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The mere fact that a claimed invention involves inputting numbers, calculating numbers, outputting numbers, and storing numbers, in and of itself, would not render it nonstatutory subject matter, unless, of course, its operation does not produce a "useful, concrete and tangible result."
Signature Financial Group, Inc. (Signature) was the assignee of the ‘056 patent, which was generally directed to a data processing system (the system) for implementing an investment structure which was developed for use in Signature's business as an administrator and accounting agent for mutual funds. In essence, the system, identified by the proprietary name Hub and Spoke (R), facilitated a structure whereby mutual funds (Spokes) pool their assets in an investment portfolio (Hub) organized as a partnership. State Street Bank & Trust Co. (State Street), which was also in the business of acting as custodian and accounting agent for multi-tiered partnership fund financial services, negotiate with Signature for a license to use its patented data processing system described and claimed in the ‘056 patent. When negotiations broke down, State Street brought a declaratory judgment action asserting invalidity, unenforceability, and noninfringement in Massachusetts district court, and then filed a motion for partial summary judgment of patent invalidity for failure to claim statutory subject matter under § 101. The district court granted State Street’s motion for summary judgment, holding that the ‘056 patent was invalid on the ground that the claimed subject matter was not encompassed by 35 U.S.C. § 101 (1994). Signature appealed.
Was the claimed subject matter of the ‘056 patent not encompassed by 35 U.S.C. § 101 (1994), making the patent invalid, and thereby, entitling State Street to summary judgment?
In reversing the decision the court held that State Street was not entitled to the grant of summary judgment of invalidity of the patent under § 101 as a matter of law, because the patent claims were directed to statutory subject matter. According to the court, section 101 defined patentable subject matter to include any new and useful process, machine, manufacture, or composition of matter. The court noted that the three categories of subject matter that were not patentable were laws of nature, natural phenomena, and abstract ideas. Although an invention which consisted solely of a mathematical algorithm which represented nothing more than an abstract idea was not patentable, mathematical algorithms which were reduced to some type of practical application with a useful concrete result were. The court found that the patent in question fell within this category, which rendered it statutory subject matter, even though the useful result was expressed in numbers, such as price, profit, percentage, cost, or loss.