Mortgage Grader, Inc. v. First Choice Loan Services Inc., NYLX, Inc.

Docket Nos. 2015-1415

O’MALLEY, TARANTO, STARK (Chief District Judge)
January 20, 2016

Brief Summary: DC found not to abuse its discretion in denying Mortgage Grader’s motion to strike Appellee’s § 101 defense, or to have erred in its grant of SJ that the claims were patent ineligible under § 101 and Alice.

Summary: Mortgage Grader appealed DC denial of its motion to strike NYLX Inc.’s patent ineligibility defenses and grant of Mortgage Grader’s motion for summary judgment that the asserted claims are patent-ineligible. The patents-in-suit are Mortgage Grader’s US 7,366,694 and 7,680,728 relating to “[a] computer-implemented system for enabling borrowers to anonymously shop for loan packages offered by a plurality of lenders”. The DC’s “Standing Patent Rules” (like Patent Local Rules of the ND CA “and many other districts”) require “that a party opposing a claim of patent infringement must serve invalidity contentions” and, after the DC claim construction, “final infringement contentions and expert reports regarding issues on which it bears the burden of proof.” Here, the DC allowed Appellees to assert the § 101 defense not included in the initial invalidity contentions after the SCOTUS Alice decision, which Mortgage Grader argued was improper (it “neither created a new defense nor changed the law” and “cannot be a basis for finding good cause to amend invalidity contentions”). The FC disagreed, explaining that “Ultramercial III demonstrates that a § 101 defense previously lacking in merit may be meritorious after Alice” and “is most likely to occur with respect to patent claims that involve implementations of economic arrangements using generic computer technology, as the claims do here.” Mortgage Grader also argued the DC decision should be reversed because it would be prejudiced by “adding Appellees’ § 101 defense back into the case” but it did not present these arguments to the DC; the FC therefore found this contention “to be waived.” On the actual § 101 argument, the FC found that the DC “correctly applied [the] two-step framework to the patents-in-suit”. It agreed with the DC that the claims “are directed to the abstract idea of ‘anonymous loan shopping’” (“[t]he series of steps covered by the asserted claims…cold all be performed by humans without a computer” (CyberSource, FC 2011)). It also found “no…inventive concept” since the “claims ‘add’ only generic computer components such as an ‘interface,’ ‘network,’ and ‘database’” and “recitation of generic computer limitations does not make an otherwise ineligible claim patent eligible” (Intellectual Ventures I LLC, FC 2015; buySAFE, FC 2014; Accenture, FC 2013) (“Nothing in the asserted claims ‘purport[s] to improve the functioning of the computer itself’ or ‘effect an improvement in any other technology or technical field’” (Alice), “solve a problem unique to the Internet” (DDR Holdings, FC 2014), and “are not adequately tied to ‘a particular machine or apparatus’” (Bilski, US 2010). Therefore, the claims were found not to be patent eligible under § 101. The FC panel also disagreed that the DC improperly resolved material factual disputes in connection with the Appellee’s SJ motion (i.e., “dueling expert testimony”) because the DC “looked only to the claims and specifications of the patents-in-suit”.

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