Every Penny Counts, Inc. v. Wells Fargo Bank, N.A.
Filing
125
ORDER denying 108 --EPC's motion for reconsideration; granting 68 --Wells Fargo's motion for summary judgment; denying as moot 106 --Wells Fargo's motion for reconsideration; directing the Clerk to ENTER JUDGMENT for Wells Fargo and against EPC, to TERMINATE any pending motion, and to CLOSE the case. Signed by Judge Steven D. Merryday on 9/11/2014. (BK)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
EVERY PENNY COUNTS, INC.,
Plaintiff,
v.
CASE NO.: 8:11-cv-2826-T-23TBM
WELLS FARGO BANK, N.A.,
Defendant.
____________________________________/
ORDER
Every Penny Counts (EPC) sues (Doc. 16) Wells Fargo for infringing U.S.
Patents 7,571,849 and 8,025,217. A Markman order (Doc. 96) construes each
patent’s claims, but EPC moves (Doc. 108) for reconsideration. Also, challenging
each patent’s validity, Wells Fargo moves (Doc. 68) for summary judgment under 35
U.S.C. § 101.
BACKGROUND
Described elsewhere in this action (e.g., Docs. 95 and 96), the ’849 and ’217
patents – using long sections of identical text – claim, respectively, a method of and a
system of automated saving or automated charitable giving. The patented inventions
are easily illustrated. For example, the dollars and cents amount of a bank
customer’s credit card purchase is “rounded up” to the next whole dollar. The
difference between the dollars and cents amount of the purchase and the next whole
dollar, to which the amount is “rounded up,” is withdrawn from the customer’s bank
account and deposited into a recipient account for personal saving or charitable
giving. Conversely, if a participating customer deposits money, the dollars and cents
amount of the bank customer’s deposit is “rounded down” to the next dollar, and the
difference is directed to the recipient account.
A March 18, 2014, Markman order (Doc. 96) construes the ’849 and ’217
patents to claim only the rounding method of contributing to a recipient account.
However, in a motion for reconsideration, EPC argues that the patents claim two
additional methods of contributing to a recipient account – the additur and
percentage methods. Under the additur method, a fixed amount is contributed to the
recipient account for each transaction. Under the percentage method, a fixed
percentage of each transaction amount is contributed to the recipient account.
Because this order grants summary judgment in favor of Wells Fargo and because
this order is unaffected by construing the patents in accord with EPC’s interpretation,
this order assumes (although deciding otherwise) that EPC’s patents claim all three
methods of contributing to a recipient account – rounding, additurs, and percentages.
However construed, EPC’s inventions are a computerized application of a
technique known from antiquity in which a small saving on many occasions
accumulates into a large saving. By distributing costs and concentrating benefits, a
series of nearly unnoticed deductions aggregate to a noticeable accretion.
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Because the costs are difficult to detect, the method is sometimes deployed as
a scam, much earlier in the form of “coin clipping” in which a minuscule,
inconspicuous portion of a coin is furtively clipped from many coins. See William
Blackstone, Commentaries on the Laws of England, Vol. 4, p. 86 (1769) (“[B]etween the
reign of Henry the Fourth and Queen Mary, . . . the spirit of inventing new and
strange treasons was revived: among which we may reckon the offences of clipping
money . . . .”); see also Sidney Sherwood, The History and Theory of Money 70 (1893),
available at http://books.google.com/books?id=Q0USAQAAMAAJ&
source=gbs_navlinks_s (describing clipping and “sweating,” a similar method of
debasing a currency).1 More recently, in the 1983 film Superman III, Gus Gorman,
played by Richard Pryor, utilizes the coin clipping concept after discovering that each
of his co-worker’s earnings includes a fraction of a cent. Gorman programs a virus to
round each paycheck down to the nearest cent and to deposit the fractional
difference into a recipient account.2
More than a scam, the technique has long existed as a legitimate practice. For
example, governments have collected revenue for millennia through a sales tax or an
1
In 1696, the Royal Mint famously hired Sir Isaac Newton to solve the problem of “coin
clipping,” which he famously solved. Isaac Newton, http://www.royalmintmuseum.org.uk/history/
people/mint-officials/isaac-newton/ (last visited Sept. 10, 2014).
2
Similarly, in the 1999 film Office Space, three employees of Initech, a fictional company,
steal several hundred thousand dollars after discovering that each of Initech’s countless business
transactions includes a fraction of a cent. The employees program a virus to round each transaction
down to the nearest cent and to deposit the fractional difference into a recipient account. The
program works but contains a misplaced decimal that rounds each transaction down to the nearest
dollar, not the nearest cent – with alarming results.
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excise tax, each of which directs either a percentage of a transaction amount or a
fixed amount into a recipient account. Similarly, since no later than the Great
Depression of the 1930s, employees have created “Christmas Clubs” to save money
for Christmas purchases. Throughout the year, an employee with a Christmas Club
deducts from each paycheck a small amount, determined by whatever method the
employer offers and the employee selects, and deposits the deduction into a recipient
account. By the end of the year, the small, manageable, periodic sacrifices amount to
a useful saving for purchasing Christmas gifts.
PRECEDENT
Limiting the subject matter of a patent-eligible invention, Section 101 of the
Patent Act states, “Whoever invents or discovers any new and useful process,
machine, manufacture, or composition of matter, or any new and useful
improvement thereof, may obtain a patent therefor, subject to the conditions and
requirements of this title.” Section 101 excludes from patent protection a law of
nature, a natural phenomenon, and an abstract idea. The Supreme Court has
decided four recent actions under Section 101 and invalidated all but one claim in the
patents considered.3
3
Association for Molecular Pathology v. Myriad Genetics, Inc., 133 S. Ct. 2107 (2013), the only
recent Supreme Court decision decided under Section 101 that upheld a claim, pertains to a natural
phenomenon. Myriad upholds a claim directed to “synthetically created” DNA but invalidates the
claims directed to naturally existing DNA.
-4-
In Bilski v. Kappos, 561 U.S. 593, 130 S. Ct. 3218 (2010), the patentee’s first
claim, a method for hedging risk, comprised (1) “initiating a series of financial
transactions between providers and consumers of a commodity,” (2) “identifying
market participants that have a counterrisk for the same commodity,” and (3)
“initiating a series of transactions between those market participants and the
commodity provider to balance the risk position of the first series of consumer
transactions.” Alice Corp. Pty. v. CLS Bank International, 134 S. Ct. 2347, 2356-57
(2014) (summarizing Bilski). In Claim 4, the patentee claimed the mathematical
formula for the method described in Claim 1, and in the remaining claims the
patentee limited the hedging technique in Claim 1 to energy and commodity
markets.
Bilski invalidates each claim in the patent as an abstract idea. Bilski discusses
in detail the law of Section 101 but applies the law only in two paragraphs. Bilski
invalidates Claims 1 and 4 because the hedging described in the claims is a “basic
concept . . . [and] fundamental economic practice long prevalent in our system of
commerce and taught in any introductory finance class.” 130 S. Ct. at 3231. Thus,
upholding Claims 1 or 4 “would effectively grant a monopoly over an abstract idea.”
130 S. Ct. at 3231. For the remaining claims, Bilski holds that “limiting an abstract
idea to one field of use or adding token postsolution components d[oes] not make [a]
concept patentable.” 130 S. Ct. at 3231. Accordingly, Bilksi invalidates the claims as
an “attempt to patent the use of the abstract idea of hedging risk in the energy market
-5-
and then [to] instruct the use of well-known random analysis techniques to help
establish some of the inputs into the equation.” 130 S. Ct. at 3231.
Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289
(2012) – another recent Supreme Court opinion decided under Section 101 –
invalidates a patent on calibrating a drug dosage based on a blood reading. The
patent instructs a doctor to “(1) measure (somehow) the current level of the relevant
metabolite, (2) use particular . . . laws of nature (which the claim sets forth) to
calculate the current toxicity/inefficacy limits, and (3) reconsider the drug dosage in
light of the law.” Mayo, 132 S. Ct. at 1299. The natural law discovered by the
patentee – a correlation between the concentration of certain metabolites in the blood
and the proper dosage of the drug – is, perhaps, abstruse and newly discovered
(especially compared to the abstract idea in this action), but Mayo holds that the
discovery is an unpatentable natural law. Similarly, the application of the natural
law – measuring metabolite levels in the blood and “reconsidering” the drug dosage –
is unpatentable because the application “add[s] nothing specific to the laws of nature
other than what is well-understood, routine, conventional activity, previously
engaged in by those in the field.” Mayo, 132 S. Ct. at 1299.
Alice Corp. Pty. v. CLS Bank International, 134 S. Ct. 2347 (2014) – the Supreme
Court’s most recent and most applicable decision – invalidates a patent “drawn to
the abstract idea of intermediated settlement.” The patent contains method and
system claims. The “representative” method claim comprises:
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(1) “creating” shadow records for each counterparty to a transaction;
(2) “obtaining” start-of-day balances based on the parties' real-world
accounts at exchange institutions; (3) “adjusting” the shadow records
as transactions are entered, allowing only those transactions for which
the parties have sufficient resources; and (4) issuing irrevocable end-ofday instructions to the exchange institutions to carry out the permitted
transactions.
Alice, 134 S. Ct. at 2359.
Alice cites Mayo and identifies a two-step analysis required under Section 101:
First, . . . determine whether the claims at issue are directed to one of
those patent-ineligible concepts. If so . . . , then ask, “what else is there
in the claims . . . ?” To answer that question, . . . consider the elements
of each claim both individually and “as an ordered combination” to
determine whether the additional elements “transform the nature of the
claim” into a patent-eligible application.
Alice, 134 S. Ct. at 2355.
Applying step one, Alice holds that the patent claims an abstract idea that is
not “meaningful[ly]” distinguishable from the risk hedging in Bilski. Without
“labor[ing] to delimit the precise contours of the ‘abstract idea’ category,” Alice
explains that intermediated settlement is a “building block of the modern economy”
and a “fundamental economic practice long prevalent in our system of commerce.”
134 S. Ct. at 2356-57.
Applying step two to the method claims, Alice states that “the relevant
question is whether the claims . . . do more than simply instruct the practitioner to
implement the abstract idea of intermediated settlement on a generic computer.” 134
S. Ct. at 2359. Alice finds that each step of the claimed method is “purely
conventional.” “In short, each step [of the method claims] does no more than
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require a generic computer to perform generic computer functions.” Alice, 134 S. Ct.
at 2359. Also, analyzed “as an ordered combination,” the steps of the method “add
nothing that is not already present when the steps are considered separately”;
instead, the steps of the method “simply recite the concept of intermediated
settlement as performed by a generic computer.” Alice, 134 S. Ct. at 2359. The
system claims fail step two for “substantially the same reasons.” The system claims
recite the unpatentable method implemented by a “generic computer,” which is
composed of a “handful of generic computer components,” including a “data
processing system” with a “communications controller” and a “data storage unit.”
Alice,134 S. Ct. at 2360. Accordingly, neither the method claims nor the system
claims in Alice are patentable.4
DISCUSSION
1. Alice’s Two-Step Analysis
As a first step, Alice instructs the district court to determine whether the
concept that each patent is “directed to” or “drawn to” is a patentable concept. 134
S. Ct. at 2355. The ’849 and ’217 patents are “directed to” or “drawn to” the
4
WildTangent, Inc. v. Ultramercial, LLC, 2014 WL 2921707 (U.S. June 30, 2014), grants a
petition for certiorari, vacates the Federal Circuit’s opinion, and remands the action “for further
consideration in light of Alice.” Bancorp Services., L.L.C. v. Sun Life Assurance Co. of Canada (U.S.),
2014 WL 2921725 (U.S. June 30, 2014), and Accenture Global Services., GmbH v. Guidewire Software,
Inc., 2014 WL 348249 (U.S. June 30, 2014), decline petitions for certiorari. Conspicuously, the
Supreme Court vacated the only Federal Circuit opinion, Ultramercial, upholding a software patent
and declined certiorari over the two actions, Bancorp and Accenture, that invalidate software patents.
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concept of routinely modifying transaction amounts and depositing the designated,
incremental differences into a recipient account.5 Like the intermediated settlement
claimed in Alice (and th0e risk hedging claimed in Bilski), the concept claimed in the
’849 and ’217 patents is a “basic concept” and a “fundamental economic practice
long prevalent in our system of commerce” and, hence, an abstract idea. Alice, 134 S.
Ct. at 2356. As discussed above, economic actors of every description and every
motive – from the scam artist to the frugal wage-earner to the government – have
understood and exploited the elemental notion of regularly and frequently capturing
a small and inconspicuous quantity and segregating and retaining the captured
quantities until the quantities accumulate into a large quantity – a program indebted
only and entirely to the fundaments of elemental arithmetic – simple addition.
Because the ’849 and ’217 patents are “directed to” an abstract idea, step two
of Alice applies. “At . . . step two, [the district court] must examine the elements of
the claim to determine whether it contains an ‘inventive concept’ sufficient to
‘transform’ the claimed abstract idea into a patent-eligible application,” which
requires “more than simply stating the abstract idea while adding the words ‘apply
it.’” Alice, 134 S. Ct. at 2357.
5
The patents in this action describe an abstract idea that lacks a convenient, catchy moniker,
such as Bilski’s “risk hedging” or Alice’s “intermediated settlement.” Perhaps the moniker most
precisely identifying the present patent is “salami slicing.” See Larios v. Nike Retail Servs., Inc., 2013
WL 4046680 (S.D. Cal. Aug. 9, 2013) (Curiel, J.) (defining “salami slicing” as the method of
“remov[ing] something gradually by small amounts at a time”).
-9-
The ’849 patent’s “representative” method, Alice, 134 S. Ct. at 2359, comprises
(1) electronically receiving data, including the transaction amounts,6 (2) modifying
the transaction amounts in accord with a formula, (3) depositing the differences
between the modified and unmodified transaction amounts into one or more
recipient accounts, and (4) adjusting each account balance accordingly. The function
performed by the computer at each step of the method is “purely conventional.”
Alice, 134 S. Ct. at 2358. The first two steps – (1) electronically receiving data (or, in
the words of Alice, “us[ing] a computer to obtain data”) and (2) rounding, or adding
a percentage or fixed number – are “well-understood, routine, conventional activities
previously known to the industry.” Alice, 134 S. Ct. at 2359 (internal quotation
marks omitted). “The same is true with respect to [steps three and four,] the use of a
computer to . . . adjust account balances . . . .” Alice, 134 S. Ct. at 2359. Also, by
adding “nothing significantly more than an instruction to apply the abstract idea . . .
using some unspecified, generic computer,”7 the four steps of the method are not
“‘enough’ to transform an abstract idea into a patent-eligible invention.” Alice, 134
S. Ct. at 2360.
6
Claim 1 of the ’849 patent lists the other data received – “a determinant, apportioning data,
payment transaction data comprising a transaction amount, and operating account identifying data
that identifies an operating account.”
7
The claims offer no description of the computer, and the specification offers no description
beyond the generic, undefined name “clearinghouse central computer” or, sometimes, “central
computer.”
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Like the ’849 patent (i.e., the method patent), the ’217 patent’s invention is not
patentable. The ’217 patent claims a system that implements – on a generic
computer – the ’849 patent’s method. Like the computer in Alice, the computer in the
’217 patent contains a “handful of generic components” – specifically, the ’217
patent’s computer comprises a “data store,” an “information processor,” and a
“communicator.” These components, two of which are discussed in Alice, are
fundamental to every computer. See Alice, 134 S. Ct. at 2360 (“Nearly every
computer will include a ‘communications controller’ and ‘data storage unit’ capable
of performing . . . basic calculation, storage, and transmission functions . . . .”). “As
a result, none of the hardware recited by the system claims offers a meaningful
limitation beyond generally linking the use of the method to a particular
technological environment, that is, implementation via computers.” Alice, 134 S. Ct.
at 2360.
In sum, the ’849 patent, a method patent, is invalid under Section 101 because
the patent claims an abstract idea that is implemented by “well-understood, routine,
conventional activities previously known to the industry.” Alice, 134 S. Ct. at 2359.
Similarly, the ’217 patent, a system patent, is invalid under Section 101 because the
patent merely implements – on a generic, unspecified computer – the ’849 patent’s
(unpatentable) method.
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2. Bilski, Mayo, and Other Precedent
Although Alice controls and shows that the ’849 and ’217 patents are invalid,
Bilski, Mayo, and other precedent further supports invalidating the ’849 and ’217
patents. Like the hedging in Bilski, modifying each transaction amount and
depositing each difference into a single account is a “basic concept . . . [and]
fundamental economic practice long prevalent in our system of commerce.”
Upholding the claims of the ’217 and ’849 patents “would effectively grant a
monopoly over an abstract idea.” Also, like the patents in Bilski (which contained
claims limited to the commodity and energy markets), the ’849 and ’217 patents are
invalid despite the patents’ “limiting [the] abstract idea to one field of use” – credit or
debit card transactions. 130 S. Ct. at 3231; accord Accenture Global Servs., GmbH v.
Guidewire Software, Inc., 728 F.3d 1336, 1345 (Fed. Cir. 2013) (invalidating, under
Section 101, a patent despite the patent’s “attempt[] to limit the abstract concept to a
computer implementation and to a specific industry”), cert. denied, 2014 WL 348249
(U.S. June 30, 2014).
Section 101 applies to the abstract idea in the ’849 and ’217 patents even more
than Section 101 applies to the invention in Mayo. The natural law in Mayo – a
correlation between the concentration of certain metabolites in the blood and the
proper dosage of a drug – is more novel than routinely modifying transaction
amounts and depositing the differences into a recipient account. And, like the claims
in Mayo, the claims in the ’849 and ’217 patents “d[o] not differ significantly from a
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claim that just said ‘apply the algorithm.’” Mayo, 132 S. Ct. at 1301. In other words,
the claims “add nothing specific to [EPC’s abstract idea] other than what is wellunderstood, routine, conventional activity, previously engaged in by those in the
field.” Mayo, 132 S. Ct. at 1299.
CONCLUSION
EPC’s motion for reconsideration is DENIED. Wells Fargo’s motion
(Doc. 68) for summary judgment is GRANTED. Under Section 101, the ’849 and
’217 patents are invalid. Because both patents are invalid under Section 101, Wells
Fargo’s motion (Doc. 106) for reconsideration is DENIED AS MOOT. The clerk is
directed to enter judgment in favor of Wells Fargo and against EPC, to terminate
any pending motion, and to close the case.
ORDERED in Tampa, Florida, on September 11, 2014.
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