In the case of State Street Bank v. Signature Financial, the claims were to a "data processing system for managing a financial services configuration of a portfolio established as a partnership, each partner being one of a plurality of funds" comprising a number of different "means" including several different "means for processing data" for a number of different purposes. The claims were intended to cover what was referred to as a "hub and spoke" relationship between a partnership portfolio and partner funds. The outcome of all the data processing was inter alia to allow allocation between the spokes of the hub's daily income, expenses, net realized gain or loss and the unrealized gain or loss. It is of particular use to fund managers. The Massachusetts District Court had held that the claim did not define a patentable invention under 35 USC 101 basically on two grounds: first, that it was directed to what was basically an accounting system that could be carried out with pencil and paper and therefore lacked sufficient "physical" activity to be patentable (i.e. it is effectively a mathematical algorithm) and second, that it fell within the long-established exception to patentability that the case law had established for business methods.

On appeal the Court of Appeals for the Federal Circuit reversed the district court decision. The Court first noted that as a practical matter, given the time frame within which the data processing had to be carried out, a computer or equivalent device is a virtual necessity. The court went on to construe the claim, noting that it was written in means plus function form and holding that when properly construed in the light of the specification it was directed to a machine. Thus in view of the court's decision in In re Alappat (see our November 1994 Newsletter (N.S. 184)) the present system was patentable as long as it met all the other requirements for patentability. The court then went on to address the supposed mathematical algorithm and business methods exceptions to patentability.

So far as the former is concerned, the court stated:


So far as the business method exception to patentability was concerned, the court took the "opportunity to lay this ill-conceived exception to rest". After analyzing prior cases that had been said to create the exception, the court concluded that all of them had really been decided on the ground that what was claimed was an abstract idea or on its proper construction lacked novelty and so concluded that the exception did not exist. In noting that the district court's application of the doctrine had in part turned on its finding that the patent in suit was "sufficiently broad to foreclose virtually any computer-implemented accounting method necessary to manage this type of financial structure", the court noted that issues of undue breadth of claim could be addressed under other provisions of the law.