Scanning Checks Is Ineligible for Patent; Just Another ‘Basic Concept,' Fed. Cir. Says

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By Tom Taylor

Dec. 23 — Scanning a check at an ATM, then collecting, reviewing and storing the data mimics tasks that have been performed by humans forever, and by banks “for some time,” the Federal Circuit said Dec. 23.

Simply adding a generic scanner and computer into the mix can't save a patent drawn to such an abstract idea, the appeals court ruled, upholding the trial court's finding of ineligibility under Section 101 of the Patent Act, 35 U.S.C. §101.

Judge Raymond T. Chen's opinion compared the “basic concept of data recognition and storage” to ineligible claims in Alice drawn to “the concept of intermediated settlement,” and those in Dealertrack directed to “processing information through a clearing house.”

And although the court seemed to scoff at the patent holder's argument that the use of a scanner could save its patents, it couldn't blame it for trying.

The Federal Circuit upheld the dismissal of tortious interference and RICO claims brought by one of the alleged infringers against the patent holder, because the infringement claims weren't “objectively baseless” given that “the state of the law of §101 was deeply uncertain” at the time the complaints were filed.

ATM Check Deposits

Content Extraction and Transmission LLC owns patents (U.S. Patent Nos. 5,258,855; 5,369,508; 5,625,465; and No. 5,768,416) on scanning documents, such as checks; converting via optical character recognition parts of the image, such as amounts, addresses and dates, to data in text format; and then storing the data in computer memory.

The last three patents are continuations of the '855 patent, which the inventors applied for in 1991. CET conceded that scanning and OCR were well known on the filing date.

Millennium L.P. was the first assignee to assert the patents, beginning in 2005. Bloomberg Law identifies 60 cases in which one or more of the patents are at issue.

CET sued Wells Fargo Bank N.A. and the PNC Financial Services Group Inc. in the U.S. District Court for the District of New Jersey in 2012, claiming patent infringement by the banks' software used when customers deposit checks at an ATM.

Diebold Inc. manufactured the ATMs and filed a separate action seeking a declaration of noninfringement, patent invalidity, tortious interference and violations of the Racketeer Influenced and Corrupt Organizations Act. CET counterclaimed asserting direct and indirect infringement by Diebold.

Judge Michael A. Shipp consolidated the cases and granted PNC's motion to dismiss, finding representative claim 1 of the '855 patent and claim 1 of the '416 patent ineligible for patenting under Section 101. CET appealed that judgment; Diebold appealed dismissal of its interference and RICO claims.

Concept ‘Undisputedly Well-Known.'

Chen's opinion began with step one of the “two-step framework” for assessing Section 101 eligibility under Alice Corp. Pty. Ltd. v. CLS Bank Int'l, 134 S. Ct. 2347, 110 U.S.P.Q.2d 1976 (June 19, 2014).

“We focus here on whether the claims of the asserted patents fall within the excluded category of abstract ideas,” the court said.

“The Supreme Court has not ‘delimit[ed] the precise contours of the “abstract ideas” category,' ” the court said, citing Alice.

But, “The concept of data collection, recognition, and storage is undisputedly well-known,” and has been performed by banks “for some time,” the court said.

How About a Computer and a Scanner?

CET argued that the requirement of a scanner in its claims could save them from falling into the category of abstract ideas because “human minds are unable to process and recognize the stream of bits output by a scanner.”

However, the Federal Circuit rejected this position, noting that the claims in Alice required a computer to process streams of bits, but were nevertheless abstract.

CET's reliance on the use of a scanner then bled into step two of the Alice analysis—as the court described it—“whether the limitations present in the claims represent a patent-eligible application of the abstract idea.”

“There is no ‘inventive concept' in CET's use of a generic scanner and computer to perform well-understood, routine, and conventional activities commonly used in industry,” the court said.

“At most,” it said, “CET's claims attempt to limit the abstract idea of recognizing and storing information from hard copy documents using a scanner and a computer to a particular technological environment.” Such a limitation is not enough to save a claim, the court held.

The court went on to reject CET's effort to challenge the district court's determination that the two claims at issue were representative, as well as it's decision to declare the claims patent-ineligible under Section 101 without first construing the claims or allowing discovery.

Worth a Shot

Finally, the court turned to Diebold's RICO and tortious interference claims against CET.

Those claims arose from what Diebold characterized as frivolous infringement claims against its customers.

According to the Noerr-Pennington doctrine, the court said, “a person's act of petitioning the government is presumptively shielded from liability by the First Amendment against certain types of claims.”

Overcoming this presumption requires a showing that the litigation was a “sham,” meaning that it was both “objectively baseless” and “intended to harm the plaintiff through the abuse of a governmental process itself, as opposed to harms flowing from the outcome of that process.”

Though the district court dismissed Diebold's claims, its reasoning had allowed it to move beyond the first hurdle—it found that the infringement claims were “objectively baseless”—and on to the second.

It should not have gotten that far, the Federal Circuit said.

The law governing Section 101 was in disarray when CET filed suit in 2012, the court said, noting the complicated procedural and jurisprudential histories of cases like Alice, Ultramercial, Inc. v. Hulu, LLC, 657 F.3d 1323, 100 U.S.P.Q.2d 1140 (Fed. Cir. 2011) (subsequently vacated), and Dealertrack, Inc. v. Huber, 674 F.3d 1315 (Fed. Cir. 2012).

“Under these circumstances, we cannot conclude that as a matter of law, no reasonable litigant in 2012 could have expected success on at least one of CET's claims,” the court held.

Judges Timothy B. Dyk and Richard G. Taranto joined the opinion.

Anatoly S. Weiser of Zimmerman & Weiser LLP, Westfield, N.J., represented CET. Frederick L. Whitmer of Kilpatrick, Townsend & Stockton LLP, New York, represented Wells Fargo. Noam J. Kritzker of Bakos & Kritzer, Florham Park, N.J., represented PNC. Roy H. Wepner of Lerner, David, Littenberg, Krumholz & Mentlik, LLP, Westfield, N.J., represented Diebold.

To contact the reporter on this story: Tom P. Taylor in Washington at ttaylor@bna.com

To contact the editor responsible for this story: Anandashankar Mazumdar at amazumdar@bna.com

Full text at http://www.bloomberglaw.com/public/document/Content_Extraction_v_Wells_Fargo_Bank_Docket_No_1301588_Fed_Cir_A.