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For true innovation in the FinTech space, overcoming the prior art is not the most significant barrier. The more challenging issue is ensuring that the invention is described and claimed in a manner that constitutes patent-eligible subject matter.
Patentability of FinTech Inventions
The legal requirements for being awarded a patent include that your invention: i) is new and not obvious, i.e. your idea is different enough from the prior art; and ii) claims patent- eligible subject matter. For true innovation in the FinTech space, overcoming the prior art is not the most significant barrier. The more challenging issue is ensuring that the invention is described and claimed in a manner that constitutes patent-eligible subject matter.
Due to a Supreme Court decision known as the Alice case, the scope of patent-eligible subject matter in the US has been narrowed.2 At a high level, the Alice case expanded on the prohibition of patenting so-called “abstract ideas.” Unfortunately, the Supreme Court provided no definition for this concept. Courts and the USPTO have since struggled with articulating the boundaries of what is and what is not an “abstract idea.”
The USPTO has issued various versions of guidance on this issue. As of June 2020, this guidance has been compiled into the Manual of Patent Examination Procedure (MPEP), which sets forth a multi-part test for patent-eligible subject matter. First, the invention must be in one of the four statutory categories of invention (processes, machines, manufactures and compositions of matter). This analysis is labelled “Step 1” in the USPTO’s analysis. If the answer is yes, a two-part patent-eligible subject matter test, labelled “Step 2A” and “Step 2B,” is applied.
The first part of the test (Step 2A) is to determine whether the claims are directed to an abstract idea (or other judicial exception). If so, the second part of the test (Step 2B) is to determine whether the claim recites additional elements that amount to “significantly more” than the judicial exception (i.e., an inventive concept). Prior tests for patent-eligible subject matter largely have been subsumed into a “significantly more” (also referred to as “integration”) determination.3
The MPEP includes the following flow chart to show the steps and pathways to patent-eligibility.
2 For a claimed invention to qualify as patent-eligible subject matter it must not be directed to a judicial exception to patentable subject matter unless the claim as a whole includes additional limitations amounting to significantly more than the exception. The judicial exceptions (also called “judicially recognized exceptions” or simply “exceptions”) are subject matter that the courts have found to be outside of, or exceptions to, the four statutory categories of invention (processes, machines, manufactures and compositions of matter), and are limited to abstract ideas, laws of nature and natural phenomena (including products of nature). Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 573 U.S. 208, 216, 110 USPQ2d 1976, 1980 (2014) (citing Ass’n for Molecular Pathology v. Myriad Genetics, Inc., 569 U.S. 576, 589, 106 USPQ2d 1972, 1979 (2013). The most relevant exception for fintech applications is abstract ideas. Thus, this paper focuses primarily on this aspect of patentability.
3 As stated in the MPEP, while the Federal Circuit’s earlier “machine-or-transformation test” is an important clue to eligibility, it should not be used as a separate test for eligibility. Instead it should be considered as part of the “integration” determination or “significantly more” determination. Likewise, eligibility should not be evaluated based on whether the claim recites a “useful, concrete, and tangible result” as the mere recitation of concrete, tangible components is insufficient to confer patent eligibility to an otherwise abstract idea. Additionally, the “programmed computer” or “special purpose computer” test of In re Alappat, 33 F.3d 1526, 31 USPQ2d 1545 (Fed. Cir. 1994), which espoused the rationale that an otherwise ineligible algorithm or software could be made patent-eligible by merely adding a generic computer to the claim for the “special purpose” of executing the algorithm or software, was allegedly superseded by the Supreme Court’s decisions. Nor does an abstract idea become nonabstract by limiting the invention to a particular field of use or technological environment, such as the Internet or a computer. Lastly, eligibility should not be evaluated based on whether the claimed invention has utility, because utility is not the test for patent-eligible subject matter.
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Key Insights for Obtaining FinTech Patents