State Street Bank & Trust Co. v. Signature Financial Group, Inc.

[5] It has been pointed out that the patent claim comprises means for performing steps that are the requirements specified in an Internal Revenue Service regulation for avoiding taxes[6] on a partnership.

is increased by (1) the amount of money contributed by him to the partnership...and is decrease by (4) the amount of money distributed to him by the partnership (2) The adjustments reflect the manner in which the unrealized income, gain, loss, deduction inherent in such property (that has not been reflected in the capital accounts previously) would be allocated among the partners if there were a taxable disposition of such property for such fair market value on that date.

The Federal Circuit stated: [T]he transformation of data, representing discrete dollar amounts, by a machine through a series of mathematical calculations into a final share price, constitutes a practical application of a mathematical algorithm, formula, or calculation, because it produces "a useful, concrete and tangible result"—a final share price momentarily fixed for recording and reporting purposes and even accepted and relied upon by regulatory authorities and in subsequent trades.At the time and during the following decade, this ruling was considered by many to be significant because previously "methods of doing business" had been widely thought not to be eligible for patent grants.

[8] For example, in Hotel Security Checking Co. v. Lorraine Co., the Second Circuit held that a bookkeeping system to prevent waiters from stealing customer payments for meals could not be patented.

Circuit held that a patent on "blind testing" whiskey blends for consumer preferences would be "a serious restraint upon the advance of science and industry" and therefore should be refused.

[11] The Federal Circuit rejected this view in its State Street Bank opinion: The business method exception has never been invoked by this court, or the CCPA, to deem an invention unpatentable.

[12] The Federal Circuit found it inappropriate to carve out a further exception[13] to the principle that "anything under the sun made by man is patentable.

"[14] Accordingly, the Federal Circuit applied that principle to all business methods that "produce a useful, concrete and tangible result."

In May 2006, Justice Kennedy of the US Supreme Court commented in a concurring opinion in the eBay case[15] that a "burgeoning number" of business-method patents were of "potential vagueness and suspect validity."

In June 2006, the Court dismissed certiorari in LabCorp v. Metabolite, Inc..[16] The Federal Circuit had decided the case on the basis of the State Street precedent.

The Court should therefore decide the case, the dissenting Justices maintained, in order to "diminish legal uncertainty in the area, affecting a substantial number of patent claims."

He quoted one source for the statement, "The Federal Circuit's recent endorsement of patent protection for methods of doing business marks so sweeping a departure from precedent as to invite a search for its justification" and another for this: "To call [the situation following State Street] distressing is an understatement.

The Supreme Court's subsequent decisions in Mayo v. Prometheus and Alice v. CLS Bank further expanded on Bilski and substantially obliterated State Street.

[23] In one of these district court decisions, Federal Circuit Judge Bryson, sitting by designation as a district judge, spoke of these business method patents as uninventive and mere "aspirational" recitations of "methods for performing a commonplace business function" without any description of "any novel manner of performing that function" other than saying "do it with a computer": In short, such patents, although frequently dressed up in the argot of invention, simply describe a problem, announce purely functional steps that purport to solve the problem, and recite standard computer operations to perform some of those steps.

In addition, because they describe the claimed methods in functional terms, they preempt any subsequent specific solutions to the problem at issue.