In re Trans Texas Holdings Corp.

• Decision Date: 22 August 2007
• Docket Number: 841,842.,2006-1600. Reexam. No. 90/005,90/005,No. 2006-1599,2006-1599
• Citation: 498 F.3d 1290
• Parties: In re TRANS TEXAS HOLDINGS CORP.
• Court: U.S. Court of Appeals — Federal Circuit

498 F.3d 1290

In re TRANS TEXAS HOLDINGS CORP.

Nos. 2006-1599, 2006-1600. Reexam. Nos. 90/005,841, 90/005,842.

United States Court of Appeals, Federal Circuit.

August 22, 2007.

COPYRIGHT MATERIAL OMITTED

David L. Parker, Fulbright & Jaworski L.L.P., of Austin, TX, argued for appellant. With him on the brief was Marcy Hogan Greer. Of counsel was Shafeeqa Watkins Giarratani.

William LaMarca, Associate Solicitor, United States Patent and Trademark Office, of Arlington, VA, argued for the Director of the United States Patent and Trademark Office. With him on the brief was Thomas L. Stoll, Associate Solicitor. Of counsel was Stephen Walsh, Acting Solicitor.

Before MICHEL, Chief Judge, MAYER and DYK, Circuit Judges.

DYK, Circuit Judge.

Appellant Trans Texas Holdings Corp. ("Trans Texas") appeals the decision of the Board of Patent Appeals and Interferences ("Board") in Reexamination Nos. 90/005,841 and 90/005,842. The Board affirmed the examiner's rejection of all of the claims of U.S. Patent No. 5,832,461 (filed Oct. 23, 1991) ("'461 patent") and U.S. Patent No. 6,052,673 (filed Nov. 2, 1998) ("'673 patent") as obvious under 35 U.S.C. § 103. We affirm.

BACKGROUND

I

Trans Texas is the assignee of both the '461 patent and the '673 patent. The '673 patent is a continuation of the '461 patent. The patents' specifications, which are nearly identical, describe a system of inflation-adjusted deposit and loan accounts. '461 patent col.2 ll.55-59; '673 patent col.2 ll.55-59. By adjusting the interest paid on deposit accounts, or received on loan accounts, to compensate for inflation, the patented system purports to insulate the value of assets from inflationary fluctuations. In addition, the patented system seeks to match, or "hedge," any increased interest a financial institution must pay to depositors as a result of inflation adjustments with the increased inflation-adjusted interest payments it receives from borrowers, thereby providing stability to the financial institution. '461 patent col.3 ll.27-37; '673 patent col.2 ll.27-37 ("During times of inflation . . . negative cash flows attributable to . . . deposit accounts will be compensated for by incoming payments on loan accounts.").

A

The '461 patent has three independent claims, claims 1, 24, and 36. Independent claim 1 claims "an investment system for providing an improved capital structure for an institution" composed, basically, of a deposit account and an account management data processor. '461 patent col.25 l.64-col.26 l.51. The claimed deposit account has a principal component representing the initial cash investment of the depositor and an accrual component representing interest paid that has both a fixed interest and a variable interest component. Id. col.26 ll.39-42. Claim 1 notes that the "deposit accrual component" is adjusted "in a manner responsive to the rate of inflation," id. (emphasis added), which the specification defines as "directly responsive to a market indicator of prior actual inflation and it is not meant to include the market's expectation of future inflation," id. col.3 ll.12-14 (emphasis added).¹ Claim 1 also specifies that the data processor includes means for "retiring the fixed interest component" and "paying the deposit principal component" according to schedules over the term of the deposit account. Id. col.26 ll.48-51.²

Independent claim 24 is generally similar to claim 1 for purposes of this appeal and includes the "responsive to the rate of inflation" limitation. Id. col.28 ll.47-59. It excludes claim 1's reference to retiring the fixed interest and paying the principal according to schedules. Id. Independent claim 36 is similar to claim 1 for purposes of this appeal but covers both deposit and loan accounts. Id. col.29 l.25-col.30 l.9. Similar to claim 1, it claims a "means for adjusting the amount in the deposit account in a manner responsive to the rate of inflation" and a "means for determining the amount in the loan accrual component in a manner responsive to the rate of inflation." Id. col.29 l.37-col.30 l.3 (emphases added). Most of the '461 patent's dependent claims were not argued separately on appeal and thus stand or fall with their corresponding independent claim. See In re Dance, 160 F.3d 1339, 1340 n. 2 (Fed. Cir.1998). Some of the dependent claims include other limitations described below.

B

The '673 patent has four independent claims, claims 1, 9, 22, and 25. Claim 1 claims a "method of managing financial accounts" by providing deposit and loan accounts that are adjusted "as a function of a rate of inflation," "paying the deposit accounts," and "receiving repayment of the loan account." '673 patent col.25 l.60 col.26 l.42. Claim 1 also recites the use of "an account data processor." Id. col.26 l.37.³ Claim 9 claims a method whereby an institution provides a deposit account to a depositor, uses a portion of the funds deposited to obtain a financial instrument "whose rate of return adjusts with inflation," and pays the "depositor a rate of return on funds . . . based on a rate of inflation." Id. col.26 l.61-col.27 l.7 (emphases added).⁴ Claim 22 is nearly identical to claim 9, except that it calls for the institution to obtain "a mortgage secured by real estate," rather than "a financial instrument." Id. col.27 l.41-col.28 l.10. Claim 25 is also similar to claim 9 for purposes of this appeal, except that it specifies that the financial instrument pays "the inflation-adjusted principal component at the end of the term," which the parties refer to as "balloon payments." Id. col.28 l.16-35. None of the dependent claims of the '673 patent was argued separately on appeal, and they therefore stand or fall with their independent claim. See Dance, 160 F.3d at 1340 n. 2.

On October 6, 2000, Trans Texas requested reexamination of the '461 and '673 patents based on a substantial new question of patentability. The United States Patent and Trademark Office ("PTO") granted this request on December 6, 2000, and initiated separate reexamination proceedings for each patent.

II

A

In the course of the reexamination proceeding, Trans Texas urged that the PTO was bound by a claim construction rendered in an earlier infringement proceeding to which the PTO was not a party. On October 12, 1999, Trans Texas had filed a complaint against Pimco Advisors, L.P. in the United States District Court for the Western District of Texas, alleging infringement of the '461 and '673 patents. On August 28, 2000, the district court had issued its claim construction ruling, which adopted the definition of the term "responsive to the rate of inflation" found in the specification, that is, it held that the term should be defined as "directly responsive to a market indicator of prior actual inflation and is not meant to include the market's expectation of future inflation." Trans Texas Holdings Corp. v. Pimco Advisors, L.P., No. 99-CA-658, slip op. at 10 (W.D.Tex. Aug. 28, 2000) ("Markman Order"). Relying on language in the accompanying district court opinion, Trans Texas urges that the district court also interpreted the "responsive to the rate of inflation" language to require a continuous, one-to-one relationship between inflation and adjustments. See id. at 12 ("The '461 patent uses the phrase `responsive to the rate of inflation' which more clearly imparts a one-to-one correlation."). For purposes of this appeal, we will assume that Trans Texas's interpretation of the district court order is correct. The district court also held that the term "as a function of the rate of inflation" in claim 1 of the '673 patent had the same meaning as the term "responsive to the rate of inflation." Id. at 12. The district court construed the term "based on the rate of inflation" in claims 9 and 25 of the '673 patent "to require the rate of return to be directly related to the rate of inflation." Id. at 12-13.

The parties then reached a settlement before trial, and the district court issued an "Order of Dismissal with Prejudice" on January 8, 2001.

B

On February 11, 2002, the examiner mailed final office actions in the reexamination proceedings rejecting all of the claims of the '461 and '673 patents as obvious under 35 U.S.C. § 103. The primary issue before the examiner was the construction of the terms "responsive to the rate of inflation" and "as a function of a rate of inflation." In holding the claims unpatentable, the examiner principally relied on Santosh Mukherjee & Claire Orlans, Indexation in an Inflationary Economy: A Case Study in Finland, Vol. XL, Broadsheet No. 551, PEP The Social Science Institute, April 1975, at 50-73, 106-111 ("Mukherjee"). Mukherjee discusses the decision of banks in Finland in the 1950s to "adjust both their loans and deposits for inflation, on the basis of quarterly inspections of the cost-of-living index." Id. Among other accounts, it describes "A" deposit accounts, which provided "100 per cent index compensation" for every one percent increase in the cost of living index.⁵ That is, for every one percent increase in the cost of living index, the capital was increased by one percent. Mukherjee also discloses that banks charged an inflation-adjusted "surcharge" on their loans in order to provide the funds needed for fully inflation-adjusted deposit accounts. It notes that "the amount of the surcharge was usually fixed according to the proportion of the bank's deposits benefiting by index adjustment, so that the bank could just balance its commitments." Id. Although Mukherjee "lacks an explicit recitation of the data-processor for account management," the examiner concluded that U.S. Patent No. 4,774,663 (filed Nov. 21, 1983) ("Musmanno") "demonstrates that it was notoriously well-known to employ data-processors to manage plural accounts" and therefore it would have been obvious to a person of ordinary skill in the art to apply Musamanno's data processor to Mukherjee.

On March 25, 2002, Trans Texas appealed...