Source: Grill IP patents news
It’s not just software patents having a difficult time in US courts, abstract ideas aren’t faring much better. In the most recent example, the Federal Circuit invalidated patent claims by online lender LendingTree, which had patented a broad concept, namely the ability to submit one application for a loan simultaneously to multiple lenders. However, the District Court – basing its decision on U.S.C. § 101 – ruled in the case LendingTree, LLC v. Zillow, Inc. Nextag, Inc., & Adchemy Inc., that LendingTree’s patents were invalid.
LendingTree is an online lending exchange, an Internet broker, which filed a suit against the real estate database company, Zillow, and other companies, in North Carolina’s Western District Court. LendingTree charged these defendants with infringement of two patents sharing a common specification. A ruling on a motion for summary judgment by Zillow was delayed until after trial by the District Court. The summary judgment request asserted the invalidity of LendingTree’s patents under 35 U.S.C § 101. The jury held that the defendants did not infringe any asserted claims of the patent, and that all patent claims in the suit were invalid by virtue of improper inventorship. The plaintiff appealed, and on that appeal, the Federal Court resolved substantive patentability concerns under § 101.
US Patent No. 6385594 (‘594) and 6611816 (‘816) were under review during this case. ‘816 is a continuation of the former, so both patents share a common specification. They involve a process for coordinating loans over the Internet, on a loan-processing computer. The impetus for these claims was the standard method of applying for loans prior to LendingTree. The process, in which an applicant would have to contact each lender and fill out separate applications or credit qualification documents was regarded as tedious and time consuming. So, LendingTree developed a loan coordination process to forgo the wait. The speed and resources of the Internet were joined with the standards of a variety of lending institutions, and out came an online mechanism for individuals to submit a single credit application to a plurality of lenders.
Representative of the claimed subject matter between both patents at issue is independent claim 1 of ‘594. It details a scheme for coordinating an electronic credit qualification form between lending institutions and Internet users. Zillow argued for the invalidity of such a claim, since it merely involves an “abstract idea.” That idea, comparing credit information to lending criteria, merely presents a central economic practice that does not substantially alter from practices that the Supreme Court has found abstract and thus patent ineligible under § 101. The Federal Circuit agreed, holding that the coordination of loans under ‘594 constitutes an abstract concept, akin to the concept of risk hedging in Bilski (2010). LendingTree’s loan-processing method is of no consequence, since the use of a third-party intermediary, a sort of clearinghouse, is a fundamental aspect of the economy. The Supreme Court struck down as too abstract claims In Mortg. Grader (2016), which involved “anonymous loan shopping.” In this decision, the representative claim of the patents at issue necessitated a computer system configured to “display to the borrower an indication of a total cost of each loan package in the set” of loans they could search in a database. In essence, these patents involved multiple lenders competing for the business of potential borrowers and lacked any inventive concept. Using generic computation to show an array of credit decisions is not appreciably different from the use of computation in Mortg. Grader. For claim 1 of ‘594 to constitute an inventive concept, it would have to transform this abstraction by listing elements that constitute a patent-eligible application of loan coordination. At most, the Circuit regards claim 1 to utilize computing to automate this basic economic application. In response, LendingTree argued that its limitation involving “simultaneous competition” is an inventive process justifying the claims’ patentability.
The Circuit disagreed, and also assessed whether LendingTree’s patent claims solved any technological problems associated with loan coordination. Unlike the Enfish (2016) decision, these claims are not directed to improving computer-related technology, they simply provide a technological environment for carrying out the coordination of loans. For the Circuit, speeding up the application process is not an “improvement” and did not fulfill the “inventive concept” requirement of § 101. In short, an abstraction for LendingTree leads to a reversal of Zillow’s denied motion for summary judgment.
In trial, the jury found the claims of these two patents invalid for improper inventorship. The Circuit’s decision regarding § 101, that claims in ‘594 and ‘816 are invalid, still left quite a few patent claims intact. In evaluating the issue of inventorship, the Circuit remanded to permit LendingTree to file a motion under Fed. R. Civ. P. 60(b), vacating judgment of invalidity for the rest of the claims of the patents, since the online lending exchange promptly moved to correct their inventorship. This correction took the form of Certificates of Correction from the PTO. These actions provide the online lending exchange with an avenue to salvage aspects of its patents, although all charges of infringement by the plaintiff against Zillow and others hold no legal water.
These decisions come on the heels of similar cases that have sought to clarify standards of patentability under 35 U.S.C § 101. LendingTree is no different, reaffirming that computational systems organizing under fundamental economic principles are developments not worth protecting. For such developments to constitute patentable subject matter, similar companies should clearly list all elements of their processing claims, making sure to demonstrate the unique contribution their innovations provide.
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