wait I need to see whether or not there is any software in there to see if it is infringing. Also, 6 any circuit can add software to not infringe. Even Moore figured this out since she has an EE background from MIT.

                5. “I have cut and paste from Mano on this board.”

                  I don’t know who or what “mano” is, nor do I much care. I already know how they’re “equivalent” so far as my edumacating has taught me, so I just want to make sure we’re on the same page.

                  “The equivalence means 6 that Ned’s attempt at saying that hardware is fine but hardware plus software is not makes no sense.”

                  That’s nice, do you at any juncture want to address the content of my post as opposed to Ned’s?

                  “It would mean”

                  I really don’t care what “it” would mean, but “it would mean the world to me” if you would engage my topic of conversation as per the “new tomorrow” policy, just as I have done you the courtesy of doing.

                  “Also, 6 any circuit can add software to not infringe. ”

                  Yes, people will be able to design around your specific solution and otherwise use the abstract idea upon which your invention is based. That’s the point. You get yours, other people get theirs. Everyone is happy except the people trying to lock up abstractions.

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