ATM Check Scanning Patents Are Patent-ineligible: Federal Circuit | Practical Law

ATM Check Scanning Patents Are Patent-ineligible: Federal Circuit | Practical Law

In Content Extraction and Transmission LLC v. Wells Fargo Bank, National Association, the US Court of Appeals for the Federal Circuit affirmed the US District Court for the District of New Jersey's dismissal of the patent owner's infringement claims, finding that the claimed check scanning technologies were directed to patent-ineligible subject matter under 35 U.S.C. § 101. 

ATM Check Scanning Patents Are Patent-ineligible: Federal Circuit

Practical Law Legal Update 7-593-9725 (Approx. 4 pages)

ATM Check Scanning Patents Are Patent-ineligible: Federal Circuit

by Practical Law Intellectual Property & Technology
Published on 24 Dec 2014 • USA (National/Federal)
In Content Extraction and Transmission LLC v. Wells Fargo Bank, National Association, the US Court of Appeals for the Federal Circuit affirmed the US District Court for the District of New Jersey's dismissal of the patent owner's infringement claims, finding that the claimed check scanning technologies were directed to patent-ineligible subject matter under 35 U.S.C. § 101.
On December 23, 2014, the US Court of Appeals for the Federal Circuit issued an opinion in Content Extraction and Transmission LLC v. Wells Fargo Bank, National Association, affirming the US District Court for the District of New Jersey's dismissal of Content Extraction and Transmission LLC's (CET) patent infringement claims (Nos. 2013-1588, -1589, 2014-1112, -1687, (Fed. Cir. Dec. 23, 2014)). The Federal Circuit held that CET's asserted patents covering check scanning technologies were directed to patent-ineligible abstract ideas under 35 U.S.C. § 101.
CET owns four patents that generally claim an automated method of scanning checks by:
  • Extracting data from the check using a scanner.
  • Recognizing specific information in the extracted data, such as an account or dollar amount.
  • Storing the recognized information in memory.
In 2012, CET brought lawsuits against PNC Financial Services Group, Inc. and PNC Bank, N.A. (collectively, PNC) and Wells Fargo, alleging that automated teller machines (ATMs) used by Wells Fargo and PNC infringed CET's patents. Diebold, Inc., the manufacturer of the accused ATMs, then filed a separate declaratory judgment action against CET, seeking declaratory judgments of non-infringement and invalidity and damages based on CET's filing of allegedly baseless infringement lawsuits against Wells Fargo, PNC and other Diebold customers.
After the district court consolidated CET's lawsuits with Diebold's declaratory judgment action, PNC moved to dismiss CET's complaint under Federal Rule of Civil Procedure 12(b)(6), arguing that CET's asserted patents are invalid because they claim ineligible subject matter under 35 U.S.C. § 101. The district court agreed with PNC, granted the motion and dismissed CET's infringement complaints. The court also dismissed Diebold's tortious interference and Racketeer Influenced and Corrupt Organizations Act (RICO) claims against CET, finding that CET's infringement lawsuits are protected by the Noerr-Pennington doctrine.
On appeal, the Federal Circuit affirmed the dismissal of CET's infringement claims, finding that the asserted patents describe patent-ineligible abstract ideas. The Federal Circuit used the two-step framework from the US Supreme Court's decision in Alice Corp. Pty. Ltd. v. CLS Bank Int'l (No. 13-298, (S. Ct. June 19, 2014)). Specifically, the court:
  • Determined that CET's patents describe the abstract idea of collecting data, recognizing certain data within the collected data and storing the recognized data in memory. The court found these concepts were well-known and were used by banks to update account records based on check information. The court rejected CET's argument that the use of a scanner distinguished its claims from those found invalid in Alice.
  • Concluded that the disputed claims do no more than simply describe the abstract method and do not add any meaningful limitations. The court explained that:
    • CET conceded at oral argument that the use of scanners and optical character recognition were well-known before CET applied for its patents;
    • the district court correctly addressed representative claims from the disputed patents because all the claims were substantially similar and linked to the same abstract idea;
    • CET's opposition to PNC's motion did not identify any claims that were different from the representative claims the district court used; and
    • the district court properly resolved this issue at the pleading stage because claim construction is not an inviolable prerequisite to a Section 101 patent-eligibility determination.
The Federal Circuit also affirmed the district court's dismissal of Diebold's tortious interference and RICO claims, which were based on CET's filing of allegedly frivolous lawsuits. The court used the two-part test from the US Supreme Court's decision in Professional Real Estate Investors, Inc. v. Columbia Pictures Industries, Inc., which held that Noerr-Pennington immunity to liability does not apply to a "sham" lawsuit that is both objectively baseless and subjectively brought in bad faith to harm the other party through abuse of the litigation process itself (508 U.S. 49 (1993)). The Federal Circuit held that CET's lawsuits were not objectively baseless because the state of the law concerning Section 101 patent-eligible subject matter was deeply uncertain when CET filed its complaints. Accordingly, the Federal Circuit affirmed the district court's dismissal of Diebold's tortious interference and RICO claims.