INTELLIGENCE

Hantz Software LLC v. Sage Intacct, Inc.

In Hantz Software, LLC, v. Sage Intacct, Inc.1, the Court of Appeals for the Federal Circuit affirmed the decision of the District Court for the Northern District of California to invalidate patents that are ineligible under 35 U.S.C. § 101. The district court held all the patent claims ineligible, not just the claims asserted in the litigation. The Federal Circuit affirmed the invalidity decision as to the asserted claims, but vacated the district court’s judgment as to the non-asserted claims.

Background

Hantz Software, LLC (“Hantz”) asserted two patents:  U.S. Patent Nos. 8,055,559 (“the ’559 patent”) and 8,055,560 (“the ’560 patent”). Claim 1 of the ’559 patent is representative and is directed to computer-implemented accounting methods or systems for accounts receivable and accounts payable within a multi-company system.2

The patents were said to solve problems in multi-company business accounting systems that record and organize company financial activity, such as forced manual entry, by the use of “balancing lines” to “automatically add” “input invoice detail lines” and “define an outstanding balance associated with each of the distinct companies.”3

The District Court Decision

Hantz sued Sage Intacct, Inc. (“Sage”) and asserted infringement of “one or more” of claims of the ’559 and ’560 patents. Its complaint alleged that Sage’s infringement was “detailed in [the accompanying] Exhibit C”, which provided claim charts for only claims 1 and 31–33 of the asserted patents. Sage moved to dismiss the complaint under the Federal Rules of Civil Procedure 12(b)(6) on the basis that the claims were invalid under 35 U.S.C. § 101 as being patent-ineligible.4  Significantly, Sage never counterclaimed the invalidity of any of the non-asserted patent claims.

In addressing Sage’s motion, the district court applied the two-step Alice test.5  In step 1, the court determined that the claims are directed to an abstract idea – improving financial recordkeeping for multi-company businesses via balancing lines.6  According to the court, “The asserted claims are directed precisely to what the Federal Circuit has held to be an abstract idea.”7  In step 2, the district court determined that the claims fail to recite an inventive concept that transforms the claimed method into a patentable application of the abstract idea.8  The court reasoned that claim 1 of the patents generally claim a method for accomplishing an abstract idea through conventional computer functions: entering invoice amounts, adding up the invoice amounts, and displaying outstanding balances. These steps recite “basic functions of a computer” and set forth a result-focused and functional method. They do not impart an inventive concept.9  The court applied the same analysis to independent claim 31, but was silent on claims 32 and 33.10

The Federal Circuit Appeal

The Federal Circuit affirmed the district court’s § 101 invalidity analysis of the ’559 and ’560 patents. On appeal Hantz took issue with the district court’s holding that “[t]he Asserted Patents therefore fail both prongs of the Alice test” because that decision swept into its invalidity holding the non-asserted claims in each patent.11

The Federal Circuit agreed with Hantz because its operative complaint alleged that Sage infringed “one or more claims” of each asserted patent, but that Sage’s infringement was “detailed in Exhibit C” to the complaint that included claim charts for only claims 1, and 31-33 of each patent.12 The Court concluded that because Sage had not made any invalidity counterclaims on the non-asserted claims, the district court erred to the extent its decision invalidated those claims. The Court vacated the district court’s judgment insofar as it held any claims other than the asserted claims of each asserted patent ineligible and affirmed in all other respects.13

1 Hantz Software, LLC v. Sage Intacct, Inc., 576 F. Supp. 3d 677, 680 (N.D. Cal. 2021), aff'd in part, vacated in
part, 2023 WL 2569956 (Fed. Cir. Mar. 20, 2023).
2 Claim 1 is reproduced below:
1. A computer implemented method for Account Receivable (AR) accounting for use within a multi-company accounting system that operates on a computer arrangement and which is accessible by one or more
persons defining an interface user, the method comprising:
at a processor, creating a multi-company invoice with the multi-company accounting system, the interface
user entering financial data into the multi-company accounting system via the computer arrangement
including:
entering an invoice total money amount; and
entering input invoice detail lines, each of the input invoice detail lines having an entered account associated with one of a plurality of companies of a multi-company group and an amount of money, at least two of the
input invoice detail lines being associated with two distinct companies of the multi-company group,
wherein the distinct companies are affiliated with each other and wherein each uses the multi-company
accounting system for tracking money flow and balancing balance sheets for their respective
accounting operations;
at the processor, automatically adding via the multi-company accounting system at least a pair of
multi-company generated balancing lines associated with the multi-company invoice for balancing money
owed to each of the distinct companies to define an outstanding balance associated with each of the distinct
companies, thereby keeping Accounts Receivable for each of the distinct companies in balance;
at the processor, entering a payment for paying the multi-company invoice including the interface user
entering an amount of the payment into the multi-company accounting system via the computer
arrangement; and
at the processor, applying the payment to the multi-company invoice to reduce the outstanding balances for
the distinct companies including the multi-company accounting system automatically adding at least a pair
of multi-company generated Due To/Due From lines as Due To/Due From entries to balance the money owed
between the distinct companies, thereby keeping the Accounts Receivable for each of the distinct companies in balance.
3 Id. at 680-681; ’559 Patent, 2:14-16; 2:16-18 and 2:46-50.
4 Hantz, 576 F. Supp. 3d at 682.
5 The Supreme Court and Federal Circuit have articulated a two-part test for determining whether a claim’s
subject matter is patent-eligible under Alice. Alice Corp. Pty. v. CLS Bank Int'l, 573 U.S. 208, 216, 134 S.Ct. 2347 (2014).
First, the Court “determine[s] whether a claim is ‘directed to’ a patent-ineligible abstract idea.”
Content Extraction and Transmission v. Wells Fargo Bank, 776 F.3d 1343, 1346-47 (citation omitted). If so, the
Court then “consider[s] the elements of the claim—both individually and as an ordered combination—to
assess whether the additional elements transform the nature of the claim into a patent-eligible application of the
abstract idea.” Id. at 1347. “This is the search for an ‘inventive concept’—something sufficient to ensure
that the claim amounts to ‘significantly more’ than the abstract idea itself.” Id. (quotation omitted).
6 Hantz, 576 F. Supp. 3d at 684.
7 Id.
8 Id. at 686.
9 Id.
10 Id. at 688.
11 Hantz Software, LLC v. Sage Intacct, Inc., 2023 WL 2569956, at *1 (Fed. Cir. Mar. 20, 2023).
12 Id.
13 Id.

SHARE

PRINT THIS PAGE

RECEIVE EMAIL UPDATES

Name(Required)