The Federal Circuit Continues To Struggle To Define What Constitutes Patentable Subject Matter Under Section 101 After Bilski

Bancorp Services, LLC ("Bancorp") owns two United States patents, the 5,926,792 ("the '792 patent") and the 7,249,037 ("the '037 patent"), both of which are entitled "System for Managing a Stable Value Protected Investment Plan." The patents have a common specification and a priority date of September 1996. The patents disclose systems and methods for administering and tracking the value of life insurance policies in separate accounts and they also disclose specific formulae for determining the values required to manage a stable value protected life insurance policy, including claims with methods and computer-readable media.

An example of one such claim that the Federal Circuit focused upon is Claim 9, which reads: "A method for managing a life insurance policy on behalf of a policy holder, the method comprising the steps of:

generating a life insurance policy including a stable value protected investment with an initial value based on a value of underlying securities; calculating fee units for members of a management group which manage the life insurance policy; calculating surrender value protected investment credits for the life insurance policy; determining an investment value and a value of the underlying securities for the current day; calculating a policy value and a policy unit value for the current day; storing the policy unit value for the current day; and one of the steps of: removing the fee units for members of the management group which manage the life insurance policy, and accumulating fee units on behalf of the management group." At the trial court level, the patents were found invalid by the Eastern District of Missouri for failing to meet the patent eligibility requirements of Section 101 of the Patent Act. The district court reached this conclusion without construing the disputed terms.

Bancorp appealed and asserted that the district court should have construed the claims before reaching the issue of validity. The Federal Circuit began its analysis by noting that "we perceive no flaw in the notion that claim construction is not an inviolable prerequisite to a validity determination under § 101. We note, however, that it will ordinarily be desirable–and often necessary–to resolve claim construction disputes prior to a § 101 analysis, for the determination of patent eligibility requires a full understanding of the basic character of the claimed subject matter."

Although the district court declined to construe the claims...