Federal Circuit finds real estate investment method not patent-eligible under Section 101 of Patent Act

A recent Federal Circuit decision found that patent claims covering a real estate investment method where not patent-eligible under Section 101 of the Patent Act.  In Fort Properties, Inc. v. American Master Lease, LLC (Fed. Cir. No. 2009- Feb. 27, 2012), the Court considered whether claims such as the following were patent-eligible in view Bilski v. Kappos and related cases:

1. A method of creating a real estate investment instrument adapted for performing tax-deferred exchanges comprising:

aggregating real property to form a real estate portfolio;

encumbering the property in the real estate port-folio with a master agreement; and

creating a plurality of deedshares by dividing title in the real estate portfolio into a plurality of tenant-in-common deeds of at least one predetermined denomination, each of the plurality of deedshares subject to a provision in the master agreement for reaggregating the plurality of tenant-in-common deeds after a specified interval.

In the decision, the Court noted that the first claim did not require the use of a computer.  Although the Court acknowledged that the claims are tied to the tangible world in that they involve the manipulation of commodities and money, the Court found that those features alone did not impart patent-eligibility.  Instead, the Court noted that:

We view the present case as similar to Bilski. Specifically, like the invention in Bilski, claims 1-31 of the ’788 patent disclose an investment tool, particularly a real estate investment tool designed to enable tax-free exchanges of property. This is an abstract concept. Under Bilski, this abstract concept cannot be transformed into patentable subject matter merely because of connections to the physical world through deeds, contracts, and real property.

In addition, although other claims did require the use of a computer, the Court found that the computer did not “impose meaningful limits” on the scope of those claims.  Unlike other cases, where the invention required “advances in computer technology,” the Court found that the use of a computer in this patent did not play any significant part in the claimed process and was merely “insignificant post-solution activity.”  Thus, the Court affirmed a summary judgment of invalidity against the patent.

Thanks to my colleague Dan Scolnick for calling the case to my attention today.