Fundamental economic practices are not patent eligible. WESTERN EXPRESS v. GREEN DOT

A patent is a set of exclusive rights granted to the inventor of a new, useful and not obvious invention. In the United States an inventor gains a patent by filing a patent application with the United States Patent and Trademark Office. The patent application is reviewed by a patent examiner at the United States Patent and Trademark Office and if the patent application meets all the requirements, the inventor is granted a patent on the invention. A patent gives its owner the exclusive right to make, use, sell and import the invention in the United States.

Even after a patent is granted, it can still be invalidated because patent law is constantly evolving. One of the grounds for invalidating a patent is the subject matter to which the invention relates. A patent can be granted on any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof. This requirement is articulated in §35 U.S.C. 101 of United States Patent Law. There are also some judicially created exceptions to patent eligible subject matter, namely, laws of nature, physical phenomena, and abstract ideas. Patents that have been granted in the past can be deemed invalid if court precedent changes the definition of these judicially created exceptions.

The Supreme Court has consistently held that fundamental economic practices are not patent eligible because they are abstract ideas. Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 573 U.S. 208 (2014) articulates the present test to determine whether a patent which involves an abstract idea is eligible for patent protection. The first step in the Alice test is to determine whether the claims of the patent are directed to a patent-ineligible concept, like an abstract idea. If the first step is true, then each patent claim is reviewed both individually and ‘as an ordered combination’ to determine whether the additional elements ‘transform the nature of the claim’ into a patent-eligible application. Understanding how the Alice test is applied can be difficult to grasp, therefore it is helpful to study case precedent.

WESTERN EXPRESS BANCSHARES, LLC, v. GREEN DOT CORP, 2020-1079 (C.A.F.C. 2020) is a case which illustrates a patent being invalidated because it claimed an economic practice.

Plaintiff owns Patent No. 8,498,932 (“’932 patent”) which is directed to a method of transferring funds between client accounts. Both the Plaintiff and the Defendant operate businesses that allow customers to transfer money between accounts using prepaid debt cards. Plaintiff sued Defendant for infringing on the patent. The District Court found that the ‘932 patent was directed to a fundamental economic practice long prevalent in commerce and is a patent ineligible abstract idea.

Plaintiff appealed to the Court of Appeals for the Federal Circuit on the theory that the District Court did no understand the invention and that the ‘932 patent solved several problems associated with prior art money account cards. The Federal Circuit noted that the advantages offered by the ‘932 patent were just the conventional benefits of a payment card. The Federal Circuit found that only potential transformation claimed in the ‘932 patent is a transformation in the legal and financial obligations between the parties, which itself is an abstract idea. The Federal Circuit ultimately concluded that the ‘932 patent failed to pass the Alice test.

The Federal Circuit affirmed the District Court’s judgement because the ’932 patent claimed patent ineligible subject matter under 35 U.S.C. § 101.

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