In Clarilogic v. FormFree Holdings, the Court Of Appeals upheld the District Court for the Southern District of California holding that the claims of U.S. Patent Application No. 8,762,243 (‘243 Patent) are ineligible under 35 U.S.C. § 101 because they are directed to an abstract idea and contain no additional elements that transform the nature of the claims into a patent-eligible application of the abstract idea.
patents binders isolated on the wooden table. 3D illustration.
The ‘243 Patent is entitled “System and Method for Electronic Account Certification and Enhance Credit Reporting.” Generally, the claimed computer implemented system gathers a potential borrower’s financial data from a third party, applies an “algorithm engine” to the gathered data, and outputs a report. The claims do not recite any specific rules implemented by the “algorithm engine.” Rather, the rules implemented by the “algorithm engine” are obtained from third parties who define rules used to identify information.
The Court noted that when “the focus of the claims” is “on collecting information, analyzing it, and displaying certain results of the collection and analysis,” the claims are directed to an abstract idea. Moreover, claiming an algorithm engine without defining a specific set of rules implemented by an algorithm engine performing the analysis is the “height of abstraction.”
Defendant Form Free argued that its invention is “transformative” and thus eligible for patent protection. Specifically, Form Free argued that the invention is “transformative” because it takes in financial data and outputs a report. The Court disagreed, stating that the claimed method simply changes the way electronic information is displayed using an unknown and unclaimed algorithm engine. As such, without any limitations in how the gathered data are changed, there is no “transformative” effect. After all, as the Court stated, “Data are still data.”
A business method claim, or any other type of method claim, must specifically define all the method stops including those that help make the method novel. Single processing data to arrive at an output is simply too abstract to be patent eligible subject matter.
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