Loyalty Conversion Systems Corp. v. American Airlines, Inc.
66 F. Supp. 3d 829
E.D. Tex.2014Background
- Plaintiff Loyalty Conversion Systems owns U.S. Patents Nos. 8,313,023 and 8,511,550 asserting methods/systems for converting non-negotiable loyalty credits of one vendor into loyalty points of another (including web/GU I and computer-program-product embodiments).
- Loyalty sued nine airlines; seven defendants moved for judgment on the pleadings under Fed. R. Civ. P. 12(c) seeking § 101 invalidity of the asserted claims; the court waited until after claim construction before ruling.
- Asserted claims include method claims (e.g., converting credits, granting entity-independent funds, accepting converted funds) and computer/program-medium/system variants; dependent claims add routine functions (display, update, transfer, thresholds).
- The specification admits the methods can be done by service agents and that any computer system is suitable; claimed computer steps are generic (recordkeeping, display, arithmetic, e-commerce transactions).
- The court applied the Alice/Mayo two-step framework (and Bilski precedent), comparing the claims to abstract business practices (currency exchange/intermediated settlement) and evaluating whether the asserted computer components supply an inventive concept.
- Ruling: the court granted defendants’ motion and held the asserted claims of both patents invalid under 35 U.S.C. § 101 (also noted claim 31 invalid for indefiniteness in a separate order).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether asserted claims are directed to patent-eligible subject matter under § 101 | Loyalty: claims recite a computerized method/system specifically for converting loyalty points and a special-purpose computer/GUI, which makes them patentable | Defs: claims merely embody the abstract idea of currency conversion applied to loyalty points and add only generic computer implementation | Held: Claims are directed to an abstract idea (currency/points exchange) and the generic computer limitations do not supply an inventive concept; claims invalid under § 101 |
| Whether computer implementation or web/GUI elements make claims patentable | Loyalty: computer, web pages, GUI and program instructions make the invention a special-purpose technological solution | Defs: those elements are routine generic computer functions (recordkeeping, display, arithmetic) and mirror CLS Bank/Mayo holdings | Held: Use of generic computers/Internet/GUI is insufficient; court follows Alice/CLS Bank rejecting generic computer implementation as transforming an abstract idea |
| Whether computer-readable-medium / system claims save patentability | Loyalty: medium/system claims are physical and thus patentable | Defs: medium/system claims rise or fall with the method claims and merely recite generic components | Held: System and computer-readable-medium claims are not meaningfully different from method claims and are invalid under § 101 |
Key Cases Cited
- Bilski v. Kappos, 561 U.S. 593 (abstract idea of hedging risk is unpatentable)
- Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S. Ct. 2347 (implementing an abstract financial idea on a generic computer does not make it patent-eligible)
- Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289 (requirement of an "inventive concept" beyond natural laws/abstract ideas)
- Diamond v. Diehr, 450 U.S. 175 (cannot evade abstract-idea prohibition by limiting to a technological environment)
- Gottschalk v. Benson, 409 U.S. 63 (mental processes and implementing mathematical principles on a machine are not per se patentable)
- Parker v. Flook, 437 U.S. 584 (implementing a principle in a specific fashion does not automatically confer patent eligibility)
- Accenture Global Servs., GmbH v. Guidewire Software, Inc., 728 F.3d 1336 (business-method-like claims invalid under § 101 where computer implementation is generic)
- Dealertrack, Inc. v. Huber, 674 F.3d 1315 (machine addition must play a significant part beyond obvious computer implementation)
- Bancorp Servs., L.L.C. v. Sun Life Assurance Co., 687 F.3d 1266 (computer must be integral in a nonconventional way to salvage an otherwise ineligible process)
- CyberSource Corp. v. Retail Decisions, Inc., 654 F.3d 1366 (Internet use and routine computer functions insufficient to confer patentability)