On July 6, 2015 the US Federal Circuit released its decision in Intellectual Ventures v Capital One (Fed Cir 2015), a patent infringement lawsuit, where the Court found that the plaintiff’s patent claims (US Patent numbers 8,083,137, 7,603,382, and 7,260,587) were directed to abstract ideas and so were invalidated.

Intellectual Ventures, the plaintiff, is a private company notable for being one of the top-five owners of US patents.  Its business model involves buying patents and aggregating these patents into a single portfolio spanning many technologies.  Intellectual Ventures then licenses the portfolio to other companies.  Intellectual Ventures is frequently referred to as a “patent troll” or a “patent assertion entity”.

Of particular interest was the Court’s analysis of US Patent number 8,083,137 (the ‘137 patent”).  The basic idea behind the ‘137 patent was to help users budget and then stick to their budget.  The selected representative claim describes a method with two steps:  (1) storing a user profile with a set of categories – each with a pre-set budget limit; and (2) transmitting a summary of transactions for a category along with the pre-set budget limit.

The Court evaluated the patent claims according to the test set out in Alice Corporation v CLS Bank International (Alice) – a case previously reported in the E-TIPS® newsletter).  The Court concluded that the claims were abstract following the first step of the Alice test which requires “determin[ing] whether the claims at issue are directed to one of [the] patent ineligible concepts”—laws of nature, natural phenomena, or abstract ideas.  Regarding the ‘137 patent, the court noted that “tracking financial transactions to determine whether they exceed a pre-set spending limit (i.e., budgeting)” is merely an abstract idea.

The Court then considered the second step of the Alice test, which requires evaluating whether the remaining elements of the claims, either in isolation or combination with the non-patent-ineligible elements, are sufficient to “transform the nature of the claim into a patent-eligible application.”  In other words, there must be an “inventive concept” sufficient to make the claim patent eligible.

After conducting step two, the Court found no such inventive concept in the ‘137 patent, stating “it is clear that the claims contain no inventive concept. . . . Instructing one to ‘apply’ an abstract idea and reciting no more than generic computer elements performing generic computer tasks does not make an abstract idea patent eligible.”

The Federal Circuit ultimately found in favour of the defendant and awarded costs, which is somewhat unusual in the US.

Additional commentary is available here.

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