Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca13-15-01415/USCOURTS-ca13-15-01415-0/pdf.json

Parties Involved:
First Choice Loan Services Inc.
Appellee
Mortgage Grader, Inc.
Appellant
NYLX, Inc.
Appellee

Document Text:

United States Court of Appeals 

for the Federal Circuit ______________________ 

MORTGAGE GRADER, INC.,

Plaintiff-Appellant

v.

FIRST CHOICE LOAN SERVICES INC., NYLX, INC.,

Defendants-Appellees

______________________ 

2015-1415

______________________ 

Appeal from the United States District Court for the 

Central District of California in No. 8:13-cv-00043-AGAN, Judge Andrew J. Guilford.

______________________ 

Decided: January 20, 2015

______________________ 

 CRAIG R. KAUFMAN, TechKnowledge Law Group LLP, 

Redwood City, CA, argued for plaintiff-appellant. Also 

represented by MICHAEL CHAOCHA TING. 

 REBECCA JEAN STEMPIEN COYLE, Levy & Grandinetti, 

Washington, DC, argued for defendants-appellees. Also 

represented by PAUL GRANDINETTI. 

______________________ 

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2 MORTGAGE GRADER, INC. v. FIRST CHOICE LOAN SERVICES

Before O’MALLEY and TARANTO, Circuit Judges, and 

STARK, Chief District Judge.*

STARK, Chief District Judge. 

This case involves patent claims directed to systems 

and methods for assisting borrowers to obtain loans. 

Plaintiff-Appellant Mortgage Grader, Inc. (“Mortgage 

Grader”) appeals two decisions of the district court. First, 

Mortgage Grader appeals the district court’s denial of its 

motion to strike Defendants-Appellees First Choice Loan 

Services, Inc. and NYLX, Inc.’s (“Appellees”) patentineligibility defense. Appellees raised patent ineligibility 

as a defense in their answer, then dropped it in their 

initial invalidity contentions, only to add it back in their 

final invalidity contentions. See Mortgage Grader, Inc. v. 

Costco Wholesale Corp., 2014 WL 10763261, at *6 (C.D. 

Cal. Oct. 27, 2014) (“Mortgage Grader I”). Second, Mortgage Grader appeals the district court’s grant of Appellees’ motion for summary judgment that the asserted 

claims are patent-ineligible. See Mortgage Grader, Inc. v. 

Costco Wholesale Corp., 89 F. Supp. 3d 1055, 1065 (C.D. 

Cal. 2015) (“Mortgage Grader II”). Mortgage Grader 

contends that the district court improperly resolved 

factual disputes against it and erred in its application of 

35 U.S.C. § 101 (“§ 101”).

For the reasons set forth below, we affirm.

BACKGROUND

The patents-in-suit, U.S. Patent Nos. 7,366,694 (“’694 

patent”) and 7,680,728 (“’728 patent”), relate to “financial 

transactions including a method for a borrower to evaluate and/or obtain financing, e.g., a loan.” ’694 patent 

* The Honorable Leonard P. Stark, Chief District 

Judge, United States District Court for the District of 

Delaware, sitting by designation.

 

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col. 1, ll. 19–21; ’728 patent col. 1, ll. 17–19. The ’694 

patent is a continuation-in-part of the ’728 patent.1 

Mortgage Grader asserts claims 1, 2, and 19 of the ’694 

patent and claim 6 of the ’728 patent.

Claim 1 of the ’694 patent is representative: 

A computer-implemented system for enabling borrowers to anonymously shop for loan packages offered by a plurality of lenders, the system 

comprising:

a database that stores loan package data 

specifying loan packages for home loans 

offered by the lenders, the loan package 

data specifying, for each of the loan packages, at least a loan type, an interest rate, 

and a required borrower credit grading; 

and

a computer system that provides:

a first interface that allows the lenders to 

securely upload at least some of the loan 

package data for their respective loan 

packages to the database over a computer 

network; and

a second interface that prompts a borrower to enter personal loan evaluation information, and invokes, on a computer, a 

borrower grading module which uses at 

least the entered personal loan evaluation 

information to calculate a credit grading 

for the borrower, said credit grading being 

1 The ’694 patent’s specification contains the entirety of the ’728 patent’s specification and adds to it further 

embodiments disclosed in Figures 3 and 4 and described 

in accompanying text.

 

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distinct from a credit score of the borrower, and being based on underwriting criteria used by at least some of said lenders;

wherein the second interface provides 

functionality for the borrower to search 

the database to identify a set of loan packages for which the borrower qualifies 

based on the credit grading, and to compare the loan packages within the set, including loan type and interest rate, while 

remaining anonymous to each of the lenders and without having to post a request 

to any of the lenders, said second interface 

configured to display to the borrower an 

indication of a total cost of each loan 

package in the set, said total cost including costs of closing services not provided 

by corresponding lenders.

Claim 2 of the ’694 patent depends from claim 1, adding only that “the second interface comprises a set of web 

pages of a web site.” Independent claim 19 recites a 

“computer-implemented method” comprising certain 

steps. Claim 6 of the ’728 patent recites a “method of 

assisting a borrower in obtaining a loan” comprising 

certain steps.

In January 2013, Mortgage Grader sued Costco 

Wholesale Corporation (“Costco”) for infringement of the 

patents-in-suit.2 On May 23, 2013, Mortgage Grader 

amended its complaint to add Appellees as defendants. 

After the parties stipulated to extend the time for Appellees to respond to the amended complaint, Appellees filed 

their answer on October 14, 2013. In it, they asserted as 

2 The parties stipulated to the dismissal of Costco 

in January 2015.

 

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affirmative defenses and counterclaims that both the ’694 

and ’728 patents failed to claim patent-eligible subject 

matter.

In the meantime, on August 30, 2013, Judge Andrew 

J. Guilford of the Central District of California, who 

presided over the proceedings below, ordered that his 

recently issued Standing Patent Rules (“S.P.R.s”) would 

apply to this case. Judge Guilford developed his S.P.R.s 

“based largely on information obtained from over 100 

patent practitioners and professors, a review of all the 

other local patent rules, and a review of related literature.” J.A. 64. The S.P.R.s are intended “to reduce transaction costs and increase procedural predictability,” while 

also being as “outcome neutral and as concise as possible.” 

Id.

Pertinent to this appeal is the S.P.R.s’ requirement 

that a party opposing a claim of patent infringement must 

serve invalidity contentions. A party’s initial invalidity 

contentions are due after the court conducts a scheduling 

conference—a conference which is held after the party 

asserting infringement produces documents and discloses

its asserted claims and infringement contentions. Pursuant to S.P.R. 2.5, the initial invalidity contentions must 

include, inter alia, “[a]ny grounds of invalidity based on 

35 U.S.C. § 101 . . . of any of the asserted claims.” J.A. 67. 

Consistent with S.P.R. 2.5, on December 20, 2013, Appellees served invalidity contentions, which included the 

statement: “Defendants do not present any grounds of 

invalidity based on 35 U.S.C. § 101 . . . of any of the 

asserted claims at this time. The final claim construction 

may require such an assertion of invalidity.” J.A. 332–33.

The S.P.R.s impose further obligations that are triggered by the district court’s issuance of an order construing claim terms. In particular, the party alleging 

infringement must serve final infringement contentions 

and expert reports regarding issues on which it bears the 

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burden of proof. Thereafter, a party opposing a claim of 

patent infringement must serve its final invalidity contentions and expert reports regarding issues on which it 

bears the burden of proof. In particular, S.P.R. 4.2.2 

requires service of:

A statement [by the party] that its S.P.R. 2.5 contentions are its Final Invalidity Contentions, or in 

the alternative, Final Invalidity Contentions that 

amend its S.P.R. 2.5 contentions. A party serving 

Final Invalidity Contentions that amend its prior 

contentions shall also provide a redline against its 

prior contentions and a statement of reasons for

each amendment. Amendments are subject to a 

good cause standard but do not require prior 

Court approval where they are made due to a 

claim construction by the Court different from 

that proposed by the party seeking amendment, or 

recent discovery of material prior art that was not 

discovered, despite diligent efforts, before the service of the [initial] Invalidity Contentions.

J.A. 71 (emphasis added). 

Here, the district court issued its claim construction 

order on April 18, 2014, and then agreed to the parties’ 

request to extend certain deadlines. Appellees timely 

served their final invalidity contentions on August 15, 

2014. In their final contentions, Appellees stated:

The Defendants informed the Plaintiff’s counsel of 

the intention to challenge the validity of the ’694 

and ’728 patents under Alice Corp. Pty., Ltd. v. 

CLS Bank International et al., 134 S. Ct. 2347, 

2014 U.S. LEXIS 4303 (2014). The use of the 

Elite Agents formal application, which was rejected in part under 35 U.S.C. § 101, and the newspaper Mortgage Rate Charts are expected to be the 

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primary basis for this challenge.[3] The good 

cause for this revision to this statement of Final 

Invalidity Contentions is caused by the Supreme 

Court’s decision issuing after the Defendant[s’] Initial Invalidity Contentions.

J.A. 151.

Mortgage Grader moved to strike Appellees’ § 101 defense, arguing that Appellees had not shown good cause 

for injecting the defense back into the case after dropping 

it in their initial invalidity contentions. Appellees responded that the Supreme Court’s decision in Alice, which 

was issued on June 19, 2014, constituted good cause for 

the amendment. The district court agreed with Appellees 

and denied Mortgage Grader’s motion. Mortgage Grader 

I, 2014 WL 10763261, at *7.

Thereafter, Appellees filed a motion for summary 

judgment that the asserted claims are patent-ineligible 

under § 101. Both sides filed expert reports in support of 

their § 101 positions. In analyzing the motion, the district 

court applied the two-part test for patent eligibility set 

forth in Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289, 1297 (2012), as clarified 

by Alice. The court concluded that all of the asserted 

claims are directed to the abstract idea of “anonymous 

loan shopping” and that they include no “inventive concept.” Mortgage Grader II, 89 F. Supp. 3d at 1063–65. 

Accordingly, the court entered summary judgment for 

Appellees, as Mortgage Grader could not prove that 

Appellees infringed any valid patent claim.

Mortgage Grader filed a timely appeal. We have jurisdiction under 28 U.S.C. § 1295(a)(1).

3 The prior art references cited in this sentence 

were disclosed elsewhere in Defendants’ final invalidity 

contentions.

 

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8 MORTGAGE GRADER, INC. v. FIRST CHOICE LOAN SERVICES

DISCUSSION

Mortgage Grader asks us to reverse the district 

court’s grant of summary judgment for Appellees and 

remand this case for further proceedings. Specifically, 

Mortgage Grader contends that the district court should 

have granted its motion to strike, thereby precluding 

Appellees from proceeding with their § 101 defense. 

Mortgage Grader also insists that the district court erred 

in granting summary judgment by improperly resolving 

factual disputes and then misapplying the Mayo/Alice test 

for patent eligibility. We address each of these issues in 

turn. 

I 

Judge Guilford’s Standing Patent Rules are similar to 

the Patent Local Rules adopted by the Northern District 

of California and many other districts. Like Patent Local 

Rules, the S.P.R.s “are essentially a series of case management orders that fall within a district court’s broad 

power to control its docket and enforce its order.” Keranos, LLC v. Silicon Storage Tech., Inc., 797 F.3d 1025, 

1035 (Fed. Cir. 2015). District courts have inherent 

power to manage their own docket, see, e.g., Ryan v. 

Gonzales, 133 S. Ct. 696, 708 (2013); Ethicon, Inc. v. 

Quigg, 849 F.2d 1422, 1426 (Fed. Cir. 1988), and are 

authorized to “consider and take appropriate action” to 

facilitate the “just, speedy, and inexpensive disposition” of 

all matters before them. Fed. R. Civ. P. 16; see also Fed. 

R. Civ. P. 1. Judge Guilford’s creation and adoption of his 

S.P.R.s fall squarely within this broad authority.

Since the S.P.R.s are “unique to patent cases and have 

a close relationship to enforcement of substantive patent 

law, we proceed to review their validity and interpretation under Federal Circuit law.” O2 Micro Int’l Ltd. v. 

Monolithic Power Sys., Inc., 467 F.3d 1355, 1364–65 (Fed. 

Cir. 2006). “[T]his court defers to the district court when 

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trate local attempts to manage patent cases according to 

prescribed guidelines.” Genentech, Inc. v. Amgen, Inc., 

289 F.3d 761, 774 (Fed. Cir. 2002). In particular, a “district court’s application of its local rules is reviewed under 

the standard of abuse of discretion.” Keranos, 797 F.3d at 

1035.

In reviewing a district court’s exercise of discretion, this court determines whether (1) the decision was clearly unreasonable, arbitrary, or 

fanciful; (2) the decision was based on an erroneous conclusion of law; (3) the court’s findings were 

clearly erroneous; or (4) the record contains no evidence upon which the court rationally could have 

based its decision.

Genentech, 289 F.3d at 774 (internal quotation marks 

omitted).

S.P.R. 4.2.2 requires “good cause” for amendments to 

invalidity contentions submitted as final invalidity contentions (other than amendments based on claim construction or recent discovery of material prior art). J.A. 

71.4 In this context, a prerequisite to good cause is a 

showing of diligence. See O2 Micro, 467 F.3d at 1366. 

The party seeking to amend its contentions bears the 

burden of proving it acted with diligence. See id.

4 As the S.P.R.s expressly contemplate amendment 

of initial invalidity contentions upon a showing of good 

cause, Mortgage Grader’s argument that Appellees 

“waived” their § 101 defense by not including it in their 

initial invalidity contentions is meritless. (See Appellant’s Br. 20.) Moreover, as we have stated, “refusing to 

allow any amendment to contentions based on new information developed in discovery could be contrary to the 

spirit of the Federal Rules.” O2 Micro, 467 F.3d at 1366.

 

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In applying S.P.R. 4.2.2, the district court found that 

generally a party cannot claim diligence when it includes 

a defense in its answer, fails to include the defense in 

initial invalidity contentions, and many months later 

adds the defense to its final contentions. See Mortgage 

Grader I, 2014 WL 10763261, at *6. While the court 

acknowledged that “an argument can be made that Alice

is only a modest advance,” it concluded that “Alice did 

provide significant additional clarity on the effect, or lack 

of effect, of requiring the use of a computer in the claims.” 

Id. at *7. Ultimately, the court concluded that, “[i]n 

short, Alice represents a big enough change to justify 

including a new § 101 argument in Defendants’ Final 

Invalidity Contentions.” Id. 

Mortgage Grader argues that the district court abused 

its discretion by failing to strike Appellees’ § 101 defense 

from their final invalidity contentions. Mortgage Grader’s 

primary basis for this argument is its claim that the 

Supreme Court’s decision in Alice neither created a new 

defense nor changed the law. On these grounds, Mortgage Grader claims the decision in Alice cannot be a basis 

for finding good cause to amend invalidity contentions. 

We find no abuse of discretion in the court’s ruling. 

In Alice, the Supreme Court held that “merely requiring generic computer implementation fails to transform 

[an] abstract idea into a patent-eligible invention.” 134 S. 

Ct. at 2352. We recognized the significance of Alice in 

buySAFE, Inc. v. Google, Inc., 765 F.3d 1350, 1354–55 

(Fed. Cir. 2014), in which we stated that Alice “made clear 

that a claim directed to an abstract idea does not move 

into § 101 eligibility territory by merely requiring generic 

computer implementation” (internal quotation marks 

omitted).

The impact of Alice is also illustrated by our decision 

in Ultramercial, Inc. v. Hulu, LLC, 772 F.3d 709 (Fed. 

Cir. 2014) (“Ultramercial III”). Ultramercial had sued 

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WildTangent for infringement of U.S. Patent No. 

7,346,545, a patent directed to allowing consumers to 

view copyrighted media products on the Internet at no 

cost in exchange for viewing an advertisement. See id. at 

712. When the case was first before us, in 2011, we

reversed the district court’s grant of WildTangent’s Rule 

12(b)(6) motion to dismiss, holding that “as a practical 

application of the general concept of advertising as currency and an improvement to prior art technology, the 

claimed invention is not so manifestly abstract as to 

override the statutory language of § 101.” Ultramercial, 

LLC v. Hulu, LLC, 657 F.3d 1323, 1330 (Fed. Cir. 2011) 

(“Ultramercial I”) (internal quotation marks omitted). 

The Supreme Court granted WildTangent’s petition for 

certiorari, vacated our order, and remanded for further 

consideration in light of Mayo. Ultramercial III, 772 F.3d 

at 713. On remand, we again reversed the district court, 

holding yet again that the claims were patent-eligible. 

Ultramercial v. Hulu, 722 F.3d 1335, 1354 (Fed. Cir. 

2013) (“Ultramercial II”). Once more, the Supreme Court 

granted WildTangent’s petition for certiorari, vacated our 

order, and remanded, this time for further consideration 

in light of Alice. Id. On this further remand, with the 

“added benefit of the Supreme Court’s reasoning in Alice,” 

we affirmed the district court and found the claims to be 

not patent-eligible. Id. Our conclusion was expressly 

based on Alice’s holding that “adding a computer to otherwise conventional steps does not make an invention 

patent-eligible.” Id. at 713, 716–17.

Ultramercial III demonstrates that a § 101 defense 

previously lacking in merit may be meritorious after 

Alice. This scenario is most likely to occur with respect to 

patent claims that involve implementations of economic 

arrangements using generic computer technology, as the 

claims do here. For example, the asserted claims of the 

’694 patent require use of a “computer system” or “computer network” for facilitating anonymous loan shopping, 

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and the asserted claim of the ’728 patent requires “programmatically generating” and uses a “network” for 

shopping for loans. In this context, it was not an abuse of 

discretion to allow Appellees to inject a § 101 defense into 

the case after Alice. 

Mortgage Grader’s arguments to the contrary are unpersuasive. First, Mortgage Grader points to this Court’s 

statement in a non-precedential opinion, Smartflash LLC 

v. Apple Inc., 621 Fed. App’x 995, 1002 (Fed. Cir. 2015), 

that “Alice did not create a new § 101 defense, but rather 

clarified § 101 jurisprudence.” As we have just explained, 

even an “old” § 101 defense may enjoy renewed vigor in 

light of Alice. More importantly, our statement in Smartflash was in an entirely different context: review of denial 

of a motion to stay pending Covered Business Method 

review, where the alleged infringer waited until four 

months after Alice was decided (by which time a jury trial 

had been completed) and argued that “the stage of litigation facing the court is irrelevant to its right to a stay.” 

Id. We found no abuse of discretion in the trial court’s 

decision to deny a stay in such circumstances. Here, we 

conclude similarly that the court did not abuse its discretion in finding that Appellees acted diligently by adding 

the § 101 defense just two months after Alice came down, 

satisfying the “good cause” standard imposed by S.P.R. 

4.2.2. The standard of review employed in both Smartflash and here cannot be removed from the results 

reached in each case—in neither instance did the district 

court abuse the broad discretion afforded it.

Next, Mortgage Grader argues we should reverse the 

district court for failing to consider whether Mortgage 

Grader would be prejudiced by adding Appellees’ § 101 

defense back into the case. Mortgage Grader concedes 

that it failed to present arguments related to prejudice to 

the district court; thus, its contention here is waived. See 

Triton Tech of Tex., LLC v. Nintendo of Am., Inc., 753 

F.3d 1375, 1379–80 (Fed. Cir. 2014). In any event, S.P.R. 

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4.2.2 does not reference prejudice—unlike S.P.R. 4.3, 

relating to amendment or supplementation of expert 

reports, which “are presumptively prejudicial,” J.A. 71, 

and unlike several Patent Local Rules in the Northern 

District of California, see, e.g., Apple, Inc. v. Samsung 

Elecs. Co., 2014 WL 1322028, at *2 (N.D. Cal. Mar. 28, 

2014) (discussing Patent Local Rule 3-6 related to amending contentions).5 The district court did not abuse its 

discretion by failing to consider prejudice when it applied 

a rule that does not require consideration of prejudice. 

Additionally, Mortgage Grader has done nothing to persuade us that it was unfairly prejudiced by Appellees’ 

amendment, as it has identified nothing (e.g., discovery, 

claim construction) it would have done differently if it had 

been given more time to respond to the § 101 defense. At 

the time Appellees amended their final invalidity contentions, “(1) expert depositions had not yet occurred, (2) 

Mortgage Grader had its full length of time to prepare 

rebuttal expert reports, and (3) there was still approximately a month and a half until the close of discovery.” 

J.A. 894. Mortgage Grader had adequate time to develop 

its response to the § 101 defense.

Thus, the district court did not abuse its discretion. 

We affirm the denial of Mortgage Grader’s motion to 

strike.

5 Mortgage Grader cites O2 Micro as support for a 

requirement to consider prejudice to the patentee before 

permitting amendment of invalidity contentions. However, O2 Micro—which involved the Northern District of 

California’s Patent Local Rules, not the S.P.R.s—

expressly stated that it was not considering “the question 

of prejudice,” as the amending party there had failed to 

act with diligence. 467 F.3d at 1368.

 

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II

Having concluded that it was proper for the district 

court to allow Appellees to proceed with their § 101 defense, we must next determine whether the district court 

properly granted summary judgment that the patents-insuit are not patent-eligible. We review a grant of summary judgment under the law of the regional circuit. 

Landmark Screens, LLC v. Morgan, Lewis, & Bockius, 

LLP, 676 F.3d 1354, 1361 (Fed. Cir. 2012). “The Ninth 

Circuit reviews the district court’s grant of summary 

judgment de novo.” Ultimax Cement Mfg. Corp. v. CTS 

Cement Mfg. Corp., 587 F.3d 1339, 1355 (Fed. Cir. 2009) 

(citing Universal Health Servs., Inc. v. Thompson, 363

F.3d 1013, 1019 (9th Cir. 2004)). “We must determine, 

viewing the evidence in the light most favorable to the 

nonmoving party, whether there are any genuine issues of 

material fact and whether the district court correctly 

applied the relevant substantive law.” Universal Health, 

363 F.3d at 1019.

A 

Under § 101, “[w]hoever invents or discovers any new 

and useful process, machine, manufacture, or composition 

of matter, or any new and useful improvement thereof, 

may obtain a patent therefor, subject to the conditions 

and requirements of this title.” There are three exceptions to § 101’s broad patent-eligibility principles: “laws of 

nature, physical phenomena, and abstract ideas.” Diamond v. Chakrabarty, 447 U.S. 303, 309 (1980). In Mayo, 

the Supreme Court set out a two-step “framework for 

distinguishing patents that claim laws of nature, natural 

phenomena, and abstract ideas from those that claim 

patent-eligible applications of those concepts.” Alice, 134 

S. Ct. at 2355. First, courts must determine if the claims 

at issue are directed to a patent-ineligible concept. See id. 

If not, the inquiry ends, as the claims are patent-eligible. 

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cept’—i.e., an element or combination of elements that is 

sufficient to ensure that the patent in practice amounts to 

significantly more than a patent upon the [ineligible 

concept] itself.” Id. (internal quotation marks omitted).

The district court carefully and correctly applied this 

two-step framework to the patents-in-suit.6 Regarding 

step 1, we agree with the district court that the asserted 

claims are directed to the abstract idea of “anonymous 

loan shopping.” Mortgage Grader II, 89 F. Supp. 3d at 

1063. The claim limitations, analyzed individually and 

“as a whole,” Alice, 134 S. Ct. at 2359, recite nothing more 

than the collection of information to generate a “credit 

grading” and to facilitate anonymous loan shopping. As 

the district court explained, the claims specify that “the 

borrower is anonymous to the lender until the borrower 

has been informed of the cost of the loan based on the 

borrower’s credit grading, and the borrower then chooses 

to expose its identity to a lender.” Mortgage Grader II, 89 

F. Supp. 3d at 1063. The series of steps covered by the 

asserted claims—borrower applies for a loan, a third 

party calculates the borrower’s credit grading, lenders 

provide loan pricing information to the third party based 

on the borrower’s credit grading, and only thereafter (at 

the election of the borrower) the borrower discloses its 

identity to a lender—could all be performed by humans 

without a computer. Cf. CyberSource Corp. v. Retail 

6 Although there was neither an agreement by the 

parties nor a finding by the district court that any one of 

the asserted claims is representative for purposes of the 

§ 101 analysis, there is also no contention that the claims 

differ in any manner that is material to the patenteligibility inquiry. We have no need to address the four 

asserted claims individually. See generally Alice, 134 S. 

Ct. at 2359-60 (finding 208 claims to be patent-ineligible 

based on analysis of one representative claim). 

 

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Decisions, Inc., 654 F.3d 1366, 1373 (Fed. Cir. 2011)

(“[C]omputational methods which can be performed 

entirely in the human mind are the types of methods that 

embody the ‘basic tools of scientific and technological 

work’ that are free to all men and reserved exclusively to 

none.”) (quoting Gottschalk v. Benson, 409 U.S. 63, 67 

(1972)). 

Because the claims are directed to an abstract idea, 

the claims must include an “inventive concept” in order to 

be patent-eligible. No such inventive concept is present 

here. Instead, the claims “add” only generic computer 

components such as an “interface,” “network,” and “database.” These generic computer components do not satisfy 

the inventive concept requirement. See Intellectual 

Ventures I LLC v. Capital One Bank (USA), 792 F.3d 

1363, 1370 (Fed. Cir. 2015) (“[T]he interactive interface 

limitation is a generic computer element.”); buySAFE, 765 

F.3d at 1355 (sending information over network is “not 

even arguably inventive”); Accenture Global Servs. GmbH 

v. Guidewire Software, Inc., 728 F.3d 1336, 1344 (Fed. 

Cir. 2013) (database components did not make claims 

patent-eligible). “[A]fter Alice, there can remain no doubt: 

recitation of generic computer limitations does not make 

an otherwise ineligible claim patent-eligible. The bare 

fact that a computer exists in the physical rather than 

purely conceptual realm is beside the point.” DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245, 1256 (Fed. 

Cir. 2014) (internal citations and quotation marks omitted).

Nothing in the asserted claims “purport[s] to improve 

the functioning of the computer itself” or “effect an improvement in any other technology or technical field.” 

Alice, 134 S. Ct. at 2359. Nor do the claims solve a problem unique to the Internet. See DDR Holdings, 773 F.3d 

at 1257. In addition, the claims are not adequately tied to 

“a particular machine or apparatus.” Bilski v. Kappos, 

561 U.S. 593, 601 (2010). Because the asserted claims are 

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MORTGAGE GRADER, INC. v. FIRST CHOICE LOAN SERVICES 17

directed to an abstract idea and nothing in the claims 

adds an inventive concept, the claims are not patenteligible under § 101. 

B 

Mortgage Grader contends that the district court improperly resolved material factual disputes in connection 

with granting Appellees’ summary judgment motion. We 

do not agree.

“Summary judgment is appropriate only if there is no 

genuine issue of material fact and the movant is entitled 

to judgment as a matter of law.” O2 Micro, 467 F.3d at 

1369 (citing Fed. R. Civ. P. 56(c); Anderson v. Liberty 

Lobby, Inc., 477 U.S. 242, 250 (1986)). However, the 

“mere existence of some alleged factual dispute between 

the parties will not defeat an otherwise properly supported motion for summary judgment.” Anderson, 477 U.S. at 

247–48. Instead, “summary judgment will not lie if the 

dispute about a material fact is ‘genuine,’ that is, if the 

evidence is such that a reasonable jury could return a 

verdict for the nonmoving party.” Id. at 248.

The § 101 inquiry “may contain underlying factual issues.” Accenture, 728 F.3d at 1341 (emphasis added); see 

also Arrhythmia Research Tech., Inc. v. Corazonix Corp., 

958 F.2d 1053, 1055–56 (Fed. Cir. 1992) (“Whether a 

claim is directed to statutory subject matter is a question 

of law. Although determination of this question may 

require findings of underlying facts specific to the particular subject matter and its mode of claiming, in this case 

there were no disputed facts material to the issue.”). But 

it is also possible, as numerous cases have recognized, 

that a § 101 analysis may sometimes be undertaken 

without resolving fact issues. See, e.g., Accenture, 728 

F.3d at 1346. In such circumstances, the § 101 inquiry 

may appropriately be resolved on a motion for summary 

judgment. 

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18 MORTGAGE GRADER, INC. v. FIRST CHOICE LOAN SERVICES

It is true that Appellees and Mortgage Grader submitted expert declarations, and the district court 

acknowledged these materials were in the record. See

Mortgage Grader II, 89 F. Supp. 3d at 1063. But the court 

did not rely on them in its § 101 analysis. Instead, in 

making its patent-eligibility determination, the district 

court looked only to the claims and specifications of the 

patents-in-suit. See id. at 1061–65. The mere existence 

in the record of dueling expert testimony does not necessarily raise a genuine issue of material fact. See, e.g., KTEC, Inc. v. Vita-Mix Corp., 696 F.3d 1364, 1374–76 (Fed. 

Cir. 2012) (affirming grant of summary judgment that 

design patent was not analogous art, despite contrary 

opinion in expert report); Minkin v. Gibbons, P.C., 680 

F.3d 1341, 1351–52 (Fed. Cir. 2012) (indicating that 

summary judgment of invalidity may be available notwithstanding expert report supporting validity). 

Appellees’ experts simply provided non-material historical information about how people obtained mortgages 

in the period before the Internet. This added little if 

anything to the ’694 patent’s specification, which observed 

that “[t]here are newspaper or Internet referral sites 

which publish interest rates for one or more lenders.” 

’694 patent col. 1, ll. 38–39. Indeed, as Mortgage Grader’s 

expert stated, neither of Appellees’ experts “reference[d]

the asserted claims, but instead merely explain[ed] the 

existence of mortgage rate tables published in newspapers 

during the 1980s and 1990s.” J.A. 1470.

Mortgage Grader’s expert, Jeffrey Lebowitz, opined 

that the patents-in-suit solved the problem of information 

asymmetry between borrowers and lenders, which had 

previously permitted lenders to “steer” borrowers to 

predatory loans. But that assertion about problem solving does not by its terms identify claimed process steps. 

In any event, the claims do not actually contain a “conflict-free requirement.” See Mortgage Grader II, 89 F. 

Supp. 3d at 1063. Instead, the claims expressly encomCase: 15-1415 Document: 45-2 Page: 18 Filed: 01/20/2016
MORTGAGE GRADER, INC. v. FIRST CHOICE LOAN SERVICES 19

pass so-called “independent” third-parties who, in addition to determining a borrower’s credit grading, may be 

“full time employee[s] of an entity providing the desired 

financial services” and may “receive[] a percentage commission from an affiliated company based on the loans 

funded through the program.” ’694 patent col. 10, l. 51 – 

col. 11, l. 5; ’728 patent col. 9, ll. 41–61. Plainly, conflictsof-interest and predatory lending are still possible when 

practicing the claims. Mr. Lebowitz’s other opinion is 

that the patents-in-suit require use of a computer. But 

given the intrinsic evidence, and Alice’s clarification that 

use of a generic computer to implement a “fundamental 

economic practice” cannot provide an inventive concept 

sufficient to save claims from patent ineligibility, 134 S. 

Ct. at 2356–57, this opinion does not create a genuine 

dispute of material fact.

In sum, no reasonable factfinder could find based on 

the expert reports that the asserted claims are directed to 

patent-eligible subject matter.

CONCLUSION

For the foregoing reasons, the district court did not 

abuse its discretion in denying Mortgage Grader’s motion 

to strike Appellees’ § 101 defense. Nor did the district 

court err in granting summary judgment to Appellees on 

that defense. Instead, the district court correctly determined that the asserted claims are directed to patentineligible subject matter.

AFFIRMED

No costs.

Case: 15-1415 Document: 45-2 Page: 19 Filed: 01/20/2016