In Dealertrack, Inc. v. Huber, the key issue before the US Court of Appeals for the Federal Circuit was whether the district court erred in granting summary judgment finding certain claims of U.S. Patent No. 7,181,427 (the '427 Patent), owned by Dealertrack, Inc., to be invalid for failing to claim patentable subject matter under 35 U.S.C. Section 101.

Dealertrack sued multiple defendants for infringement of three of its patents, including its '427 Patent covering a method for processing car loan credit applications over the internet. The various defendants filed for summary judgment, in part, for invalidity of certain claims of the '427 Patent for failing to claim patentable subject matter under Section 101.

The US District Court for the Central District of California granted summary judgment of invalidity because it found the '427 Patent failed to claim patent-eligible subject matter. Applying the machine-or-transformation test as stated in In re Bilski, 545 F.3d 943 (Fed. Cir. 2008), the district court determined that the computer implicated by the claims was not specially programmed and was only a general purpose computer that had been programmed in an unspecified manner. Therefore, it could not constitute a particular machine making the claims patent-eligible.

Dealertrack appealed to the Federal Circuit.

On appeal, the Federal Circuit held that the claims of the '427 Patent were invalid as patent ineligible abstract ideas under Section 101.

The Federal Circuit explained that there are three categories of subject matter that are ineligible for patent protection, namely:

The Federal Circuit noted that Dealertrack's claimed loan application processing method included only the following three steps:

The Federal Circuit noted that a court must focus on a patent's claims in considering patent eligibility under Section 101, because a claim may only preempt what it encompasses, not what is disclosed but unclaimed. The court explained that the steps in Dealertrack's method failed to impose meaningful limits on the claims' scope and that allowing these claims would allow Dealertrack to preempt the general clearinghouse concept. Further, the court stated that Dealertrack had failed to specify how any computer hardware and database were specifically programmed to perform the steps claimed in its patent.

To avoid summary judgment, a patent owner with a computer-related method should ensure that its patent claims include meaningful limitations to the scope of the claims, especially if the method deals with a broad concept like loan application processing. A patent owner is more likely to avoid summary judgment finding a method to be unpatentable as an abstract idea if the claims include computer hardware limitations that recite: