The Software IP Report

Digital Gift Certificates Fail Alice Patent-Eligibility Test

By Charles Bieneman

Categories: Patent Eligibility, Software Patents, The Software IP Report

Patent claims directed to electronic gift certificates are not patent-eligible under 35 U.S.C. § 101 and the Alice/Mayo test, according to a US magistrate judge’s recommendation to grant a Rule 12(b)(6)  motion to dismiss. Coqui Technologies, LLC v. Gyft, Inc.No. 17-777-CFC-SRF (D. Del. Nov. 16, 2018). The court found that claims of U.S. Patent No. 7,580,864, entitled “Method for circulating an electronic gift certificate in online and offline system,” were “directed to the abstract idea of selling, gifting, and using electronic gift certificates” without an additional inventive concept.

Claim 1 of the ’864 patent recites:

1. A gift certificate service system for managing sales, gifting, and usage of electronic gift certificates according to a request by a user’s communication terminal through a wired network, wireless network, or both, comprising:

a gift certificate service server for managing purchase, gifting, and usage operations on the electronic gift certificates from the communication terminal;

a gift certificate database, accessed by the gift certificate service server, for storing electronic gift certificate information prior to transferring the gift certificate to a transferee, and processing a reply to an inquiry of electronic gift certificate usage from the gift certificate service server; and

a network server, accessed by the gift certificate service server and accessed by the user’s communication terminal through the wired network, wireless network, or both, for performing a client interface function with the purchase, gifting, and usage of the electronic gift certificates, and transmitting the user’s gift certificate purchase particulars and gift certificate information for usage of the corresponding gift certificate to the communication terminal,

wherein the electronic gift certificate is a multimedia message including barcode data, wherein the network server is responsive to use of the electronic gift certificate occasioned by displaying the barcode data on the communication terminal, and wherein the electronic gift certificate information stored by the gift certificate database includes at least one of a gifting history of the gift certificates or a usage history of the gift certificates.

The patent owner argued that the ’864 patent claims recite “patent eligible material unique to the Internet” based on the recitation of receiving a barcode, and tracking use of specific electronic gift cards. But the court, starting with the preamble of claim 1, agreed that the claims “relate to the abstract idea of selling, gifting, and using electronic gift certificate.” All of the limitations of claim 1, as well as of dependent claims, including to the recited servers and database, referred back to this functionality.

Moreover, “use of gift certificates is a long-standing, fundamental economic practice,” and electronic gift certificates had been used in many contexts. The ’864 claims could be found to be abstract even though they applied “Internet and computer components to the commercial practice of electronic gift certificates,” just as automated commercial practices were found patent-ineligible in Alice, Cybersource Corp. v. Retail Decisions, Inc. (Fed. Cir. 2011), and buySAFE, Inc. v. Google, Inc. (Fed. Cir. 2014). In contrast to Enfish LLC v. Microsoft Corp. (Fed. Cir. 2016), the present claims did not improve operation of a computer. Alleged security benefits could not save the claims because these benefits could have been achieved by a human with pen and paper.

Turning to the second prong of the patent-eligibility test, there was no significant innovation because the patent claims merely recited generic components functioning and conventional ways. Bascom Global Internet Services, Inc. v. AT&T Mobility LLC (Fed. Cir. 2016) was distinguishable because there filtering software was located in a way that constituted an innovative concept, whereas here the ’864 patent “does not describe the order or combination of generic components in a non-generic arrangement.” Likewise, citing, Secured Mail Solutions LLC, v. Universal Wilde, Inc. (Fed. Cir. 2017), the court explained that using “barcodes, MMS messages, and devices with Internet access . . . for circulating electronic gift certificates is not in inventive concept.”  Moreover, citing OIP Techs., Inc. v., Inc. (Fed. Cir. 2015), the court stated that the claims could not be saved merely because they did not preempt the field of electronic gift certificates; lack of preemption does not necessarily confer patent-eligibility.

Lessons for Practice

The application for the ’864 patent was filed in 2003 , and was drafted in a way that probably made sense at the time. Today, however, the patent illustrates the perils of describing and claiming implementations of those methods. Assuming that the magistrate’s recommendation stands, the patent owner will certainly wish it could have stricken the preamble to claim 1. But hindsight is 2020. Looking forward, patent practitioners can use this case is an illustration of why patent applications drafted today should avoid or minimize reference to business methods, should frame technical problems and solutions, and, where possible, should specifically point out where novel and advantageous technical architectures are disclosed and claimed.