Federal Circuit Finds Claims Directed to Securing Financing Patent Ineligible

In a precedential opinion, the Federal Circuit affirmed the determination by the Patent Trial and Appeal Board (“PTAB”) in a covered business method review proceeding that the claims of U.S. Patent No. 6,950,807 for providing financing to a customer seeking to purchase a car were not patent eligible.  Credit Acceptance Corp. v. Westlake Services (Fed. Cir. June 9, 2017)[1].

The claims of the ’807 patent are directed to storing a dealer’s inventory information in a database, receiving financial information about a customer in relation to certain products sold by the dealer via a user terminal, combining these two sources of information to create a financial package for each of the inventoried items, and presenting the financial packages to the user.  Applying the two-step Alice framework, the PTAB determined that the claims are directed to the abstract idea of “processing an application for financing a purchase” and that claims do not recite significantly more than the abstract idea.[2]

The Federal Circuit panel agreed that the claims are directed to an abstract idea, finding that there is no meaningful distinction between the type of financial industry practice recited in the claims and “the concept of intermediated settlement” held to be abstract in Alice or the “basic concept of hedging” held to be abstract in Bilski.[3]  The Court noted that the patent applicant, via the specification admitted that processing an application for financing a purchase is a widely-known.[4]  Rejecting the patent owner’s argument that the claims are not abstract because they improve functionality of a general purpose computer “by programming fundamentally new features,” the Court reaffirmed that the mere automation of a manual process using generic computer components cannot constitute a patentable improvement in computer technology.[5]

In step two of Alice analysis, the Court held that the use and arrangement of conventional and generic computer components recited in the claims do not transform the claim, as a whole, into significantly more than the abstract idea.[6]  The patent owner argued that the claims greatly simplified then-existing “manual, iterative, and laborious” automobile financing process.[7]  The Court disagreed and explained that merely configuring generic computers to perform routine tasks more quickly or accurately is “precisely the sort of invention that the Alice Court deemed ineligible for patenting.”[8]

This case provides another example of how statements in the disclosure of a patent can undermine patent eligibility.  The Federal Circuit opinion cites to the background section of the ’807 patent (which was drafted more than a decade before the Alice decision) describing methods for financing the selling of cars and trucks including a “salesperson completing a credit application” followed by other manual steps for obtaining lender approval.[9]  Relying on this disclosure, the Court concluded that the claims were directed to the abstract idea of automating the manual process of applying for credit.