On February 27, 2012, a three-judge panel of the Federal Circuit decided Fort Properties Inc. v. American Master Lease LLC, a patent case involving a patent claim that was explicitly based on achieving the benefits of a section 1031 nonrecognition transaction.
The Federal Circuit panel upheld the lower court decision, concluding that claims 1-31, which dealt with deeds to real property and contractual relationships, were patent claims on "abstract ideas" analogous to those in the In re Bilski case and were ineligible patent subject matter. Similarly, claims 31-41, which involved some computer activity to assign and track deedshares, were too broad and general to be "saved" as patent-eligible subject matter and constituted "insignificant post-solution activity" that had been found to be insufficient under Bilski and indeed under earlier Federal Circuit precedent such as Dealertrack (decided on January 25, 2012).
The question is where the line is drawn. Of the four primary cases decided by the Federal Circuit since the Supreme Court's Bilski decision, three found the claims to be patent-ineligible subject matter and only one found the claims to be patent eligible (reversing the district court on the issue).
Cybersource, 654 F.3d 1366 (Fed. Cir. 2011) (decided on August 17, 2011, and finding that a system for detecting credit card fraud in internet transactions was an abstract idea that was not made patent-eligible by having it performed on computers so that the process was embedded in program instructions).
Dealertrack, 101 USPQ2d 1325 (Fed. Cir. 2012) (decided January 25, 2012, and finding that a computer aided system for processing credit applications over the internet was not patent eligible)
Fort Properties No. 2009-1242 (Fed. Cir 2012) (available here) (decided Feb. 27, 2012, and finding that a system for aggregating real estate for tax advantages under section 1031 using computer assistance to allocate deedshares was not patent eligible).
versus
Ultramercial, 657 F.3d 1323 (Fed. Cir. 2011) (decided September 20, 2011, with an opinion written by Judge Rader, and concluding that the invention of a method for monetizing and distributing copyrighted products (songs, books, movies) over the internet for free in return for the recipient's viewing of an ad was patent eligible).
What distinguishes Ultramercial? The claims there "require" interaction between consumer and website, so it is harder to cast the computer element as a peripheral add-on or "post-solution activity." The court in Fort Properties refers to Ultramercial as requiring " intricate and complex computer programming" with "specific applications to the internet and cyber-market environment."
Thus, guidance for future cases involving patents that are tax strategy patents (purportedly now prohibited by the Patent Reform Act, if IP lawyers don't find a way to tweak all the tax claims as "machine" claims) is that if the case appears to be analogous to Bilski in that any role of computers is almost a post hoc addition (it could have been done with pencil and paper, just harder) then it will not be upheld; but if the case seems to have a complicated-enough interface with computerization that it can be described as a "new" software or an "advance in computer technology" then by analogy with Ultramercial it stands a chance of being upheld. (Remember that the In re Alappat case said that programming "creates a new machine" and that was the justification for giving a patent to software.)
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