Anderson's-Black Rock, Inc. v. Pavement Salvage Co.

Facts

Pavement Co. had a patent in which four elements, a radiant-hear burner, a spread, a tamper and
screed are combined on one chassis so that there is no cold joint between strips. There are radiant-heat
burners in prior art, and there are also pavers in which a spread, a tamper and screed are combined on
one chassis. District Court ruled that the combination of the radiant-heat burner and the existing paver
made the patent to Pavement Salvage obvious, thus unpatentable. The court of appeals reversed the
judgment of the District Court.

Issue

Does the combination of the old elements create a valid combination patent?

Held

No. The combination is reasonably obvious to one with ordinary skill in the art, thus the combination is
unpatentable. The combination of putting the burner together with the other elements in one machine
did not produce a new or different function, even though the combination filled a long felt want and has
enjoyed commercial success. It is unconstitutional to issue a patent when there is no innovation,
advancement, or things which add to the sum of useful knowledge.

State Street Bank and Trust Company v. Signature Financial Group, Inc.,

Facts

Signature is the assignee of U.S. Patent No. 5,193,056 (the '056 patent), entitled "Data Processing
System for Hub and Spoke Financial Services Configuration." The '056 patent is generally directed to a
data processing system for implementing an investment structure which was developed for use in
Signature's business as an administrator and accounting agent for mutual funds. The data processing
system facilitates a structure wherein mutual funds pool their assets into an investment portfolio
organized as a partnership, providing the administrator of the mutual fund with the combination of
economies of scale in administering investments and the tax advantages of a partnership.

The '056 patent application initially contained six machine claims and six method claims. During
prosecution the examiner contemplated a § 101 rejection for failure to claim statutory subject matter.
However, upon cancellation of the six method claims, the examiner allowed the remaining six machine
claims.

State Street brought a declaratory judgment action asserting invalidity, unenforceability, and
noninfringement, and then filed a motion for partial summary judgment of patent invalidity for failure to
claim subject matter encompassed by § 101. The motion was granted because the district court
concluded that the claimed subject matter fell into one of two alternative judicially-created exceptions to
statutory subject matter, the "mathematical algorithm" exception or the "business method" exception.

Issues

1. Whether the district court erred in holding that the transformation of data, representing discrete dollar
amounts, through a series of mathematical calculations, by a machine, into a final share price, does not
constitute a practical application of a mathematical algorithm, formula or calculation.

2. Whether the district court erred in holding that this transformation should be excluded from eligible
subject matter because it falls under the business method exception to statutory subject matter.

Disposition

1. Yes. This transformation constitutes a practical application of a mathematical algorithm, formula, or

calculation because it produces a useful, concrete, and tangible result. Hence, the transformation is
eligible subject matter because it passes the test for utility.
2. Yes. Judge Rich for the Federal Circuit laid the "ill-conceived" business methods exception to rest.