Freddie Mac Proves Patent Invalid On Motion To Dismiss That Is Converted Into A Summary Judgment Motion For Claiming Unpatentable Subject Matter

Graff/Ross Holdings LLP ("Graff/Ross") filed a patent infringement action against the Federal Home Loan Mortgage Corporation ("Freddie Mac") for patent infringement. Freddie Mac moved to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) on the ground that the patent was invalid for claiming unpatentable subject matter. The district court referred the motion to the Magistrate Judge who recommended granting Freddie Mac's motion after converting it into a motion for summary judgment. Graff/Ross objected to the district court.

Claim 101 of the patent-in-suit provides:

A method for making a financial analysis output having a system-determine purchase price for at least one component from property in consummating a sale, the financial analysis output being made by steps including:

Converting input data, representing at lest one component from property, wherein the property is a fixed income asset, into input digital electrical signals representing the input data;

Proving a digital electrical computer system controlled by a processor electronically connected to receive said input digital electrical signals and electronically connected to an output means;

Controlling a digital electrical computer processor to manipulate electrical signals to compute a system-determined purchase price for at least once component from property in consummating a sale and corresponding purchase of the component; and

Generating the financial analysis output at said output means.

As the first part of the district court's analysis, it first agreed with the standard of review used by the Magistrate Judge: "The Court agrees with Magistrate Judge Kay that the issue of patent validity should be decided on summary judgment, and therefore, hereby converts defendant's motion to dismiss into a motion for summary judgment. Summary judgment is appropriate when, based on the record, there is no genuine issue as to any material fact, and the moving party is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(a)."

The district court then agreed with the Magistrate Judge that the patent claims were directed to nothing more than an abstract idea on a general purpose computer. "As Judge Kay concluded, plaintiff's claims 'recite [] nothing more than an abstract idea on a general purpose computer - i.e., computing a price for the sale of a fixed income asset and generating a financial analysis output.' R&R at 11. 'To salvage an otherwise patent-ineligible process, a computer must be...