ED Tex: Computerized Business Method Patent Fails Bilski Test Under 35 USC 101

H&R Block Tax Services v. Jackson Hewitt Tax Services Inc., No. 6:08-cv-37 (E.D. Tex., Nov. 10, 2009)

H&R Block sued Jackson Hewitt in February 2008 alleging infringement of patents relating to "a system and method for distributing payments to individuals and, more particularly, to a system and method for allocating a portion or all of an individual’s payment into a spending vehicle."  Jackson Hewitt subsequently moved the court to find the patent invalid for claiming ineligible subject matter on summary judgment

Unlike Bilski, H&R argued that the business method was tied to a machine (i.e., computer) and pointed to specific claims directed to "a computerized system for distributing spending vehicles."

Since the court did not issue a claim construction opinion, Magistrate Judge Love accepted plaintiff’s contentions that the patents claim “computerized systems” that are capable of performing certain functions as defined by the claims allegedly functional language.

A financial relationship is simply an abstract intellectual concept. Absent the recitation of a computer, the ‘862 patent would certainly claim unpatentable subject matter. See Benson, 409 U.S. at 67 (reiterating “the long standing rule that ‘(a)n idea of itself is not patentable’”). Plaintiff argues the present recitation of a computer imposes meaningful limits on the scope of the claim such that a fundamental principle is not fully preempted. The Court disagrees. The computer component is not a particular, special purpose machine; it is capable of no more than storing and retrieving data memorializing associations. The computer is an insignificant, extra-solution component of the claimed system. Cf. Bilski, 545 F.3d at 961-963 (concluding that data gathering steps are insignificant extra-solution activity). If an extra-solution step is insufficient to render an otherwise unpatentable process claim valid, then by analogy an extra-solution component is insufficient to render an otherwise unpatentable “system” claim valid. Thus, the addition of a generic computer, capable only of storing and retrieving data associating payments with spending vehicles, to the claimed system fails to impose meaningful limits on these claims. Therefore, the Court finds the claims of the ‘862 patent invalid for claiming unpatentable subject matter.

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[T]he Court finds that none of the remaining claims at issue pass the transformation prong of the test. Plaintiff argues that the ‘829 claims transform “tax return data into an anticipated tax refund amount which is transformed into a spending vehicle issued by a third party provider” and that the ‘425 method claims transform “an individual’s income and expense data into an estimated income tax return amount which is transformed into a loan distributed to a tax payer.” PL.’S RESP. at 24. Plaintiff argues the data “represent real world items (e.g., money).” Id. at 25. It argues that income and expense data do not represent hypothetical income and expenses but rather “actual money which has been earned and spent.” Id. The final transformation, it urges, is from data to a loan for a specific amount of money. Id. At all steps in the claimed processes, the manipulated data represent legal obligations and relationships. See Bilski, 545 F.3d at 963. However described, the data and resulting loan represent money. Although tangible in some forms, money is simply a representation of a legal obligation or abstract concept. Therefore, the Court finds that the claims of the ‘829 patent and the method claims of the ‘425 patent fail the transformation prong of the machine-or-transformation test.

Read/download a copy of the opinion here (link)

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