Intellectual Ventures (IV) is the world's biggest patent-licensing company and boasts of having collected tens of thousands of patents since it was founded in 2000. It's raised about $6 billion from investors over the years, and to recoup that money, it started filing lawsuits over patents a few years ago. In 2013, it launched a new salvo, filing 13 lawsuits against major US banks, including Bank of America, JP Morgan Chase, and Capital One.

The Capital One case ended last Wednesday, when a Virginia federal judge threw out the two IV patents that remained in the case. It's the first IV patent case seen through to a judgment, and it ended in a total loss for the patent-holding giant: both patents were invalidated, one on multiple grounds. (An IV case against Motorola went to a jury, but it ended in a mistrial, and no new trial has been scheduled.)

The case was just weeks away from a jury trial, but US District Judge Anthony Trenga didn't let it get that far. In an opinion published Wednesday, Trenga found that IV's patents were simply abstract ideas: "nothing more than the mere manipulation or reorganization of data," he wrote. "At most, the patents describe a more efficient system or method for performing tasks than could be done without a computer, i.e. monitoring expenditures according to preset limits (the '137 Patent) or determining what would appeal to a particular user from a particular website (the '382 Patent.)"

The '382 patent, invented by the same Philadelphia patent lawyer who prosecuted it, received a special smackdown from Trenga, who found it invalid on two different grounds. The patent, entitled "advanced Internet interface providing user display access of customized webpages," dates to an original application filed in 1998. Its principal claim describes sending customized webpages "as a function of the user's personal characteristics." But "neither the public nor a person of ordinary skill in the art could reasonably determine the precise metes and bounds of the claimed invention" wrote Trenga.

IV lawyers argued that the '137 patent was infringed by Capital One's "account alerts" system, while the ShareBuilder investing website infringed the '382 patent. Three other patents that were dropped by IV earlier in the litigation were initially said to cover widely used features of modern banking: CVV/CVC codes on the back of Visa and MasterCard cards, online bill paying, and envelope-free ATMs.

Capital One's lawyer declined to comment on the case. Intellectual Ventures' statement about its loss made clear the solution it's going to pursue: more litigation.

"We are disappointed with the court's decision and are considering our options," said Melissa Finocchio, IV's chief litigation counsel. "But, our patent portfolio is deep and we have another action pending against Capital One in Maryland. We remain committed to defending our intellectual property rights, as well as those of our customers and investors."

That second suit against Capital One will move ahead, but it isn't clear what effect Trenga's ruling will have on IV's 12 other banking lawsuits, which are still pending. Some of the other suits involve a somewhat varied group of patents. The lawsuits are filed in venues ranging from Minnesota to Alabama, and judges will have wide discretion about what to do with those cases while this one winds through the likely appeal process.

Meanwhile, the laws about when patents are too abstract may change soon. The Supreme Court just heard oral arguments on an important software patent case relating to that area of law, Alice v. CLS Bank.

Behind banking breakthroughs: Patent lawyers

Intellectual Ventures proudly buys patents from both companies and "individual inventors," who are feted with their own section on IV's website. And patent reform opponents, like IV, have put "individual inventors" front and center as they argue that Congress should stop proposed patent reforms; the main group opposing reform, Innovation Alliance, has created a website beseeching Congress to "Save the Inventor" by halting reform efforts.

Taking a closer look at the inventors powering IV's attempt to get paid royalties on basic banking practices is revelatory. The two financial "inventions" tossed out on Wednesday didn't originate in IV's labs, nor with programmers or any bank—they both came from the homes of patent lawyers.

The '137 patent was invented by Mary Tannenbaum, an electrical engineer who retired many years ago from AT&T. Her husband, David Tannenbaum, is a retired patent lawyer, who until last year practiced in the Dallas office of Norton Rose Fulbright. He wrote the patent, turning his wife's home budgeting ideas into a piece of intellectual property.

"I think this is disappointing for all inventors," said David Tannenbaum, who was reached by Ars on Thursday. "They invent things, and then the court thinks it's too basic. I'm a patent attorney, and I disagree with the decision. I think the courts are wrong when they talk about patents such as this being not patentable. It destroys the basis for industry, particularly in California," where so many companies base their business on intellectual property.

The parent patent of '137 was filed in 2002, and it describes a kind of electronic budgeting system, "providing messages and other information," to help follow "self-imposed limits on the user's spending."

Tannenbaum said the ideas sprung up when his wife was doing retirement planning. He explained:

Up until the time when she invented this, there was no way to know how you were performing against your budget on a line-by-line item. You get a bill at the end of the month and you know that you spent X dollars, but you don't know in what categories. If you want to do a budget for travel, food, and whatnot—you don't get that. You might get it at the end of a year, but you don't get it at the time of sale, and you don't get it by the month. That was the essence of her invention.

"Based on her background as an engineer, working on software and things for computers at Bell Labs, she realized that she could do this in a database," said Tannenbaum.

At trial, IV lawyers were preparing to put Mary Tannenbaum on the stand. Her kitchen-table breakthrough, they would have argued to a jury, should have forced Capital One—and eventually, all banks—to pay a royalty for using "account alerts," which do things like alert consumers when a particular purchase is over, say, $100.

Her husband wrote the patent, but the invention is "100 percent her idea," David Tannenbaum said. "She is the inventor. I had some follow-on ideas to it, and those were put in my name and her name [in the patent applications]."

Tannenbaum said his wife wouldn't be able to do a direct interview. He declined to say what the financial arrangements were when the patent was transferred to Intellectual Ventures. Asked if he thought that it was a problem that such a basic idea could be patented, Tannenbaum also declined to comment. He wouldn't say whether he and his wife were continuing to invent and patent their inventions.

Patent office records suggest they are. Google's patent search indicates Mary Tannenbaum is listed as the inventor on at least 17 patents in a range of technologies, while David Tannenbaum is an inventor on 21 issued patents. The couple puts their patents into a holding company called Union Beach LP. They co-created a patent relating to GPS tracking, and Mary Tannenbaum holds a patent describing a "traveler's package pick-up and delivery service."

Add one “advanced Internet interface,” one charity patent

The application leading to the '137 patent, which has significantly broader language than the original, appears to have been filed after the sale to IV. It was assigned to Niaco Data Management, an IV-controlled shell company, rather than the Tannenbaums' company Union Beach LP.

The inventor of the '382 patent, which claimed essential Web functionality, is also a patent lawyer. Gerald Halt practices at a Philadelphia IP law firm, Volpe and Koenig, where he is also firm president. Before he was a patent lawyer, he worked for six years at the Philadelphia Electric Company. His resume does not suggest any technical work in finance or software. Halt didn't respond to interview requests.

Halt's patent, which he wrote and prosecuted himself, contains breathless prose about the Internet ("a global computer network that is rapidly changing the landscape of the business community") combined with the promise of "an advanced Internet interface" between users and providers.

It's essentially a description of how providers could tailor their websites according to information about the user. Other patent claims describe tailoring a website based on other changing variables. "As shown in FIG. 6, this or any other data stream may be tailored toward the time of day," wrote Halt in his patent. "This will give the information user the pleasing experience that the Web page is 'fresh.'"

Halt's patent was filed in 2004, but claims priority to earlier applications, filed in 1998 and 1999.

Three other IV patents were dropped from the case at earlier stages of the litigation. One of them, No. 6,182,894, originated with research at American Express. IV lawyers said it covered the use of the three-digit CVV security codes on the back of credit cards, but in January they submitted a motion in which they "recognize that the claims, as written, are at risk of being found invalid," and withdrew the patent.

Of course, some commentators wondered how a three-digit security code on the back of a credit card could be purchased at all. Perhaps in recognition of how terrible it would look suing over such a patent, AMEX donated the patent to a non-profit, the Consumer and Merchant Awareness Foundation (CMAF). The charity promised not to use the patent to sue "issuers, acquirers, merchants or consumers." In 2009, patent office records show CMAF sold the patent to Intellectual Ventures.

Another IV patent originated with a third individual inventor, while the fifth, said to cover no-envelope ATMs, originated with Kodak. Intellectual Ventures arranged the purchase of 1,100 Kodak patents in December 2012, several months before this suit was filed.