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Following Bilski, court upholds validity of patents that meet a “meaningful limits” test
By Irina Oberman – Edited by Avis Bohlen

H&R Block Tax Services, Inc. v. Jackson Hewitt Tax Service, Inc., No. 608cv37 (E.D. Tex. Feb. 2, 2011)
Slip Opinion hosted by 271 Patent Blog

Magistrate Judge Love, sitting in the United States District Court for the Eastern District of Texas, reconsidered a previous Report and Recommendation in this case, which recommended invalidating two of the plaintiff’s three asserted patents (the ‘862 and ‘425 patents). Applying the machine-or-transformation test as well as a new “meaningful limits” test, Judge Love modified the recommendation and upheld the validity of the ‘862 patent because the claims applied a “meaningful limit” on the scope of the claims.

JOLT Digest previously reported on the revised recommendation271 Patent Blog offers an overview of the decision highlighting the discussion of the ‘862 patent. Additionally, FreePatentsOnline and Patent Storm provide a helpful overview of the ‘862 patent.

On February 8, 2008, H&R Block filed suit against Jackson Hewitt for infringement of three of its patents – the ‘862, 829, and ‘425 patents. The ‘862 patent consists of a computerized system that assigns a portion of an individual’s right to receive a payment from a government entity to a third party in exchange for a spending vehicle (such as a debit card, credit card, or coupon) offered by the third party. The ‘829 patent consists of a method for preparing tax returns in which taxpayers assign a portion of their future income tax refund to a third party in exchange for a spending vehicle from that third party. And the ‘425 patent consists of “a computerized system for providing a loan to a taxpayer prior to the end of the current tax year” based on the customer’s estimated income tax refund.

This case is one of the first examples of a court attempting to determine patent eligibility following the Supreme Court’s decision in Bilski v. Kappos, 130 S.Ct. 3218 (2010). In Bilski the Court rejected the Federal Circuit’s holding that the machine-or-transformation test was the exclusive test for patent eligibility and held that while the machine-or-transformation test was a “useful and important clue” it was not the sole test for deciding whether an invention was patent-eligible.  In construing the Supreme Court’s decision, the district court, citing Diamond v. Diehr, 450 U.S. 175 (1981), applied a “meaningful limits” test to determine eligibility. Reasoning that the Supreme Court rejected the Bilski patent because patenting the process of hedging risk would “pre-empt the use of this approach in all fields,” the district court concluded that  “meaningful limits on the claim’s scope…impart patent eligibility.”

Reconsidering the plaintiff’s patents, the district court reversed its prior recommendation and upheld the validity of the ‘862 process claims because the claims established a meaningful limit by disclosing a spending vehicle and thus limited its applicability to “non-cash collateralized loans” within the broader field of “assignable government payments in exchange for something of value.”

The district court also upheld the validity of the ‘829 patent. The court found that while the claims failed to meet the machine-or-transformation test, they imposed sufficiently meaningful limits on the scope of the patent. The court first concluded that the patent failed the machine prong of the test because it only involved the use of a computer in “1) preparing a tax return and 2) obtaining tax return data”. The court then opined that money was only a “representation of a legal obligation or abstract concept” and therefore the patent did not satisfy the transformation prong of the test. However, the court still found that the ‘829 claims put in place meaningful limits.

Then lastly, the court found that the ‘425 patent failed the meaningful limits test and the machine-or-transformation test. The court held that the ‘425 patent claims failed the meaningful limits test because the patent’s recited use of loans collateralized by an income tax refund was not sufficiently limited and constituted an abstract idea.

Following the Supreme Court’s ruling in Bilski, the district court in this case applied a “meaningful limits” test to supplement the machine-or-transformation test. While it remains to be seen whether the Federal Circuit will apply a different test or reject the recommendation on appeal, the district court’s novel application may set a precedent for future tests in assessing patent eligibility in cases to come.

Posted On Feb - 20 - 2011 Comments Off

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