Federal Home Loan Mortgage Corporation v. graff/ross Holdings LLP ( 2012 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
FEDERAL HOME LOAN MORTGAGE )
CORPORATION, )
) Civil Case No. 10-1948 (RJL)
Plaintiff, )
)
v. ) related to
)
GRAFF/ROSS HOLDINGS LLP, )
) Civil Case No. 11-941 (RJL)
)
Defendant. )
"-
MEMORANDUM OPINION
(September~, 2012) [Dkt. ##24, 33] 1
These actions are related to Graff/Ross Holdings LLP v. Federal Home Loan
Mortgage Corp., No. 07-cv-796 ("Graff/Ross f'), in which this Court recently issued a
ruling of invalidity as to the challenged patent claims. Mem. Op. [Dkt. #121], Graff/Ross
I, No. 07-cv-796 (Sept. 24, 2012). These cases involve two related patents issued to
defendant Graff/Ross Holdings LLP ("Graff/Ross") by the United States Patent and
Trademark Office ("USPTO"): Patent No. 7,685,053 (the "'053 patent") and Patent No.
7,908,202 (the "'202 patent"). On November 15, 2010, plaintiff Federal Home Loan
Mortgage Corporation ("Freddie Mac") filed a complaint against Graff/Ross seeking a
1Unless otherwise noted, all docket references herein are to the docket in lead
Civil Case No. 10-1948. The respective docket numbers for the pending motions in Civil
Case No. 11-941 are numbers 16 and 25.
declaratory judgment of non-infringement or invalidity of the '053 patent. 2 Compl. [Dkt.
# 1]. Thereafter, defendant counterclaimed for patent infringement. See De f.'s Answer to
Pl.'s Am. Compl. for Declaratory J. ("Def.'s Ans.") [Dkt. #9] at 7. On May 19,2011,
Freddie Mac filed a complaint in a separate action seeking a declaratory judgment of non-
infringement or invalidity of the '202 patent, Compl., No. 11-cv-941 [Dkt. #1] (the '"202
Complaint"), to which Graff/Ross filed a counterclaim for patent infringement. 3 See
Def.'s Answer & Countercls., No. 11-cv-941 [Dkt. #7] ("Def.'s '202 Ans."). On
September 9, 2011, defendant filed a Motion for Partial Summary Judgment as to Patent
Validity ("Def.'s Mot. Validity") [Dkt. #24] with respect to both patents. Plaintiff
opposed this motion, and on May 21, 2012, filed a Motion for Summary Judgment of
Invalidity Under 35 U.S.C. § 101 ("Pl.'s Mot. Invalidity") [Dkt. #33] as to both patents.
Upon consideration of the parties' pleadings, relevant law, and the entire record herein,
plaintiff Freddie Mac's motion [Dkt. #33] is GRANTED and defendant Graff/Ross's
motion [Dkt. #24] is DENIED.
2 Plaintiff filed an amended complaint on February 17, 2011, supplementing its
allegations. See First Am. Compl. ("Am. Compl.") [Dkt. #7].
3 Graff/Ross originally sought to amend its complaint in Graff/Ross I to include
allegations related to the '053 and '202 patents. See Graff/Ross's Notice Concerning
Amending Compl. to Add Two Related Graff/Ross Patents, Graff/Ross I, No. 07-cv-796
[Dkt. #89]; Graff/Ross's Opposed Mot. for Leave to File Third Am. Compl. for Patent
Infringement & Demand for Jury Trial, Graff/Ross I, No. 07-cv-796 [Dkt. #98]. This
request was denied by the Court. See Minute Orders, Graff/Ross I, No. 07-cv-796 (May
12 & 16, 2011). Because these later filed cases, 10-cv-1948 and 11-cv-941, "involve the
same accused products," the parties proposed a joint schedule and filed joint briefing in
the cases. See Revised Joint Meet & Confer Statement Under LCvR 16.3 & Rule 26(t)
[Dkt. #29] at 1-2. Therefore, this Court will simultaneously address the identical motions
filed in each case.
2
BACKGROUND
On March 23, 2010, the USPTO issued the '053 patent, entitled "Bidder System
Using Multiple Computers Communicating Data to Carry Out Selling Fixed Income
Instruments," to Graff/Ross. Am. Compl. ~ 16. Nearly a year later, on March 15, 2011,
the USPTO issued to Graff/Ross the '202 patent, entitled "Computer System to Generate
Financial Analysis Output."4 '202 Compl. ~ 29, No. 11-cv-941. The patents are directed
at "systems and methods that allow for the electronic sale of a component of a fixed-
income asset," and both "are continuations of the '347 Patent" at issue in related case
Graff!Ross Holdings LLP v. Federal Home Loan Mortgage Corp., No. 07-cv-796. Mem.
ofP. & A. in Supp. ofDef.'s Mot. Validity ("Def.'s Mem. Validity") [Dkt. #24-1] at 3.
Plaintiff alleges that Freddie Mac has infringed on these patents "by using computer
systems and methods to conduct electronic bond auctions of fixed income instruments." 5
Def.'s Ans. at 7; Def.'s '202 Ans. at 7-8, No. 11-cv-941. Now both parties seek a
determination of the validity of the patents. See generally Def.'s Mot. Validity; Pl.'s
Mot. Invalidity. At issue is the validity of614 claims of the two different patents. Pl.'s
Mem. ofP. & A. in Supp. ofPl.'s Mot. Invalidity ("Pl.'s Mem. Invalidity") [Dkt. #33]
at 4; Def.'s Mem. ofP. & A. in Opp'n to Pl.'s Mot. Invalidity ("Def.'s Mem. Opp'n")
4 Richard A. Graff is listed as the sole inventor of the patents, but he assigned his
interest to Graff/Ross. See Am. Compl. ~ 17 (the '053 patent); '202 Compl. ~ 29, No. 11-
cv-941 (the '202 patent).
5 I find it important to note, as plaintiff so kindly pointed out, that Freddie Mac
does not host the website it uses to conduct these auctions; rather, an entity named Grant
Street Group "runs the website," and Freddie Mac is merely a user. Pl.'s Mem. Invalidity
at 1 n.l. According to plaintiff, Graff/Ross curiously has not sued Grant Street. /d.
3
[Dkt. #37-1] at·3. 6 For the sake of ease and clarity, I will analyze the claims in
accordance with the categories identified by plaintiff in its motion for summary
judgment.
Plaintiff divided the claims into nine groups. Group 1 consists of independent
claims describing a "computer system" similar to the independent claim found invalid by
this Court in Graff/Ross I. Pl.'s Mem. Invalidity at 4, 10. Group 2 consists of claims
dependent on Group 1 Claims, 7 but limited to particular fields of use. !d. at 4. Group 3 ·
Claims include two independent claims, and claims dependent on them, that describe the
"methods" of Groups 1 and 2 Claims. !d. Group 4 Claims include two independent
claims directed at multiple computer systems that implement Group 1 Claims. !d.
Group 5 consists of claims dependent on Group 4 Claims, but limited to particular fields
of use. Id. Group 6 contains one independent claim that describes the method used by
the Group 4 Claims. !d. Group 7 consists of claims dependent on the Group 6 Claim, but
limited to particular fields of use. Id. Group 8 Claims include three independent claims,
6 The '053 patent contains 415 claims, U.S. Patent No. 7,685,053, Ex. A to Pl.'s
Mem. Invalidity, and the '202 patent contains 199 claims, U.S. Patent No. 7,908,202,Ex. B to Pl.'s Mem. Invalidity. Sixteen ofthe 614 claims-four claims ofthe '053 patent
and twelve claims of the '202 patent-are independent claims, and the remaining 598
claims--411 claims of the '053 patent and 187 claims of the '202 patent-are dependent
on one or more ofthe independent claims. Pl.'s Mem. Invalidity at 8; Def.'s Mem.
Opp'n at 3. Of the 614 claims, 470 claims, including thirteen of the sixteen independent
claims, assert use of a "computer system," while the remaining 144 claims, including
three independent claims, recite a method. Def.'s Mem. Opp'n at 3.
7 Dependent claims "contain a reference to a claim previously set forth and then
specify a further limitation of the subject matter claimed. A claim in dependent form
shall be construed to incorporate by reference all the limitations of the claim to which it
refers." 35 U.S.C. § 112.
4
and claims dependent on them, that describe the apparatus used to implement Groups 6
and 7 Claims. 8 !d. And, Group 9 consists of claims dependent on Group 8 Claims with
output means limited to monitors. !d. Groups 1-5 include claims only from the '202
patent and Groups 6-9 include claims only from the '053 patent. !d. at 9.
Plaintiff contends that the "patents-in-suit" fail "to claim patent-eligible subject
matter." !d. at 1. According to plaintiff, the patents "recite the abstract idea of
computing a price for the sale of a fixed-income asset and generating a financial output,"
and, because abstract ideas are not patentable, defendant's patents are invalid under 35
U.S.C § 101. !d. at 3-4. Defendant counters that the patents constitute subject matter
eligible for patent, and in any event, plaintiff has failed to meet its burden of persuasion.
Def.'s Mem. Opp'n at 1; Def.'s Mem. Validity at 1-2. Defendant argues that the patent
"claims are directed to computer systems," and are "patent-eligible because they do
not ... merely recite a fundamental principle with only the words 'apply it [using a
computer]."' 9 Def.'s Mem. Opp'n at 1. For the reasons that follow, I find that plaintiff
has met its burden by clear and convincing evidence, and therefore, GRANT plaintiffs
motion for summary judgment, and DENY defendant's motion for summary judgment.
8 The Court's description of Groups 6 and 8 differs slightly from plaintiffs
descriptions. Plaintiffs Group 6 "claims recite the same abstract idea as Group 1 claims,
but use generic terms such a 'computer system' and 'processor,"' and "Group 8 claims
recite in 'method' form the abstract idea of Groups 6 and 7." Pl.'s Mem. Invalidity at 4.
Upon review of the patent language, however, the Court believes its descriptions are
more accurate.
9Defendant also argues that the validity of the patents has already been
determined by the USPTO. Def.'s Mem. Opp'n at 4, 22. But, Federal Circuit "case law
consistently provides that a court is never bound by an examiner's finding in an ex parte
patent application proceeding." Pfizer, Inc. v. Apotex, Inc., 480 F.3d 1348, 1359 (Fed.
Cir. 2007).
5
STANDARD OF REVIEW
Summary judgment is appropriate when, based on the record, there is no genuine
issue as to any material fact, and the moving party is entitled to judgment as a matter of
law. See Fed. R. Civ. P. 56( a). The moving party bears the burden, and the court will
draw "all justifiable inferences" in favor of the non-moving party. Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 255 (1986). But, a party opposing summary judgment "may
not rest upon the mere allegations ... of his pleading"; instead, he "must set forth
specific facts showing that there is a genuine issue for trial." !d. at 248 (quoting Fed. R.
Civ. P. 56(e)). A genuine issue exists only when "the evidence is such that a reasonable
jury could return a verdict for the nonmoving party." !d.
ANALYSIS
A patent is presumed valid under 35 U.S.C. § 282, and the party asserting
invalidity bears the burden to show by clear and convincing evidence that the patent is
invalid. Research Corp. Techs. v. Microsoft Corp., 627 F.3d 859, 870 (Fed. Cir. 2010)
(citation omitted). A patent may be granted to "[w ]hoever invents or discovers any new
and useful process, machine, manufacture, or composition of matter," 35 U.S.C. § 101,
unless the idea to be patented is a law of nature, a physical phenomenon, or an abstract
6
idea, Diamondv. Diehr, 450 U.S. 175, 185 (1981). 10 However, "an application of a law
of nature or mathematical formula to a known structure or process may well be deserving
of patent protection," Fort Props., Inc. v. Am. Master Lease LLC, 671 F .3d 1317, 1321
(Fed. Cir. 2012) (quoting Diamond, 450 U.S. at 187), provided, "the prohibition against
patenting abstract ideas '[is not] circumvented by attempting to limit the use of the
formula to a particular technological environment' or adding 'insignificant postsolution
activity,"' Bilski v. Kappas, 130 S. Ct. 3218, 3230 (2010) (quoting Diehr, 450 U.S. at
191-92).
"[T]he form of the claims should not trump basic issues of patentability."
Bancorp Servs., L.L.C. v. Sun Life Assurance Co. of Can., 687 F.3d 1266, 1277 (Fed. Cir.
2012) (citations omitted). Therefore, a court should "look not just to the type of claim
but also to the underlying invention," and may find that "a machine, system, medium, or
the like may in some cases be equivalent to an abstract mental process for purposes of
patent ineligibility." !d. at 1276-77 (citation and internal quotation marks omitted). To
10 The Federal Circuit has "not presume[ d) to define 'abstract' beyond the
recognition that this disqualifying characteristic should exhibit itself so manifestly as to
override the broad statutory categories of eligible subject matter and the statutory context
that directs primary attention on the patentability criteria of the rest of the Patent Act."
Research Corp. Techs., Inc. v. Microsoft Corp., 627 F.3d 859, 868 (Fed. Cir. 2010).
Further, "[ u]nless the single most reasonable understanding is that a claim is directed to
nothing more than a fundamental truth or disembodied concept, with no limitations in the
claim attaching that idea to a specific application, it is inappropriate to hold that the claim
is directed to a patent ineligible 'abstract idea' under 35 U.S.C. § 101." CLS Bank Int'l v.
Alice Corp. Pty. Ltd., 685 F.3d 1341, 1352 (Fed. Cir. 2012).
7
determine the patent-eligibility of a process, II a court may use the "machine-or-
transformation" test (the "MOT test") as "an investigative tool" for analyzing claims
under§ 101. Bilski, 130 S. Ct. at 3227, 3231. Under the MOT test, a process is patent-
eligible if it either ( 1) "is tied to a particular machine or apparatus, or (2) [] transforms a
particular article into a different state or thing." In re Bilski, 545 F.3d 943, 954 (Fed. Cir.
2008) (citations omitted), aff'd sub nom. Bilski v. Kappos, 130 S. Ct. 3218. But, for "an
otherwise unpatentable process" to be made patent-eligible by use of "a machine, the use
of the machine 'must impose meaningful limits on the claim's scope."' CyberSource
Corp. v. Retail Decisions, Inc., 654 F.3d 1366, 1375 (Fed. Cir. 2011) (quoting In re
Bilski, 545 F.3d at 961). "[T]he machine must play a significant part in permitting the
claimed method to be performed," id. (quoting SiRF Tech., Inc. v. Int'l Trade Comm 'n,
601 F.3d 1319, 1333 (Fed. Cir. 2010)) (internal quotation marks omitted), and must be
more than "incidental use ... to perform [a] mental process," id., because "the basic
character of a process claim drawn to an abstract idea is not changed by claiming only its
performance by computers," Fort Props., 671 F.3d at 1323 (quoting CyberSource Corp.,
654 F.3d at 1375).
II "The term 'process' means process, art or method, and includes a new use of a
known process, machine, manufacture, composition of matter, or material." 35 U.S.C.
§ 100(b).
8
L Group 1 Claims
Group 1 Claims describe computer systems "that allow for the electronic sale of a
component of a fixed-income asset." 12 Def.'s Mem. Validity at 3. Claim 104 ofthe '202
patent is representative:
A computer system to make financial analysis output having a system-
determined purchase price for at least one component from property in
consummating a sale, the system comprising:
an input device converting input data, representing at least one
component from property, wherein the property is a fixed-income
asset, into input digital electrical signals representing the input data;
a digital electrical computer system controlled by a processor
electrically connected to receive said input digital electrical signals
and electrically connected to an output means, the processor
controlled to manipulate electrical signals to compute a system-
determined purchase price for at least one component from property
in consummating a sale and corresponding purchase of the
component, and to generate financial analysis output at said output
means.
U.S. Patent No. 7,908,202 col.61 11.8-24, Ex. B to Pl.'s Mem. Invalidity at 55.
Claim 104 is nearly identical to the independent method claim previously found
12 As categorized by plaintiff, Group 1 Claims include the following claims from
the '202 patent: 57, 58, 76, 104, 106, and 139. Pl.'s Mem. Invalidity at 9. Claim 76 is
slightly different from the other Group 1 Claims in that it is directed toward "[a]
machine ... including a computer system." U.S. Patent No. 7,908,202 col.5911.1-2, Ex.
B to Pl.'s Mem. Invalidity at 54.
9
invalid by this Court in Graff/Ross I. 13 See Mem. Op., Graff/Ross I, No. 07-cv-796. The
equivalence of these claims is readily apparent and the only real difference between the
claims is the form in which they were drafted. For example, Claim 104 describes "[a]
computer system to make financial analysis output," whereas Claim 101 of the '347
patent describes "[a] method for making financial analysis output." The computer system
is comprised of "an input device converting input data, representing at least one
component from property, ... a digital electrical computer system controlled by a
processor ... , the processor controlled to manipulate electrical signals to compute a
system-determined purchase price ... and to generate financial analysis output." U.S.
Patent No. 7,908,202 col.61ll.8-24, Ex. B to Pl.'s Mem. Invalidity at 55. Similarly, the
steps of the Graff/Ross I method claim include "converting input data, representing at
least one component from property, ... providing a digital electrical computer system
Claim 10 1 of the '34 7 patent disputed in Graff/Ross I provided:
13
A method for making a financial analysis output having a system-
determined purchase price for at least one component from property in
consummating a sale, the financial analysis output being made by steps
including:
converting input data, representing at least one component
from property, wherein the property is a fixed income asset, into
input digital electrical signals representing the input data;
providing a digital electrical computer system controlled by a
processor electronically connected to receive said input digital
electrical signals and electronically connected to an output means;
controlling a digital electrical computer processor to
manipulate electrical signals to compute a system-determined
purchase price for at least one component from property in
consummating a sale and corresponding purchase of the component;
and
generating the financial analysis output at said output means.
Mem. Op. at 3, Graff/Ross I, No. 07-cv-796.
10
controlled by a processor ... ; controlling a digital electrical computer processor to
manipulate electrical signals to compute a system-determined purchase price ... and
generating the financial analysis output." Mem. Op. at 3, Graff/Ross I, No. 07-cv-796.
This Court will not fall victim to "the draftsman's art," Mayo Collaborative Servs. v.
Prometheus Labs., Inc., 132 S. Ct. 1289, 1294 (2012), and "exalt form over substance,"
particularly here, where "the claim is really to the method or series of functions itself,"
CyberSource Corp., 654 F.3d at 1374 (citation omitted). Therefore, for purposes of
patent-eligibility, these claims are equivalent. See Bancorp Servs., 687 F.3d at 1277.
The method underlying the Group 1 computer systems is clearly the same as the
method described by the Graff/Ross I independent method claim-i.e., computing a price
for the electronic sale of a component of a fixed-income asset and generating financial
analysis output. Thus, having already determined that the Graff/Ross I independent
method claim was a patent-ineligible abstract idea, Mem. Op. at 11-13, Graff/Ross I, No.
07-cv-796, I easily conclude that the Group 1 Claims are also patent-ineligible.
Like the claim to "computer readable medium" in CyberSource Corp., and
contrary to defendant's assertions, the Group 1 Claims recite abstract ideas that fail to
meet the MOT test. Emphasizing the applicability of the Federal Circuit's decision in In
re Alappat, 33 F.3d 1526 (Fed. Cir. 1994), Graff/Ross argues that its computer system
claims are special purpose machines, and as such, cannot "flail] within the 'abstract idea'
exception to patent eligibility." Def.'s Mem. Opp'n at 14-16 (citations omitted).
However, the Federal Circuit has also noted that, "[a]t its most basic, ... a computer is an
automatic electronic device for performing mathematical or logical operations," and
11
"prior to the information age, a computer was not a machine at all; rather, it was a job
title: a person employed to make calculations." Bancorp Servs., 687 F.3d at 1277-78
(citations and internal quotation marks omitted). Therefore, "the use of a computer in an
otherwise patent-ineligible process for no more than its most basic function ... fails to
circumvent the prohibition against patenting abstract ideas and mental processes." !d. at
1278. Here, by looking to the substance of the claims, I find that the computer
components are "function[ing] solely as an obvious mechanism for permitting a solution
to be achieved more quickly," 14 SiRF Tech., Inc., 601 F.3d at 1333, and "[s]imply adding
a 'computer aided' limitation"-even multiple computer component limitations-"to a
claim covering an abstract concept, without more, is insufficient to render the claim
patent eligible," Dealertrack, Inc. v. Huber, 674 F.3d 1315, 1333 (Fed. Cir. 2012). Much
like Claim 101 to the '347 patent in Graff/Ross I, the Group 1 Claims are directed to
patent-ineligible subject matter.
IL Group 2 Claims
Group 2 Claims are dependent on Group 1 Claims, but limit the claim to particular
fields of use, such as corporate debt. 15 See, e.g., U.S. Patent No. 7,908,202 col.61 11.25-
14 The patent description specifically states that, as a matter of efficiency, "it
would be best to use automated means to do computing and data processing," U.S. Patent
No. 7,908,202 col.8 11.46-50, Ex. B to Pl.'s Mem. Invalidity at 28, not that the computer
components are integral to the performance of the process, see CyberSource Corp., 654
F.3d at 1375. In fact, the patent lists the specific equations that will be used to compute
the financial output sought, equations that one could complete mentally or by hand. See,
e.g., U.S. Patent No. 7,908,202 col.1911.9-30, Ex. B to Pl.'s Mem. Invalidity at 34.
15 As categorized by plaintiff, Group 2 Claims include the following claims from
the '202 patent: 59-63, 77-97, 105, 107-117, 129, 140-160, 163, 191-199. Pl.'s Mem.
Invalidity at 9.
12
28, Ex. B to Pl.'s Mem. Invalidity at 55 (Claim 105: "The system of claim 104, wherein
the digital electrical computer processor manipulates the electrical signals to generate the
system-determined purchase price for corporate debt as the fixed income asset.").
Having determined that the Group 1 Claims' machine limitations fail to "impose
meaningful limits on the claim[s'] scope,"' CyberSource Corp., 654 F.3d at 1375(citation omitted), "the question under § 101 reduces to an analysis of what additional
features remain in the claims," Bancorp Servs., 687 F.3d at 1279 (citation omitted). As
established by the Supreme Court in Parker v. Flook, 437 U.S. 584, 589-90 (1978), and
reiterated by that Court in Bilski, "limiting an abstract idea to one field ... d[ oes] not
make the concept patentable." Bancorp Servs., 687 F.3d at 1275-76, 1280 (quoting
Bilski, 130 S. Ct. at 3231). Thus, the Group 2 Claims are not patent-eligible, because
their various field of use limitations-i.e., corporate debt security (Claim 61); tax-exempt
security (Claim 63); yield/discount rate (Claim 109)-fail to provide meaningful limits.
See id. at 1280 (claim limited to use in life insurance market was unpatentable).
IlL Group 3 Claims
Group 3 Claims, including both independent and dependent claims, are similar to
the claims in Groups 1 and 2, but describe the method of the process. 16 Claim 98 is a
16As categorized by plaintiff, Group 3 Claims include the following claims from
the '202 patent: 98-103, 118-127, 131-138, 164-190. Pl.'s Mem. Invalidity at 9. Claims
98 and 164 are the independent claims. Def.'s Mem. Opp'n at 8-9.
13
representative independent claim:
A method of using a machine to make financial analysis output, the
machine including a computer system comprising a processor and an output
device, the method comprising:
receiving input signals representing input data at a processor, the
input data representing a first component of property and a second
component of property, wherein at least some of the input data is
received from another computer system, wherein the property is a
fixed-income asset;
program-controlling the processor to manipulate the input signals to
compute a one valuation for the first component and an other
valuation for the second component in consummating a one sale and
corresponding one purchase of the first component to a one buyer at
a one price corresponding to the one valuation and in consummating
an other sale and corresponding other purchase of the second
component to an other buyer at an other price corresponding to the
other valuation, and;
producing financial analysis output including one of the one
valuation and the one price and one of the other valuation and the
other price at an output device.
U.S. Patent No. 7,908,202 col.60 11.30-59, Ex. B to Pl.'s Mem. Invalidity at 54. Claim 99
is a representative dependent claim:
The method of claim 98, wherein the program-controlling includes
program-controlling the processor to compute the one valuation for the first
component including at least one security for corporate debt.
!d. col.60 11.51-54, Ex. B to Pl.'s Mem. Invalidity at 54.
Much like the Group 1 Claims, these method claims cite to computer components
for "implementation of a purely mental process that could otherwise be performed
without the use of a computer," CyberSource Corp., 654 F.3d at 1375, and the dependent
claims' field of use limitations do not provide sufficient additional limitations, Bancorp
Servs., 687 F.3d at 1275-76, 1280. Once the "insignificant postsolution activity" is
14
removed, the Group 3 Claims are quite similar to the claims in Bilski, where petitioners'
sought to patent a well-known business method. 130 S. Ct. at 3229-30. Like the court in
Bilski, I find that the Group 3 Claims, too, are invalid.
IV. Groups 4 Claims
The two Group 4 Claims are independent Claims 3 and 64 of the '202 patent.
Claim 3 provides:
A multiple computer system to make financial analysis outputs, the
multiple computer system including:
a first computer system controlled to generate a first valuation of a
component of property, wherein the property is at least one fixed-
income asset, as part of a first financial analysis output; and
a second computer system including a processor programmed to
receive at least some of the first financial analysis output including
the first valuation as input, programmed to generate using at least
some of said input a second valuation of the component reflecting
computation of a yield/discount rate for the property, and controlled
to produce a second financial analysis output in consummating a sale
and corresponding purchase of the component at a price
corresponding to the second valuation, wherein the second financial
analysis output includes the price.
U.S. Patent No. 7,908,202 col.55 ll.7-23, Ex. B to Pl.'s Mem. Invalidity at 52. Claim 64
provides:
An apparatus to make financial analysis outputs, the apparatus including:
a first computer system including a processor programmed to receive
input signals representing a fixed-income asset and controlled to
manipulate the input signals to generate a valuation of a component
of the fixed-income asset as part of a first financial analysis output;
and
a second computer system including a processor programmed to
receive at least some of the first financial analysis output including
the valuation as input and controlled to generate, using at least
some of the input, a second financial analysis output including a
15
system-determined purchase price for the component in
consummating a sale and corresponding purchase of the
component.
!d. col.58 11.1-16, Ex. B to Pl.'s Mem. Invalidity at 53.
Again, these claims are simply applying multiple computer limitations to the same
abstract idea of computing a price for the sale of a fixed-income asset and generating a
financial analysis output, and the "yield/discount rate" field of use limitation in Claim 3
does little to provide additional meaningful limitations. I see no transformation of these
computer components into "a different state or thing" or innovation that adds something
"specific to the [abstract idea] other than what is well-understood, routine, conventional
activity, previously engaged in by those in the field." Prometheus, 132 S. Ct. at 1299,
1302. Claims 3 and 64 of the '202 patent are directed toward ineligible subject matter.
V. Group 5 Claims
Group 5 consists of claims similar to Group 4 Claims, but limited to particular
fields ofuse. 17 All but two of the Group 5 Claims are dependent claims. However, the
two independent claims, Claims 1 and 9 of the '202 patent, merely incorporate additional
field of use limitations to the Group 4 Claims. For example, Claim 1 is essentially
identical to Claim 3, except that Claim 1 specifies that the fixed-income asset is tax-
exempt. U.S. Patent No. 7,908,202 col.54 11.54-col.55 11.4, Ex. B to Pl.'s Mem. Invalidity
at 51-52. Thus, for the same reasons the Group 2 and Group 4 Claims are invalid, so too
are the Group 5 Claims.
17As categorized by plaintiff, Group 3 Claims include the following claims from
the '202 patent: 1-2,4-56, 65-75, 128, 130, 161-162. Pl.'s Mem. Invalidity at 9. Claims
1 and 9 are the independent claims. !d. at 8.
16
VI. Group 6 Claims
The one claim in Group 6 is independent Claim 1 of the '053 patent:
A method of using an apparatus in producing financial analysis output in
selling fixed income instruments to multiple buyers, the method including:
receiving at a first processor of a first computer system, from a
second processor of a second computer system, data associated with
a price a first buyer is willing to pay for a first at least one fixed
income instrument, the first computer system being a seller
computer system, the first buyer being one of the multiple buyers,
each respective one of said at least one fixed income instrument
being a respective one of the fixed income instruments;
program-controlling the first processor in automatically computing a
first yield/discount rate at least in part from at least some of said data
associated with the price the first buyer is willing to pay for the first
at least one fixed income instrument, the first yield/discount rate
being associated with said first at least one fixed income instrument;
and
outputting financial analysis output comprised of the first
yield/discount rate to one of the second computer system and a third
computer system of another one of the multiple buyers.
U.S. Patent No. 7,685,053 col.5611.1-26, Ex. A to Pl.'s Mem. Invalidity at 52.
Defendant emphasizes that the method recites neither "a mathematical formula"
nor a "fundamental economic practice," and stresses the method's use of computer
components. Def.'s Mem. Opp'n at 20-21. But a review ofthe substance of the claim
demonstrates that, at its core, the claim is directed toward computer components that are
used simply to facilitate the computation of various equations. 18 As this Court previously
stated, the use of the machine must be more than "incidental use ... to perform [a]
18 The '053 patent application contains the same statement as the '202 patent, that,
as a matter of efficiency, "it would be best to use automated means to do computing and
data processing," U.S. Patent No. 7,685,053 col.811.54-61, Ex. A to Pl.'s Mem. Invalidity
at 28, and then recites some of the various equations used to compute the output. See,
e.g., id. col.1911.27-48, Ex. A to Pl.'s Mem. Invalidity at 34.
17
mental process." CyberSource Corp., 654 F.3d at 1375. The Group 6 Claim is directed
toward patent-ineligible subject matter.
VII. Group 7 Claims
The Group 7 Claims are dependent on the Group 6 Claim and recite additional
limitations to a particular technological environment or field of use. 19 Because the
Group 6 Claim is invalid, and for the same reasons that the Group 2 Claims are invalid,
so too are the Group 7 Claims.
VIII. Group 8 Claims
Group 8 Claims include three independent claims, and claims dependent on them,
°
that describe the apparatus used to implement Groups 6 and 7 Claims. 2 Claim 51 is
representative of the independent claims:
An apparatus to produce financial analysis output in a system to sell fixed
income instruments to multiple buyers, the apparatus adapted to carry out
the operations of:
receiving at a first processor of a first computer system, from a
second processor of a second computer system, data associated with
a price a first buyer is willing to pay for a first at least one fixed
income instrument, the first computer system being a seller
computer system, the first buyer being one of the multiple buyers;
and
program-controlling the first processor in automatically computing a
first yield/discount rate at least in part from at least some of said data
associated with the price the first buyer is willing to pay for the first
at least one fixed income instrument, the first yield/discount rate
19As categorized by plaintiff, Group 7 Claims include the following claims from
the '053 patent: 2-50, 372-415. Pl.'s Mem. Invalidity at 9.
20As categorized by plaintiff, Group 8 Claims include the following claims from
the '053 patent: 51-320,322,324-371. Pl.'s Mem. Invalidity at 9. Claims 51-53 are the
independent claims. Id at 8.
18
being associated with said first at least one fixed income instrument;
and
outputting financial analysis output comprised of the first
yield/discount rate to one of the second computer system and a third
computer system of another one of the multiple buyers.
U.S. Patent No. 7,685,053 col.64 11.45-64, Ex. A to Pl.'s Mem. Invalidity at 56. Claim 54
is representative of the dependent claims:
The apparatus of claim 51, wherein the data includes the price the first
buyer is willing to pay for the first at least one fixed income instrument.
!d. col.6511.49-51, Ex. A to Pl.'s Mem. Invalidity at 57.
Although different in form, the Group 6 and Group 8 Claims are similarly directed
to an abstract mental process, which defendant attempts to limit through recitation of
computer components and field of use restrictions. For the same reasons I found the
claims in Groups 2, 6, and 7 invalid, so too, do I find these claims patent-ineligible.
IX Group 9 Claims
Finally, Group 9 includes two dependent claims, Claims 321 and 323 of the '053
patent. Pl.'s Mem. Invalidity at 9. Claim 321 is dependent on Claim 59, a Group 8
Claim, and specifies that the output means is a monitor. U.S. Patent No. 7,685,053 col.98
11.41-43, Ex. A to Pl.'s Mem. Invalidity at 73. Claim 323 is dependent on Claim 321, and
further limits the apparatus to the field of corporate debt securities. !d. col.98 11.46-48,
Ex. A to Pl.'s Mem. Invalidity at 73. The Court has already stated, ad nauseum, that
merely providing a particular technological environment or field of use limitation to an
otherwise patent-ineligible subject matter, does not render the claim patentable.
Therefore, I conclude that the Group 9 Claims are also invalid.
19
CONCLUSION
For all of the foregoing reasons, I find that the defendant's Patent Nos. 7,685,053
and 7,908,202 constitute patent-ineligible subject matter under 35 U.S.C. § 101, and are
therefore invalid. Accordingly, the Court GRANTS Freddie Mac's Motion for Summary
Judgment of Invalidity Under 35 U.S.C. § 101 [Dkt. #33] and DENIES Graff/Ross's
Motion for Partial Summary Judgment as to Patent Validity [Dkt. #24]. The Court
further DISMISSES these actions in their entirety. An Order consistent with this decision
accompanies this Memorandum Opinion.
20