IP Alerts

September 4, 2014

In its first post-Alice precedential decision on statutory subject matter, the Court of Appeals for the Federal Circuit, in buySAFE, Inc. v. Google, Inc., held that the patent claims under consideration were invalid as being directed to unpatentable subject matter under 35 U.S.C. 101. This case marks a new precedential decision applying the recent Alice Corp. Pty. Ltd. v. CLS Bank Int’l case to software-based technology. (See related Fitch Even IP Alert.)

In the lawsuit, the plaintiff, buySAFE, Inc., asserted certain claims of U.S. Patent No. 7,644,019 against Google, Inc. Claim 1 of the ’019 patent recites:

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.

The district court held that the claims were directed to unpatentable subject matter under 35 U.S.C. 101. Plaintiff buySAFE appealed.

On appeal, the court acknowledged that the case was governed by the Supreme Court’s Alice decision. As the Federal Circuit observed, Alice held that a patent claim that “directly reads on matter” in one of three excluded categories—laws of nature, natural phenomena, and abstract ideas—is outside the purview of the patent statute. The court further read the Alice case as holding that a claim also will fall outside the ambit of section 101 if it is “directed to” matter in one of these three excluded categories and if “‘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.”

Applying this reasoning to the asserted claims, the Federal Circuit held that the claims are “about creating a contractual relationship—‘a transaction performance guarantee’—that is beyond question of ancient lineage.” Accordingly, the Federal Circuit held that the claims were “directed” to an abstract idea similar to the financial transaction-related claims addressed in Alice. The court then determined that the claims’ recitations regarding computers did not amount to a recitation of something more than generic application of a known method in a known computer environment. Specifically, the court observed that the recited computers were generic and operated over a network without further specification of the parameters of the network or computers.

Other asserted claims in the buySAFE patent were drawn to a computer-readable medium. The parties had stipulated that the analysis of the method claims would control the analysis of these claims. Accordingly the court affirmed the invalidity holding for these claims as well.

As the precedent builds around the Alice decision, at least two aspects of this case are noteworthy. First, the Federal Circuit expressly hinged its analysis on whether the recited computer aspects were “inventive,” indicating consideration of novelty or innovation in the analysis of subject matter eligibility. This approach of considering “inventiveness” in the context of a subject matter eligibility analysis had been criticized in cases predating the Alice decision. Second, as in a recent nonprecedential decision addressing subject matter eligibility under Alice (Planet Bingo, LLC v. VKGS LLC), the Federal Circuit did not apply an element-by-element analysis such as the one performed in the Alice decision. 

Fitch Even attorneys will watch to see if these trends continue in further decisions following Alice.

For more information, please contact Fitch Even partner Nicholas T. Peters, the author of this alert.

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