Clarilogic, Inc. v. Formfree Holdings Corporation

NOTE: This disposition is nonprecedential.
United States Court of Appeals
for the Federal Circuit
______________________
CLARILOGIC, INC.,
Plaintiff-Appellee
v.
FORMFREE HOLDINGS CORPORATION,
Defendant-Appellant
______________________
2016-1781
______________________
Appeal from the United States District Court for the
Southern District of California in No. 3:15-cv-00041-DMS-
NLS, Judge Dana M. Sabraw.
______________________
Decided: March 15, 2017
______________________
ARTHUR ALBERT WELLMAN, JR., San Diego, CA, argued
for plaintiff-appellee.
NIGAMNARAYAN ACHARYA, Baker Donelson Bearman
Caldwell & Berkowitz, P.C., Atlanta, GA, argued for
defendant-appellant. Also represented by KRISTIN S.
TUCKER.
______________________
Before LOURIE, REYNA, and CHEN, Circuit Judges.
2 CLARILOGIC, INC. v. FORMFREE HOLDINGS CORPORATION
REYNA, Circuit Judge.
FormFree Holdings Corporation (“FormFree”) appeals
from the United States District Court for the Southern
District of California’s grant of Clarilogic, Inc.’s (“Clarilo-
gic”) summary judgment motion holding that the claims of
U.S. Patent No. 8,762,243 (“the ’243 patent”) are ineligible
under 35 U.S.C. § 101. Because the ’243 patent’s claims
are directed to an abstract idea and the claims contain no
additional elements that transform the nature of the
claims into a patent-eligible application of the abstract
idea, we affirm.
BACKGROUND
The ’243 patent is entitled “Systems and Methods for
Electronic Account Certification and Enhanced Credit
Reporting.” According to the ’243 patent, it generally
relates to a method for electronically certifying a potential
borrower’s financial account data and providing a credit
report. Figure 1A shows the steps the system undertakes:
CLARILOGIC, INC. v. FORMFREE HOLDINGS CORPORATION 3
J.A. 109.
The ’243 patent has 18 claims, of which claims 1 and
16 are independent.
Claim 1 is representative:
1. A computer-implemented method for provid-
ing certified financial data indicating financial
risk about an individual, comprising:
(a) receiving a request for the certified financial
data;
(b) electronically collecting financial account data
about the individual from at least one financial
source,
4 CLARILOGIC, INC. v. FORMFREE HOLDINGS CORPORATION
(c) transforming the financial account data into a
desired format;
(d) validating the financial account data by apply-
ing an algorithm engine to the financial account
data to identify exceptions, wherein the excep-
tions indicate incorrect data or financial risk;
(e) confirming the exceptions by collecting addi-
tional data and applying the algorithm engine to
the additional data,
(f) marking the exceptions as valid exceptions
when output of the algorithm engine validates the
exceptions; and
(g) generating, using a computer, a report from
the financial account data and the valid excep-
tions,
wherein the financial account data comprises at
least one of real-time transaction data, real time
balance data, historical transaction data, or his-
torical balance data; and the algorithm engine
identifies a pattern of financial risk; the method is
computer implemented, and steps (c), (e), and (f)
are executed via the computer or a series of com-
puters.
J.A. 145 at col. 26 ll. 19–43.
In brief, the claimed computer-implemented system
seeks a potential borrower’s financial information from a
third party, applies an “algorithm engine” to the data, and
outputs a report. The algorithm engine itself is not
claimed, nor are the claims limited by any rules that are
used to complete the various method steps attributed to
the “algorithm engine.” Rather, the “system may receive
logic rules from government entities or particular users
which may establish logic rules used to identify infor-
CLARILOGIC, INC. v. FORMFREE HOLDINGS CORPORATION 5
mation.” J.A. 140 at col. 16 ll. 32–35. Thus, the “algo-
rithm engine” is obtained from third parties.
The district court found that the ’243 patent was di-
rected to patent-ineligible subject matter. It reasoned
that “[a]t best, the claims describe using generic, multi-
purpose computer functions to automate the fundamental
economic process of financial risk assessment. . . . Howev-
er, any proprietary risk analysis is contained in an un-
patentable, undescribed algorithm or set of algorithms.”
Clarilogic, Inc. v. Formfree Holdings Corp., No. 15-cv-41-
DMS(NLS), 2016 WL 3247890, at *3 (S.D. Cal. Mar. 4,
2016).
FormFree appeals. We have jurisdiction under 28
U.S.C. § 1295(a)(1).
STANDARD OF REVIEW
We review a district court’s grant of summary judg-
ment according to the law of the regional circuit, here the
Ninth Circuit. See Synopsys, Inc. v. Mentor Graphics
Corp., 839 F.3d 1138, 1146 (Fed. Cir. 2016) (citations
omitted). In the Ninth Circuit, summary judgment is
reviewed de novo. Humane Soc’y of the U.S. v. Lock, 626
F.3d 1040, 1047 (9th Cir. 2010). We also review de novo
whether a claim is invalid under the judicially created
exceptions to § 101. McRO, Inc. v. Bandai Namco Games
Am. Inc., 837 F.3d 1299, 1311 (Fed. Cir. 2016) (citations
omitted).
DISCUSSION
Section 101 defines patent-eligible subject matter as
“any new and useful process, machine, manufacture, or
composition of matter, or any new and useful improve-
ment thereof,” subject to the other limitations of the
Patent Act. 35 U.S.C. § 101. Apart from the Patent Act,
the Supreme Court has created exceptions to the literal
scope of § 101. “Laws of nature, natural phenomena, and
abstract ideas are not patentable.” Alice Corp. v. CLS
6 CLARILOGIC, INC. v. FORMFREE HOLDINGS CORPORATION
Bank Int’l., 134 S. Ct. 2247, 2354 (2014) (quoting Ass’n for
Molecular Pathology v. Myriad Genetics, Inc., 133 S. Ct.
2107, 2116 (2013)).
In Alice, the Court supplied a two-step framework for
analyzing whether claims are patent eligible. First, we
determine whether the claims at issue are “directed to” a
judicial exception, such as an abstract idea. 134 S. Ct. at
2355. If not, the inquiry ends. Thales Visionix Inc. v.
United States, ___ F.3d ___, 2017 WL 914618, at *5, (Fed.
Cir. Mar. 8, 2017); Enfish, LLC v. Microsoft Corp., 822
F.3d 1327, 1339 (Fed. Cir. 2016). If the claims are deter-
mined to be directed to an abstract idea we next consider
whether the claims contain an “inventive concept” suffi-
cient to “transform the nature of the claim into a patent-
eligible application.” Alice, 134 S. Ct. at 2355.
1. Alice Step One
Under Alice step one, “the claims are considered in
their entirety to ascertain whether their character as a
whole is directed to excluded subject matter.” Internet
Patents Corp. v. Active Network, Inc., 790 F.3d 1343, 1346
(Fed. Cir. 2015). We look to whether the claims in the
patent focus on a specific means or method, or are instead
directed to a result or effect that itself is the abstract idea
and merely invokes generic processes and machinery.
McRO, 837 F.3d at 1314.
Claim 1 recites a method for “providing certified fi-
nancial data indicating financial risk about an individu-
al,” comprising the steps of receiving a request,
electronically collecting financial data, transforming the
data into a desired format, validating the data by “apply-
ing an algorithm engine,” analyzing certain exceptions,
and generating a report. J.A. 145 at col. 26 ll. 19–43.
We find that claim 1 of the ’243 patent is directed to
the abstract idea of gathering financial information of
potential borrowers. When “the focus of the asserted
CLARILOGIC, INC. v. FORMFREE HOLDINGS CORPORATION 7
claims” is “on collecting information, analyzing it, and
displaying certain results of the collection and analysis,”
the claims are directed to an abstract idea. Elec. Power
Grp., LLC v. Alstom S.A., 830 F.3d 1350, 1343 (Fed. Cir.
2016). Peculiar to this case is that the algorithm engine
mentioned in the claim is not claimed, identified, or
explained. To be sure, claiming an algorithm does not
alone render subject matter patent eligible. See
Gottschalk v. Benson, 409 U.S. 63, 71–72 (1972). But a
method for collection, analysis, and generation of infor-
mation reports, where the claims are not limited to how
the collected information is analyzed or reformed, is the
height of abstraction.
2. Alice Step Two
Our next inquiry is whether the patent can be sal-
vaged under step two. In step two, we consider the ele-
ments of the claim, both individually and as an ordered
combination, to assess whether the additional elements
transform the nature of the claim into a patent-eligible
application of the abstract idea. Content Extraction &
Transmission LLC v. Wells Fargo Bank, 776 F.3d 1343,
1347 (Fed. Cir. 2014). This is the search for an inventive
concept, which is something sufficient to ensure that the
claim amounts to significantly more than the abstract
idea itself. Id. For example, merely reciting the use of a
generic computer or adding the words “apply it with a
computer” cannot convert a patent-ineligible abstract idea
into a patent-eligible invention. Alice, 134 S. Ct. at 2358;
Versata Dev. Grp., Inc. v. SAP Am., Inc., 793 F.3d 1306,
1332 (Fed. Cir. 2015).
FormFree invokes Diamond v. Diehr, 450 U.S. 175
(1981) to argue that its invention is “transformative,” and
thus eligible for patent protection. In Diehr, the Supreme
Court confirmed the patentability of claims directed to a
new process for curing synthetic rubber by employing a
well-known mathematical equation. 450 U.S. at 187. At
8 CLARILOGIC, INC. v. FORMFREE HOLDINGS CORPORATION
the end of the Diehr process, there was something tangi-
bly different from what was input, i.e., cured rubber. See
id. FormFree argues that its invention is “transforma-
tive” because it takes in financial data and outputs a
report. We disagree. In contrast to Diehr, claim 1 recites
a method that changes the way electronic information is
displayed via an unknown and unclaimed process. Absent
any limitation to how the data are changed, there is little,
if any, transformative effect. Data are still data.
In Electric Power Group, we held that claims directed
to real-time gathering and analysis of data from different
points in an electric power grid were not sufficient under
Alice step one or step two. 830 F.3d at 1353–56. Here, as
in Electric Power Group, the claims require only off-the-
shelf, conventional computer technology for gathering,
analyzing, and displaying the desired information. 830
F.3d at 1355. Even if the ’243 patent may be said to
invoke internet-based systems to increase speed, as
FormFree argues, this does not make the claimed inven-
tion patent eligible. Id. at 1355–56. The ’243 patent does
not claim the technical manner in which financial data is
gathered, analyzed, or output. It does not claim any
proprietary risk-assessment algorithm. The claims of the
’243 patent therefore do not clear Alice step two.
CONCLUSION
For the foregoing reasons, we affirm the district
court’s judgment that the claims of the ’243 patent are
ineligible under § 101.
AFFIRMED