Buysafe, Inc. v. Google, Inc.- Another Business Method Patent Invalidated

On September 3, 2014, the United States Court of Appeals for the Federal Circuit affirmed a lower court’s finding that the claims to a patent owned by buySAFE, Inc. are invalid under 35 U.S.C. section 101. Perhaps more significantly, the Court of Appeals used the approach recently affirmed by the United States Supreme Court in Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014) to reach the conclusion that the claims in buySAFE’s patent were drawn to merely abstract ideas and thus patent-ineligible.

The patent at issue in this case is U.S. Patent No. 7,644,019 (the ‘019 Patent), which claims a method (and computer-readable medium) directed to creating commercial arrangements by use of computers and networks- namely steps for guaranteeing a party’s performance of its on-line transactions. Claim 1, which was specifically asserted against Google, reads as follows:

 1. A method, comprising:

 receiving, by at least one computer application program running on a computer of a safe transaction service provider, a request from a first party for obtaining a transaction performance guaranty service with respect to an online commercial transaction following closing of the online commercial transaction;

 processing, by at least one computer application program running on the safe transaction service provider computer, the request by underwriting the first party in order to provide the transaction performance guaranty service to the first party,

 wherein the computer of the safe transaction service provider offers, via a computer network, the transaction performance guaranty service that binds a transaction performance guaranty to the online commercial transaction involving the first party to guarantee the performance of the first party following closing of the online commercial transaction.

 In providing an outline of the court’s analysis, the opinion lays out a basic framework, which the Court has created for identifying claims falling outside the scope of section 101 (citing Alice, 134 S. Ct at 2355; and Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289, 1301 (2012) at 1296-97. First, the Court notes the three basic categories excluded from patent eligibility under section 101: laws of nature, natural phenomenon, and abstract ideas are all categorically excluded from patent eligible subject matter. Then, the Court goes on to explain that there are certain claims that although by their very terms “read on a human-made physical thing (“machine, manufacture, or composition of matter”) or a human-controlled series of physical acts (“process”) rather than laws of nature, natural phenomena, and abstract ideas” must non-the-less be excluded because they fall outside section 101.

Basically, merely taking an abstract method, such as a method of performing some commercial transaction, and requiring the method be performed by a computer, will not make the abstract method a patent eligible method. In providing some guidance as to the legal analysis involved to determine whether a method is merely abstract, the Court cites Alice once again: “a claim falls outside section 101 if (a) it is ‘directed to’ matter in one of the three excluded categories and (b) ‘the additional elements’ do not supply an ‘inventive concept’ in the physical realm of things and acts—a ‘new and useful application’ of the ineligible matter in the physical realm—that ensures that the patent is on something ‘significantly more than’ the ineligible matter itself.  Alice, 134 S. Ct. at 2355, 2357.

In this case, the Court noted, the claims (e.g. claim 1 shown above) merely require that a computer is utilized for creating a contractual obligation to guarantee a commercial transaction. Because the claims’ invocation of computers adds no inventive concept, the claimed role of the computer medium is insufficient to take the claims outside the realm of exclusion under 101. Thus, the Court concluded that the ‘019 Patent is a straightforward example of invalid claims.

PRACTICE TIP: In light of the recent decisions, and particularly in the realm of so called business patents, it is important to look for details that may overcome the 101 exclusion. For example, a unique interface that facilitates the method and improves functionality of otherwise known technology, or unique systems implemented to achieve the method. Under the guidelines of cases such as Alice and Mayo, it’s not surprising to see more and more patents of this sort being invalidated, so it will be wise to consult with your client regarding these limits to patentability of their business methods.

If you, or your company, receive a cease-and-desist letter claiming infringement of a so-called business method patent, contact our patent attorneys. As we have outlined in other articles, recent new proceedings allow challenging these patents in a much more economically feasible alternative than litigation. For example, see our article on new trial proceeding at the USPTO, which include Inter Partes Review proceedings and the Transitional Program for Covered Business Method Patents (TPCBM); see also our article on inter partes review. Alternatively, give us a call and schedule a free consultation to briefly discuss your options.