Check Processing Claims Bounce

McDermott Will & Emery

McDermott Will & Emery

The US Court of Appeals for the Federal Circuit found claims directed to using data from a check to credit a merchant’s account before scanning the check to be subject matter ineligible under 35 USC § 101 as reciting an abstract idea. Solutran, Inc. v. Elavon, Inc., Case Nos. 19-1345, -1460 (Fed. Cir. July 30, 2019) (Chen, J).

Solutran owns a patent directed to a system and method for processing paper checks. The patent explains that in the past, the payee would transport the check to her own bank to be read and processed, then the payee’s bank would transport the check to the payor’s bank, where it was again read and processed. At this point, the payor’s bank would debit the payor’s account and transfer the money to the payee’s bank, which would credit the payee’s account. Solutran’s invention purports to improve on this process by providing a system and method of electronically processing checks in which (1) “data from the checks is captured at the point of purchase,” (2) “this data is used to promptly process a deposit to the merchant’s account,” (3) the paper checks are moved elsewhere “for scanning and image capture,” and (4) “the image of the check is matched up to the data file.” Solutran alleged that the claimed method was an improvement over the prior art because it allowed merchants to get their accounts credited sooner, without having to wait for the check scanning step.

Solutran sued U.S. Bank alleging infringement of its patent. After answering, U.S. Bank filed a motion for summary judgment, arguing that the claims were directed to the abstract idea of delaying and outsourcing the scanning of paper checks. The district court denied the motion, finding that the claims were not directed to an abstract idea. In reaching its decision, the district court was persuaded by a Patent Trial and Appeal Board (PTAB) decision in a previous covered business method review of the patent at issue. The PTAB case focused on obviousness (the eligibility issue having been determined at institution), and the Federal Circuit affirmed the PTAB on the obviousness issue. In the instant case, the district court relied on the PTAB’s reasoning that the basic, core concept of the claim is a method of processing paper checks, which is more akin to a physical process than an abstract idea. The district court also found that the claims recited an inventive concept under step two of Alice and that the claims passed muster under the machine-or-transformation test. U.S. Bank appealed.

The Federal Circuit reversed, concluding that “the claims are directed to the abstract idea of crediting a merchant’s account as early as possible while electronically processing a check.” In particular, the Court relied on Content Extraction v. Wells Fargo (IP Update, Vol. 18, No. 1) in finding that the claims “recite basic steps of electronic check processing.” The Court rejected Solutran’s argument that the claims as a whole were not directed to an abstract idea, finding that the only advance recited in the claims was crediting the merchant’s account before the paper check is scanned. The Court found this feature to be an abstract idea. The Court also noted that Solutran had admitted that the claims did not include a technical improvement to capture check information in order to create a digital file or electronically credit a bank account, and also did not improve how a check is scanned. In view of this, the Court found that the claims were written at a “distinctly high level of generality.”

The Federal Circuit also found that even when viewed as a whole, the claims did not improve the functioning of the computer itself or effect an improvement in any other technology or technical field. The Court concluded that the claims did not pass the machine-or-transformation test, and noted that the claims did not amount to an inventive concept because they used “a general-purpose computer and scanner to perform conventional activities in the way they always have.”

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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