In a nonprecedential opinion issued earlier today, the Federal Circuit invalidated claims under 35 U.S.C. § 101 that had survived the District Court in LendingTree, LLC, v. Zillow, Inc., Nextag, Inc., & Adchemy, Inc. This case is eerily similar both in terms of subject matter and outcome as the Federal Circuit's recent decision in Mortg. Grader, Inc. v. First Choice Loan Servs. Inc., 811 F.3d 1314, 1318 (Fed. Cir. 2016). Both cases involved loan application software patents, and both had claims held invalid under 35 U.S.C. § 101. The Federal Circuit's analysis here, by comparing claims-in-suit being challenged under section 101 to prior claims held invalid, continues to be the strongest evidence considered by the Court when analyzing patentable subject matter.
LendingTree filed suit against Zillow and other defendants in the U.S. District Court for the Western District of North Carolina, asserting claims of U.S. Patent Nos. 6,385,594 and 6,611,816 (the '816 patent is a continuation of the '594 patent, and thus, the patents in suit share a common specification). Zillow moved for summary judgment of invalidity under 35 U.S.C. § 101 with respect to the asserted claims of both patents, but the District Court delayed ruling on the motion until after trial, at which point the Court orally denied it from the bench. Following trial, the jury returned a verdict finding that Zillow and the other defendants did not infringe the asserted claims of the patents in suit and that all claims of the patents in suit were invalid for improper inventorship. All of these issues were appealed, respectively.
The only substantive issue with respect to the claims that the Federal Circuit resolved on appeal was the patentability under 35 U.S.C. § 101. This rendered other issues moot.
The patents in suit relate to a process for coordinating loans on a loan processing computer over the Internet. According to the '594 patent, which was filed in May 1998, traditional methods of applying for a loan were tedious and time consuming because there was no way to apply without physically going to or calling each lender and filling out an application or credit qualification form. The inventors sought to combine the vast resources and speed of the Internet with additional knowledge of various lending institution's selection criteria to create a simple mechanism whereby an Internet user can submit a single credit application to a plurality of lending institutions who then make offers to the customer via the Internet. The loan coordination process of the '594 patent includes ten general stages. Independent claim 1 of the '594 patent is representative of the claimed subject matter, and is reproduced below.
1. A method for coordinating an electronic credit qualification form between an Internet user and a plurality of lending institutions via the Internet, comprising the steps of:
a) receiving selection criteria from the plurality of lending institutions;
b) storing the selection criteria in a database;
c) displaying a plurality of documents in a web site;
d) receiving a plurality of credit data sent from the Internet user;
e) applying said credit data to a filter comprising the plurality of selection criteria of the database to select without manual intervention each one of said plurality of lending institutions associated with a match of said credit data to said selection criteria;
f) determining an appropriate transfer method to transmit said electronic credit qualification form to the lending institutions associated with a match of said credit data;
g) transmitting said electronic qualification form comprising said credit data to said plurality of lending institutions associated with a match of said credit data via said appropriate transfer method, the transmission of said electronic qualification form comprising said credit data occurring without a delay for reception of any credit decisions from said lending institutions;
h) receiving a plurality of positive credit decisions from said plurality of lending institutions associated with a match of said credit data regarding an offer of credit or a loan to the Internet user;
i) simultaneously displaying the plurality of positive credit decisions to the Internet user on the web site;
j) receiving via the web site at least one decision from the Internet user regarding at least one of the positive credit decisions, the Internet user's decision comprising an acceptance, denial or request for more information regarding a positive decision for one of said lending institutions associated with a match of said credit data; and
k) transmitting the at least one Internet user's decision to at least one lending institution corresponding with a positive credit decision so that said Internet user can obtain credit or a loan from one of said lending institutions associated with a match of said credit data, whereby said lending institutions associated with a match of said credit data compete with each other for business with the Internet user.
Invalidity under 35 U.S.C. § 101
Abstract Idea—Zillow contended that the patents in suit are directed to the idea of "comparing credit information to lending criteria" (i.e., a "credit application clearinghouse"). In Zillow's view, that idea represents a fundamental economic practice not meaningfully different from practices previously found by the Supreme Court to be abstract and is thus ineligible for patenting under § 101.
The Federal Circuit found that on its face, claim 1 is directed to an abstract idea; namely, a loan-application clearinghouse or, more simply, coordinating loans. The Federal Circuit found similarities of these concepts to those of risk hedging in Bilski, and intermediated settlement in Alice since each is something long prevalent in our financial system. The Federal Circuit found that the patents in suit use a computer program on a loan-processing computer to organize the process to be of no consequence because the use of a third-party intermediary (or clearing house) is also a building block of the modern economy.
The Federal Circuit noted that within Mortg. Grader, similar claims were also held to be directed toward abstract ideas (finding claims directed to the idea of "anonymous loan shopping" to be abstract).
Inventive Concept—The Federal Circuit next held that claim 1 does not recite any elements that individually, or as an ordered combination, transform the abstract idea of coordinating loans into a patent-eligible application of that idea. The Federal Circuit thought, at best, claim 1 describes the automation of a fundamental economic concept through the use of generic-computer functions.
LendingTree contended that the particular limitation relating to "simultaneous competition" amounts to an inventive concept sufficient to render the claims patent eligible. But the Federal Circuit noted that similar claims with similar limitations have been addressed and found to lack an inventive concept.
In Mortg. Grader, the representative claim of the patents at issue required a computer system that was configured to enable a borrower "to search [a] database to identify a set of loan packages" from a plurality of lenders and "to compare the loan packages within the set," and that also was configured "to display to the borrower an indication of a total cost of each loan package in the set." This was summarized as multiple lenders competing simultaneously for the potential borrower's business. In Mortg. Grader, the claims were found to not include an inventive concept.
Similarly, here, the Federal Circuit found that using a generic computer to display a "plurality of positive credit decisions," as recited in claim 1 of the '594 patent, is not meaningfully different from using a generic computer to display competing loan packages or to issue instructions. Consequently, the Federal Circuit stated that, like the claims in Mortg. Grader and Alice, claim 1 is patent ineligible because it does nothing more than facilitate the claimed loan-application process using generic technology.
In addition to comparing the claims to those previously held invalid under section 101, the Federal Circuit searched for and did not find any technological problem solved by the claims. Rather, the claims were found to merely provide a generic, technological environment (i.e., computers and the Internet) in which to carry out the abstract idea of coordinating loans. Likewise, the Federal Circuit further noted that the claims are not directed to improvements in computer-related technology (as in Enfish). Simply speeding up the loan-application process by enabling borrowers to avoid physically going to or calling each lender and filling out an application was an insufficient technological improvement, in the eyes of the Federal Circuit, so as to satisfy the "inventive concept" requirement of the section 101 analysis.
Accordingly, the Federal Circuit found that the asserted claims of the patents in suit are directed to an abstract idea and do not present an "inventive concept," and thus, are directed to ineligible subject matter under 35 U.S.C. § 101. The District Court's denial of Zillow's motion for summary judgment was reversed.
Inventorship
At trial, the jury found all claims of the patents in suit invalid for improper inventorship. The conclusion on the § 101 issue -- that some claims of the '594 patent and the '816 patent are invalid -- still leaves a number of claims intact, and so the Federal Circuit evaluated the inventorship issue.
During trial, LendingTree moved to correct inventorship of the patents in suit pursuant to 35 U.S.C. § 256. The PTO issued Certificates of Correction (adding James F. Bennett, Jr. as a named inventor) for the patents in suit. In LendingTree's view, the PTO's actions rendered moot the inventorship dispute.
The Federal Circuit agreed, and remanded to permit LendingTree, if it chooses to do so, to file a motion under Fed. R. Civ. P. 60(b) to vacate the judgment of invalidity for improper inventorship with respect to the remaining claims of the patents in suit.
LendingTree, LLC v. Zillow, Inc. (Fed. Cir. 2016)
Nonprecedential disposition
Panel: Circuit Judges Moore, Schall, and O'Malley
Opinion by Circuit Judge Schall
