Case 12: State Street Bank & Trust Co. v. Signature Financial Group, Inc. (1998)

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Signature Financial Group appealed the decision of the District Court that their patent for a financial services program was invalid due to non-statutory subject matter. The patent was for a data processing system which provided mutual fund account support for Signature's clients. The system, termed Hub and Spoke, pooled mutual funds, or spokes, together into a single portfolio, or hub, in a partnership. State Street and Signature had been negotiating terms for the use of Hub and Spoke; State Street, upon the dissolution of negotiations, filed a declaratory judgment action stating that the patent was invalid. The Appellate Court had to determine whether the District Court was correct in issuing a summary judgment on the case; that is, whether there were any questions of the facts which would necessitate a trial to determine the material fact of the case. They found that State Street was not entitled to summary judgment because the patent was, in fact, valid and directed to statutory subject matter.

The patent filed was for a program which assisted the management of mutual funds, particularly the daily allocation of assets and the percentage share of each spoke in the system. Expenses, income, and other features of the investment portfolio are split among the spokes, and the yearly income, expenses, and gains or losses are determined for accounting and taxation purposes for each spoke. These features must be calculated quickly and accurately; this was performed by the subject matter of the patent.

As before, the patent was filed not for the mathematical formulae, but for the entire system which utilized the formulae, specifically the computer which was designed to perform these functions. Since the patent was filed for the machine, it is therefore valid since it pertains to statutory subject matter. Formulae are unpatentable because they are not, in and of themselves, "useful;" rather, they are abstract ideas or laws of nature the exclusivity of which cannot be granted to a single person or entity. However, when used in conjunction with a machine or practical application, formulae become patentable insofar as they are a part of that machine or application. In this case, it is not the formula but the machine or application which is protected by the patent. In addition, the District Court cited the broadness of the patent as a means of rendering it unpatentable. However, this decision falls under the regulation of sections 102, 103, and 112, not 101. Broadness does not preclude patentability.