Claims Directed to Providing Financing for Allowing a Customer to Purchase a Car found Invalid under 35 U.S.C. § 101

In a precedential opinion, the Federal Circuit affirmed a final written decision of the Patent Trial and Appeal Board ("Board") in a Covered Business Method ("CBM") review proceeding in which claims were held to be directed to patent-ineligible subject matter under 35 U.S.C. § 101.

Credit Acceptance Corp. ("CAC") is the assignee of U.S. Patent No. 6,950,807, which includes both system and method claims directed to providing financing for allowing a customer to purchase a product selected from an inventory of products maintained by a dealer.  In one embodiment, the products are vehicles for sale at a car dealership.  The invention involves maintaining a database of the dealer's inventory, gathering financing information from the customer, and presenting a financing package to the dealer for each individual product in the dealer's inventory.

Certain claims, such as the claims at issue here, involve the application of these steps using elements such as a "database," a "user terminal," and a "server."  For example, representative claim 25 provides:

25.  A system for generating financing packages provided by a financing party, for a customer purchase of a product from a dealer's inventory of a plurality of products, the system comprising:
    a database for storing information related to products in the dealer's inventory including a dealer cost associated with each product;
    a user terminal, communicatively coupled to said database, for receiving financial information about the customer in relation to said products; and
    a server having access to the data in the database adapted to communicate with the user terminal over a network, whereby the financial information about the customer may be transmitted to the server, the server generating a financing package for each product in the dealer's inventory and transmit financing terms for each financing package to the user terminal via the network for presentation to the user for immediate purchase, wherein the server is further configured such that the financing terms of each financing package include an advance amount to be paid to the dealer by said financing party if the customer purchases the product associated with the financing package.

The Board determined that claims 10–12 and 14–33 of the '807 patent were directed to patent-ineligible subject matter under 35 U.S.C. § 101.  CAC appealed that decision.

To determine whether the claims were patent-eligible, the Federal Circuit followed the two-step Alice/Mayo analysis.  First, a determination is made of whether the claims at issue are directed to an abstract idea.  If so, in a second step is performed for a search for an inventive concept -- i.e., an element or combination of elements that is sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the ineligible concept itself.

Abstract Idea

The Board determined that the claims were directed to the abstract idea of "processing an application for financing a purchase."  The Federal Circuit agreed.  The Federal Circuit did not see any meaningful distinction between this type of financial industry practice and "the concept of intermediated settlement" held to be abstract in Alice, or the "basic concept of hedging" held to be abstract in Bilski v. Kappos.

CAC suggested that the claims are not abstract because they "improve[] the functionality of the general purpose computer by programming fundamentally new features."  But the Federal Circuit found that this is so only in the sense that the claims permit automation of previously manual processing of loan applications.

The background portion of the '807 patent specification explains that under present methods for selling cars and trucks, the financing process begins with the salesperson completing a credit application, and this involves receiving detailed financial information from the customer.  The specification continues to describe a known process that occurs when the first application is rejected:  resubmitting applications to different lending institutions, submitting applications for other vehicles in the dealer's inventory, and submitting applications with changed financing terms.

Prior cases have made clear that mere automation of manual processes using generic computers does not constitute a patentable improvement in computer technology.  Using computers as tools to perform an abstract idea is not going to satisfy section 101.

Here, the invention's communication between previously unconnected systems -- the dealer's inventory database, a user credit information input terminal, and creditor underwriting servers, was not considered to be an improvement in computer technology.  Rather, the focus of the claims is on the method of financing, and the recited generic computer elements are invoked merely as a tool.

CAC also asserted that claim 25 is not directed to an abstract financial process, but rather to configuring a computer system to combine data from multiple electronic data sources to synthesize a comprehensive report of structures for a dealer and a creditor to co-finance a purchase.  But the Federal Circuit commented that collecting information, including when limited to particular content (which does not change its character as information), is within the realm of abstract ideas, and the output of data analysis can also be abstract.

Inventive Concept

At step two of the Alice framework, the Board concluded that the claims did not recite an inventive concept.  Again, the Federal Circuit agreed.

The Federal Circuit noted that the use and arrangement of conventional and generic computer components recited in the claims -- such as a database, user terminal, and server -- does not transform the claim, as a whole, into "significantly more" than a claim to the abstract idea itself.

CAC asserted that prior to the '807 patent, because computers were unable to perform the claimed process, automobile financing was manual, iterative, and laborious.  CAC suggested that the invention solves this problem because it provides software that allows computers to supplant and enhance the existing series of manual steps of securing financing -- a task they were previously not configured to perform.

But the Federal Circuit found that merely configuring generic computers in order to supplant and enhance an otherwise abstract manual process is precisely the sort of invention that the Alice Court deemed ineligible for patenting.  Relying on a computer to perform routine tasks more quickly or more accurately is insufficient to render a claim patent eligible.

Significantly, the Federal Circuit noted that the claims do not provide details as to any non-conventional software for enhancing the financing process.  Also, the Federal Circuit found that CAC did not clearly identify any particular inventive concept in the ordered combination that it alleges the Board overlooked.

Thus, the Federal Circuit concluded that the challenged claims of the '807 patent are not directed to patent-eligible subject matter under 35 U.S.C. § 101.

Estoppel

This case also included arguments of estoppel, by CAC, alleging that Westlake (the petitioner) should have been barred from challenging certain claims of the '807 patent in the CBM in light of a prior CBM proceeding which was instituted on different claims of the '807 patent.

However, the Federal Circuit noted that a CBM review proceeds in stages:  first, the Board decides whether to institute a review, and second, if review is instituted, the proceeding enters a trial stage and the Board later issues a "final written decision" under 35 U.S.C. § 328(a).  Once the Board issues a final written decision, the estoppel statute applies.

The Federal Circuit found that a final written decision on instituted claims is not a final determination on the patentability of non-instituted claims.  Because a final written decision does not determine the patentability of non-instituted claims, it follows that estoppel does not apply to those non-instituted claims in future proceedings before the PTO.

Credit Acceptance Corp. v. Westlake Services (Fed. Cir. 2017)
Panel:  Circuit Judges Dyk, Mayer, and Reyna
Opinion for the court by Circuit Judge Dyk; opinion dissenting-in-part by Circuit Judge Mayer (the dissent concerns a jurisdictional issue that was raised in the appeal, and which is not addressed here)