The Software IP Report

Providing a Guaranty of Online Transactions Not Patent-Eligible, Says Delaware Court

By Charles Bieneman

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

Claims of a patent directed to “providing a guaranty service for online transactions” are not patent-eligible under 35 U.S.C. § 101, according to the court in Buysafe, Inc. v. Google Inc., C.A. No. 11-1282-LPS (D. Del. July 29, 2013). Accordingly, the court granted the defendant’s motion for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c).

Claim 1 of U.S. Patent No. 7,644,019 was representative:

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.

To determine whether the ’019 patent claims recited patentable subject matter, the court focused on the “machine-or-transformation” test.  The court acknowledged that this test was not the sole test for patentability.  Nonetheless, the court focused  on the “machine” prong as an application of the “abstract idea” test promulgated by the United States Supreme Court in Bilski v. Kappos, 130 S. Ct. 3218 (2010).

The ’019 patent dug itself a serious hole by stating “on its face . . . that the entire inventive process can be performed by a human.” In CyberSource Corp. v. Retail Decisions, Inc., 654 F.3d 1366 (Fed. Cir. 2011), patent claims directed to verifying a credit card over the Internet were held patent-ineligible.  Citing CyberSource, the court disagreed with the plaintiff here “that the claimed process is patent-eligible because it takes place online, and online transactions by definition require a computer.”

The court also rejected the plaintiff’s argument that the claims were patent-eligible because they required performing millions of transactions that could not practically be completed without a computer. The claims required only a general-purpose computer that performed basic processing functions, and did not recite any detail concerning the use of, or ascribe any significance to, the computer. Moreover, “the patent’s process would be performed exactly the same way by a person and by a computer, the only difference being that the computer performs the process significantly faster than a human.”

The court emphasized that its decision would have been the same even if the Federal Circuit had not reversed its panel decision in CLS Bank Int’l v. Alice Corp., 717 F.3d 1269 (Fed. Cir. 2013) (en banc). Even under the CLS Bank panel decision, the plaintiff had not shown “that the ’019 patent claims are directed to any specific way of using a computer to guarantee a safe transaction.” Instead, “the claims are directed to a method that just happens to be performed by a computer.”

Finally, after dispensing with the ’019 patent claims under the machine-or-transformation test, the court spent just a few sentences explaining that the claims failed the abstract idea test. Here, the “abstract – and, therefore, unpatentable – process” was that of “of underwriting commercial transactions by a third party to guarantee performance.”