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No Patent Eligibility Reward for Customer Loyalty Program Computer System

| Samuel CockrielKaren Cassidy

CXLOYALTY, INC. v. MARITZ HOLDINGS INC.

Before Prost, Lourie, and Hughes.  Appeal from the Patent Trial and Appeal Board.

Summary: A claim implementing an abstract idea using conventional techniques is patent ineligible.

CxLoyalty petitioned for covered business method (“CBM”) review of claims of Maritz’s patent relating to a computerized system that permits a customer of a loyalty program to redeem loyalty points for rewards offered by vendors without the need for human interaction.

The Board concluded that the original claims were patent ineligible but that Maritz’s proposed substitute claims were patent eligible.  At step one of the two-step framework for evaluating patent eligibility, the Board determined that the original and substitute claims were directed toward “facilitating, or brokering, a commercial transaction” between “a purchaser using a first form of value (i.e., a rewards program participant using points in whole or in part) and a seller transacting in a second form of value (i.e., a vendor system which transacts purchases in currency,” which the Board concluded was a “fundamental economic practice long prevailing in commerce” and, therefore, an abstract idea.  At step two, the Board concluded that the original claims were patent ineligible because they merely recited “generic and conventional computer components . . . and functionality for carrying out” the abstract idea but that the substitute claims were patent eligible because, based primarily on Maritz’s expert’s testimony, they contained an inventive concept.

On appeal, the Federal Circuit concluded that both the original and substitute claims were directed to patent ineligible subject matter.  At step one, the Federal Circuit agreed with the Board, concluding that because the original and substitute claims were directed to transfers of information relating to a longstanding commercial practice, the claims were directed to an abstract idea.  At step two, the Federal Circuit determined that the original and substitute claims were directed toward nothing more than applying the foregoing abstract idea using techniques, whether considered individually or as an ordered combination, that were well understood, routine, and conventional.  Maritz argued that its expert’s testimony established that the invention was a technological solution to a technological problem.  The Federal Circuit disagreed, reasoning that the expert testimony was conclusory and that the purported solved technological problem of connecting the loyalty awards system with those of third-party vendors while keeping the overall nature of the transaction hidden was not a technological problem requiring a solution that improved the performance of the computer system itself.  Moreover, the claims did not recite a solution to the problem Maritz identified.  Accordingly, the Federal Circuit affirmed the Board’s determination that the original claims were patent ineligible and reversed the Board’s determination that the substitute claims were patent eligible.

Editor: Paul Stewart