United States Court of Appeals 

for the Federal Circuit 

__________________________ 

FORT PROPERTIES, INC., 

Plaintiff-Appellee, 

v. 

AMERICAN MASTER LEASE LLC, 

Defendant-Appellant. 

__________________________ 

2009-1242 

__________________________ 

Appeal from the United States District Court for the 

Central District of California in case no. 07-CV-365, 

Judge Andrew J. Guilford. 

__________________________ 

Decided: February 27, 2012 

__________________________ 

ARIANNA FRANKL, Cole, Schotz, Meisel, Forman & 

Leonard, P.A., of New York, New York, argued for plaintiff-appellee. 

DONALD M. FALK, Mayer Brown, LLP, of Palo Alto, 

California, argued for defendant-appellant. With him on 

the brief were RITA K. LOMIO; and NEIL M. SOLTMAN, of 

Los Angeles, California. Of counsel was ANTHONY G.

GRAHAM, LLP, Graham & Martin, LLP, of Costa Mesa, 

California. 
FORT PROPERTIES v. AMERICAN MASTER 2

__________________________ 

Before PROST, SCHALL, and MOORE, Circuit Judges. 

PROST, Circuit Judge. 

Defendant-Appellant American Master Lease LLC 

(“AML”) appeals from the decision of the United States 

District Court for the Central District of California to 

grant summary judgment in favor of Plaintiff-Appellee 

Fort Properties, Inc. (“Fort Properties”). In issuing this 

ruling, the district court invalidated all claims in U.S. 

Patent No. 6,292,788 (“’788 patent”) for failing to meet the 

subject matter eligibility requirements of 35 U.S.C. § 101. 

We affirm. 

I. BACKGROUND

The ’788 patent discloses an investment tool designed 

to enable property owners to buy and sell properties 

without incurring tax liability. Proceeds generated from 

real estate sales are ordinarily taxed, with some exceptions. One such exception is contained in 26 U.S.C. 

§ 1031, which allows an owner of investment property to 

exchange one property for another of like kind without 

incurring tax liability if the following conditions are met: 

(1) the value of the purchased property is greater than or 

equal to the value of the sold property; (2) the debt burdening the purchased property is greater than or equal to 

the debt burdening the sold property; (3) the purchased 

property is identified within 45 days of the sold property’s 

date of sale, and the entire acquisition is completed 

within 180 days; and (4) the real estate owner does not 

exercise control over the proceeds from the sold property 

before acquiring the purchased property. See 26 U.S.C. 

§ 1031. 
3 FORT PROPERTIES v. AMERICAN MASTER

The investment tool disclosed in the ’788 patent is designed to invoke the benefits of § 1031. In particular, the 

claims require the aggregation of a number of properties 

into a “real estate portfolio.” The property interests in 

this portfolio are then divided into shares and sold to 

investors much in the same way that a company sells 

stock. These divided property interests are called “deedshares.”1 Each deedshare can be encumbered by its own 

mortgage debt, which provides flexibility to real estate 

investors attempting to structure their debts in a way 

that complies with § 1031. 

The ’788 patent also allows for a “master tenant” to 

oversee and manage the deedshares. Among other things, 

the master tenant performs administrative tasks such as 

paying insurance, property taxes, and rents. ’788 patent 

col.7 ll.44-51. Moreover, the real estate portfolio can be 

governed by a “master agreement,” which permits the 

deedshares to “reaggregate” after a predetermined time 

interval. This arrangement provides flexibility to deedshare owners wishing to sell their properties. Finally, the 

investment instrument disclosed in the ’788 patent utilizes a “qualified intermediary” (essentially a straw man) 

to facilitate sales and purchases of deedshares for property owners in a manner consistent with 26 U.S.C. § 1031. 

See ’788 patent col.10 ll.1-62. 

All claims in the ’788 patent are method claims. 

Claim 1 discloses: 

 1 As an illustration, a real estate portfolio worth 

$100 million can be divided into one thousand deedshares 

worth $100,000 each. Each of these deedshares represents a 0.1% ownership interest in the real estate portfolio. See ’788 patent col.6 ll.46-56. 
FORT PROPERTIES v. AMERICAN MASTER 4

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 portfolio 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. 

Two of the other independent claims, claims 22 and 

32, are nearly identical to claim 1—though claim 32 

contains an additional limitation requiring a computer to 

“generate a plurality of deedshares.” The only other 

independent claim in the ’788 patent, claim 11, discloses a 

method of transferring ownership of deedshares in a 

manner consistent with 26 U.S.C. § 1031. Nearly all of 

the dependent claims in the ’788 patent either outline 

contractual provisions to include in the master agreement 

or provide for duties that the master tenant can perform 

(e.g., the payment of rent, property taxes, and insurance, 

etc.). 

The district court invalidated each of the forty-one 

claims in the ’788 patent for failing to claim patenteligible subject matter under 35 U.S.C. § 101. In doing so, 

the court applied the machine-or-transformation test. 

Regarding the machine prong, the court found that the 
5 FORT PROPERTIES v. AMERICAN MASTER

claims of the ’788 patent were not “tied to a particular 

machine or apparatus,” reaching this conclusion by relying on AML’s prior representation during prosecution that 

the recited methods “need not be performed by a computer.” Fort Props., Inc. v. Am. Master Lease, LLC, 609 F. 

Supp. 2d 1052, 1055-56 (C.D. Cal. 2009) (internal quotation marks omitted). Regarding the transformation 

prong, the court found that “none of the claims of the ’788 

Patent ‘transform[ed] any article to a different state or 

thing,’” reasoning that the claimed deedshares, which 

AML argued provided the transformation, “represent[ed] 

only legal ownership interests in property. . . . not physical objects.” Id. at 1056. In light of its decision to invalidate the claims of the ’788 patent, the district court 

granted summary judgment in favor of Fort Properties. 

Id. 

Notably, the district court, following our precedent in 

In re Bilski, 545 F.3d 943 (Fed. Cir. 2008), relied solely on 

the machine-or-transformation test in its § 101 analysis. 

After the district court issued its decision, the Supreme 

Court clarified that the machine-or-transformation test, 

although not the exclusive test for patentability, is “a 

useful and important clue.” Bilski v. Kappos, 130 S.Ct. 

3218, 3227 (2010). Despite this intervening precedent, we 

affirm the district court’s judgment invalidating the 

claims under § 101 for the reasons stated below. We have 

jurisdiction under 28 U.S.C. § 1295(a)(1). 

II. DISCUSSION

We review the district court’s grant of summary 

judgment de novo. Tokai Corp. v. Easton Enters., Inc., 

632 F.3d 1358, 1366 (Fed. Cir. 2011). “Issues of patenteligible subject matter are questions of law and are reviewed without deference.” Cybersource Corp. v. Retail 
FORT PROPERTIES v. AMERICAN MASTER 6

Decisions, Inc., 654 F.3d 1366, 1369 (Fed. Cir. 2011). 

The statute sets forth the categories of patent-eligible 

subject matter, stating that “[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.” 35 U.S.C. 

§ 101. “Section 101 thus specifies four independent 

categories of inventions or discoveries that are eligible for 

protection: processes, machines, manufactures, and 

compositions of matter.” Bilski, 130 S.Ct. at 3225. “In 

choosing such expansive terms . . . Congress plainly 

contemplated that the patent laws would be given wide 

scope.” Diamond v. Chakrabarty, 447 U.S. 303, 308 

(1980). Supreme Court precedent, however, has “provide[d] three specific exceptions to § 101’s broad patenteligibility principles: ‘laws of nature, physical phenomena, 

and abstract ideas.’” Bilski, 130 S.Ct. at 3225 (quoting 

Chakrabarty, 447 U.S. at 309). “The concepts covered by 

these exceptions are ‘part of the storehouse of knowledge 

of all men . . . free to all men and reserved exclusively to 

none.’” Bilski, 130 S.Ct. at 3225 (quoting Funk Bros. Seed 

Co. v. Kalo Inoculant Co., 333 U.S. 127, 130 (1948)). 

At issue in the present case is whether the real estate 

investment tool disclosed in the ’788 patent falls under 

the “process” category of § 101. Section 100(b) of the 

Patent Act defines “process” to mean “process, art, or 

method, and includes a new use of a known process, 

machine, manufacture, composition of matter, or material.” AML argues that its invention constitutes a patenteligible process. Fort Properties, on the other hand, 

contends that the invention is an unpatentable abstract 

idea. 
7 FORT PROPERTIES v. AMERICAN MASTER

Four seminal Supreme Court precedents provide 

guidance regarding when an invention qualifies as a 

patent-eligible process as opposed to an abstract idea: 

Bilski, 130 S.Ct. 3218; Diamond v. Diehr, 450 U.S. 175 

(1981); Parker v. Flook, 437 U.S. 584 (1978); and 

Gottschalk v. Benson, 409 U.S. 63 (1972). First, in Benson, the Court found that an algorithm capable of converting binary-coded decimal numerals into pure binary code 

was an unpatentable abstract idea. 409 U.S. at 64-67, 71-

72. In reaching this conclusion, the Court explained that 

allowing such an invention to qualify as patent-eligible 

subject matter “would wholly pre-empt [a] mathematical 

formula and in practical effect would be a patent on the 

algorithm itself.” Id. at 72. 

In Flook, another algorithm-based invention was at 

issue, with this particular algorithm being designed to 

enable the monitoring of conditions during a catalytic 

conversion process in the petrochemical and oil-refining 

industries. 437 U.S. at 585-86. “The Court conceded that 

the invention at issue, unlike the algorithm in Benson, 

had been limited so that it could still be freely used outside the petrochemical and oil-refining industries.” 

Bilski, 130 S.Ct. at 3230 (citing Flook, 437 U.S. at 589-

90). Despite this limitation, the Court still characterized 

the invention as unpatentable under § 101, stating that 

“[t]he notion that post-solution activity, no matter how 

conventional or obvious in itself, can transform an unpatentable principle into a patentable process exalts form 

over substance.” Flook, 437 U.S. at 590. As the Court 

later explained, “Flook stands for the proposition that the 

prohibition against patenting abstract ideas ‘cannot be 

circumvented by attempting to limit the use of the formula to a particular technological environment’ or adding 

‘insignificant postsolution activity.’” Bilski, 130 S.Ct. at 

3230 (quoting Diehr, 450 U.S. at 191-92). 
FORT PROPERTIES v. AMERICAN MASTER 8

Third, in Diehr, the Court explained that while an abstract idea could not be patented, “an application of a law 

of nature or mathematical formula to a known structure 

or process may well be deserving of patent protection.” 

450 U.S. at 187. The invention at issue in Diehr was a 

method for “molding raw, uncured synthetic rubber into 

cured precision products” using a mathematical formula 

and a computer. Id. at 177. This invention qualified as 

patentable subject matter under § 101 because it was not 

“an attempt to patent a mathematical formula, but rather 

[was] an industrial process for the molding of rubber 

products.” Id. at 192-93. 

Finally, in its recent Bilski decision, the Supreme 

Court relied on Benson, Flook, and Diehr to find an invention very similar to the one at issue in our case unpatentable under § 101. See Bilski, 130 S.Ct. 3229-31. The 

invention in Bilski involved a method by which buyers 

and sellers of commodities could protect, or hedge, against 

risk of price changes. Id. at 3223. Claim 1 of the invention required the following steps: 

Initiating a series of transactions between a commodity provider and consumers whereby the consumers 

purchase the commodity at a certain rate; 

Identifying market participants for the commodity 

having a counter-risk position to the consumers; and 

Initiating a series of transactions between the commodity provider and the market participants at a second rate in a manner that permits the market 

participant transactions to balance the risk position 

of the consumer transactions. 
9 FORT PROPERTIES v. AMERICAN MASTER

Id. at 3223-24. Claim 4 incorporated the steps listed in 

Claim 1 into a mathematical formula. Id. at 3223. The 

remaining claims at issue in Bilski explained how claims 

1 and 4 could be applied in the energy market. Id. at 

3224. 

The Court concluded that the claims at issue in Bilski

did not satisfy the requirements of § 101. Id. at 3229-30. 

Specifically, the Court reasoned that claims 1 and 4 

merely explained the basic concept of hedging, which “is 

an unpatentable abstract idea, just like the algorithms at 

issue in Benson and Flook.” Id. at 3231. “Allowing petitioners to patent risk hedging would pre-empt use of this 

approach in all fields, and would effectively grant a monopoly over an abstract idea.” Id. at 3231. Regarding the 

remaining claims, which were confined to the energy 

market, the Court explained that “limiting an abstract 

idea to one field of use or adding token postsolution 

components [does] not make the concept patentable.” Id.

at 3231. Thus, these claims were also characterized as 

abstract. Id. at 3231. 

A. Claims 1-31 of the ’788 patent 

For the reasons provided below, claims 1-31 of the 

’788 patent do not satisfy the patent-eligibility requirements of § 101. As an initial matter, these claims, like 

the invention in Bilski, disclose an investment tool not 

requiring the use of a computer. Specifically, claims 1-10 

and 22-31 involve the following conceptual steps: aggregating real property into a real estate portfolio, dividing 

the interests in the portfolio into a number of deedshares, 

and subjecting those shares to a master agreement. 

Claims 11-21 then describe how property can be bought 

and sold under this arrangement in a manner that permits a tax-deferred exchange. 
FORT PROPERTIES v. AMERICAN MASTER 10

AML argues that claims 1-31 constitute a patentable 

process and not an abstract idea because they require a 

series of steps to take place in the real world that involve 

real property, deeds, and contracts. More specifically, 

AML contends that the deeds remove the invention from 

the realm of the abstract because they are physical legal 

documents signifying real property ownership that must 

be publicly recorded. Fort Properties disagrees, arguing 

that the claimed method of aggregating property, making 

it subject to an agreement, and then issuing ownership 

interests to multiple parties consists entirely of mental 

processes and abstract intellectual concepts. Fort Properties counters that under Bilski, 130 S.Ct. at 3218, the 

invention’s intertwinement with deeds, contracts, and 

real property does not transform the abstract method into 

a patentable process. 

We agree with Fort Properties. Indeed, the claims in 

Bilski were tied to the physical world through at least two 

tangible means: commodities and money. Id. at 3223-24. 

These ties, however, were insufficient to render the 

abstract concept of hedging patentable. See id. at 3231. 

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. Our reasoning is further supported by the fact 

that the claimed algorithm in Flook also had ties to the 

physical world (i.e., the invention involved the “catalytic 

chemical conversion of hydrocarbons”), yet the Supreme 

Court still characterized that invention as unpatentable. 

437 U.S. at 586, 594-95. For these reasons, we conclude 
11 FORT PROPERTIES v. AMERICAN MASTER

that claims 1-31 of the ’788 patent do not disclose patenteligible subject matter. 

Our precedent is in accord. Specifically, in In re Comiskey, we found claims to a method of “mandatory 

arbitration resolution” unpatentable under § 101 even 

though those claims required the use of physical “unilateral and contractual documents.” 554 F.3d 967, 981 (Fed. 

Cir. 2009). Additionally, in In re Schrader, the applicants 

sought to patent a method of bidding at an auction. 22 

F.3d 290, 291 (Fed. Cir. 1994). The claim at issue “required” the “physical effect or result” of “entering of bids 

in a ‘record,’ a step that [could have] be[en] accomplished 

simply by writing the bids on a piece of paper or a chalkboard.” Id. at 294. This court concluded that this physical effect was “insufficient to impart patentability” to the 

claim, explaining that “[t]he dispositive issue [was] 

whether the claim as a whole recite[d] sufficient physical 

activity to constitute patentable subject matter.” Id. As 

explained above, claims 1-31 of the ’788 patent recite an 

abstract real estate investment tool. When viewing the 

claimed invention as a whole, the physical activities 

involving the deeds, contracts, and real property are 

insufficient to render these claims patentable. 

B. Claims 32-41 of the ’788 patent 

Claims 32-41 of the ’788 patent have the same ties to 

deeds, contracts, and real property as claims 1-31. For 

the reasons explained in Section II.A, these physical 

connections are insufficient to qualify claims 32-41 for 

patent eligibility under § 101. Claims 32-41 contain an 

additional limitation, however, requiring a computer to 

“generate a plurality of deedshares.” We address this 

limitation below. 
FORT PROPERTIES v. AMERICAN MASTER 12

This court has recently provided guidance on how 

claim limitations involving computers apply in the § 101 

analysis. In Cybersource, we explained that “the basic 

character of a process claim drawn to an abstract idea is 

not changed by claiming only its performance by computers, or by claiming the process embodied in program 

instructions on a computer readable medium.” 654 F.3d 

at 1375. Instead, “to impart patent-eligibility to an 

otherwise unpatentable process under the theory that the 

process is linked to a machine, the use of the machine 

‘must impose meaningful limits on the claim’s scope.’” Id.

(quoting In re Bilski, 545 F.3d at 961). As an example, in 

Ultramercial, LLC v. Hulu, LLC the claimed invention 

“require[d] intricate and complex computer programming” 

and “specific application to the Internet and a cybermarket environment.” 657 F.3d 1323, 1328 (Fed. Cir. 

2011). The addition of the computer to the claims was not 

merely insignificant post-solution activity; rather, the 

invention itself involved “advances in computer technology,” and it was thus sufficient to qualify the claims for 

patent eligibility under § 101. Id. at 1329. 

On the other hand, in Dealertrack, Inc. v. Huber, we 

concluded that claims to a method of applying for credit 

did not satisfy § 101 even though the claims contained a 

limitation requiring the invention to be “computer aided.” 

Nos. 2009-1566, -1588, 2012 WL 164439, at *14, *18 (Fed. 

Cir. Jan. 20, 2012). In reaching this conclusion, we explained that “[t]he claims [were] silent as to how a computer aids the method, the extent to which a computer 

aids the method, or the significance of a computer to the 

performance of the method.” Id. at *17. “Simply adding a 

‘computer aided’ limitation to a claim covering an abstract 

concept, without more, is insufficient to render the claim 

patent eligible.” Id. Dealertrack distinguished itself from 

Ultramercial on the grounds that its claims “recite[d] only 
13 FORT PROPERTIES v. AMERICAN MASTER

that the method [was] ‘computer aided’ without specifying 

any level of involvement or detail,” while the Ultramercial

claims required “an extensive computer interface.” Id. 

The computer limitation in claims 32-41 of the ’788 

patent, like the computer limitation in Dealertrack, does 

not “play a significant part in permitting the claimed 

method to be performed.” See id. Specifically, claims 32-

41 only require the computer to “generate a plurality of 

deedshares.” At the claim construction stage, AML 

agreed that “using a computer” merely meant “operating 

an electronic device that features a central processing 

unit.” Such a broad and general limitation does not 

“impose meaningful limits on the claim’s scope.” See

Cybersource, 654 F.3d at 1375. AML simply added a 

computer limitation to claims covering an abstract concept—that is, the computer limitation is simply insignificant post-solution activity. See id. at 1371. Without 

more, claims 32-41 cannot qualify as patent-eligible. See

Dealertrack, 2012 WL 164439, at *17. 

III. CONCLUSION

Because claims 1-41 of the ’788 patent attempt to capture unpatentable abstract subject matter, they are 

invalid under 35 U.S.C. § 101. Therefore, we affirm the 

district court’s grant of summary judgment in favor of 

Fort Properties. 

AFFIRMED