STATE STREET BANK AND TRUST COMPANY v SIGNATURE FINANCIAL GROUP, INC

                STATE STREET BANK AND TRUST COMPANY v SIGNATURE FINANCIAL GROUP, INC

Facts:  State Street Bank and Trust Company filed an action against Signature Financial Group, Inc for the declaratory judgment that Signature’s patent for a computerized accounting system for managing a mutual fund investment structure is invalid and unenforceable.

State Street act as administrators and accounting agent of mutual funds while Signature owns US patent No. 5, 193, 056 entitled “Data Processing System for Hub and Spoke Financial Services Configuration,” issued on March 9, 1993 by assignment of the inventor, R. Todd Boes. State Street alleges that Signature’s patent should be invalid as the invention claims an unpatentable mathematical algorithm.

Issue: Whether computer software that essentially performs mathematical accounting functions and is configured to run on a general purpose is patentable subject matter?

Held:     The Court held that Signature’s patent is not valid due to the subject matter not patentable under Section 101 of Title 35 of the US Code which provides that:

 “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and usefutl improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.”

The court in determining whether Signature’s claimed invention is patentable used 1) Mathematical Algorithm Test and 2) Physical Transformation Test.

In the first test, its results provided although the data processing system is an apparatus specifically designed to solve a mathematical problem, it however provides a data processing system and a method for monitoring and recording the information flow and data and making all calculations, necessary for maintaining a partnership portfolio and partner fund financial services configuration. An invention that inputs, processes, and outputs number must by definition perform mathematical operations.

In the second test, Signature’s patent also failed the physical transformation examination as it provided that the invention does nothing other than present and solve a mathematical algorithm and therefore not patentable.