Overdrawn: Judge Oetken Dismisses Reciprocal Deposit Patents under Section 101
On May 29, 2020, United States District Judge J. Paul Oetken (S.D.N.Y.) granted Defendant StoneCastle’s Rule 12(b)(6) motion to dismiss for failure to claim patent eligible subject matter under 35 U.S.C. § 101.
Plaintiff Island Intellectual Property, LLC alleged infringement of United States Patent Nos. 8,719,157; 8,359,267; 8,712,911; and 8,150,766 (collectively, the “Reciprocal Deposit Patents”) and 8,655,689 (the “Allocation Model Patent”). According to the patents, banks are statutorily obligated, or otherwise expected, to accept public deposits from government entities and to federally insure or otherwise secure those deposits. However, the interest rates paid for these deposits are often higher than the interest rates earned on government securities forcing the banks to take a loss. To address this problem, the patents disclose a previously-known scheme where “the recipient bank (often a local bank) may distribute the deposited public funds to another (usually larger) bank or network of banks that are better positioned to receive public deposits, in exchange for funds from those banks that do not trigger the same regulatory requirements.” The claims purport to automate this process through methods and systems that access account information from a plurality of banks, transfer funds between the banks, and update the aggregated account information in each bank. See, e.g., ’766 Patent at claims 1 and 31.
Similarly, the court characterized the Allocation Model Patent as disclosing a “scheme for computerized management of account balances across a multi-bank, multi-account depository system” that can be used with the system of the Reciprocal Deposit Patents.
Reciprocal Deposit Patents
First, Judge Oetken found that representative claim 1 of the ’766 patent was directed to the ineligible abstract idea of “a multibank depository program to stay within insurance limits.” Judge Oetken relied on Federal Circuit decisions holding previously known financial and business practices ineligible, even though they were performed by computers or technology.
Having found that the claims are directed to an abstract idea, Judge Oetken next analyzed whether the claims embody an inventive concept that would transform the abstract idea into a patent-eligible invention. The court rejected Island’s argument that the claims solve a technological problem. Specifically, after failing to find any description of a technological problem or solution in the “asserted claims, their specifications, Island’s briefing, [or] the cited sources” the court determined that the claimed solution is the abstract idea itself which cannot alone satisfy the requirements of Alice step 2. Accordingly, the Reciprocal Deposit Patents’ claims were found to be patent ineligible.
Allocation Model Patent
Similarly to the Reciprocal Deposit Patents, under Alice step one, Judge Oetken held the Allocation Model Patent “merely recites execution on a computer of a bookkeeping process that could be executed by humans manually.” Indeed, Judge Oetken noted that the specification itself teaches that “several steps of the claimed invention could be performed by a human over the phone or in person.” Because the patent seeks to merely automate existing manual methodologies, the court found the claims are directed to an abstract idea. Judge Oetken stated that the purported inventive concept was “merely a verbose recitation of otherwise quotidian and manually executable bookkeeping practices.” Accordingly, the Allocation Model Patent’s claims were found to be patent ineligible.
Case: Island Intellectual Property, LLC v. StoneCastle Asset Management LLC et al., 1:19-cv-04792(JPO), Dkt. No. 58 (S.D.N.Y. May 29, 2020).
 Judge Oetken also granted StoneCastle’s 12(b)(6) motion to dismiss Island’s claims under the Defend Trade Secrets Act of 2016 (“DTSA”), 18 U.S.C. § 1831 because Island had failed to sufficiently plead what trade secrets were misappropriated.