Buysafe, Inc. v. Google, Inc. ( 2014 )

United States Court of Appeals
for the Federal Circuit
______________________
BUYSAFE, INC.,
Plaintiff-Appellant,
v.
GOOGLE, INC.,
Defendant-Appellee.
______________________
2013-1575
______________________
Appeal from the United States District Court for the
District of Delaware in No. 11-CV-1282, Judge Leonard P.
Stark.
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Decided: September 3, 2014
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STEPHEN M. HANKINS, Schiff Hardin LLP, of San
Francisco, California, argued for plaintiff-appellant. With
him on the brief was ALISON L. MADDEFORD. Of counsel
on the brief were BRIAN D. SIFF and JAMES E. HANFT, of
New York, New York, and DONALD E. STOUT, Antonelli,
Terry, Stout & Kraus, LLP, of Arlington, Virginia.
ANDREW J. PINCUS, Mayer Brown, LLP, of Washing-
ton, DC, argued for defendant-appellee. With him on the
brief were BRIAN A. ROSENTHAL, ANN MARIE DUFFY, and
PAUL W. HUGHES. Of counsel on the brief were A. JOHN P.
2 BUYSAFE, INC. v. GOOGLE, INC.
MANCINI and ALLISON LEVINE STILLMAN, of New York,
New York.
______________________
Before TARANTO and HUGHES, Circuit Judges. *
TARANTO, Circuit Judge.
This case involves claims directed to creating familiar
commercial arrangements by use of computers and net-
works. The district court held the asserted claims invalid
because they cover subject matter ineligible for patenting
under 35 U.S.C. § 101. buySAFE, Inc. v. Google, Inc., 964
F. Supp. 2d 331 (D. Del. 2013). Under the approach to
section 101 affirmed by the Supreme Court in the recent
decision in Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S.
Ct. 2347 (2014), the district court’s holding is correct.
BACKGROUND
U.S. Patent No. 7,644,019, owned by buySAFE, Inc.,
claims methods and machine-readable media encoded to
perform steps for guaranteeing a party’s performance of
its online transaction. In 2011, buySAFE sued Google,
Inc., in the District of Delaware, alleging that Google
infringes claims 1, 14, 39, and 44 of the ’019 patent.
Google moved for judgment on the pleadings, arguing that
the asserted claims are invalid under 35 U.S.C. § 101.
Claim 1 is an independent method claim, with claim
14 dependent on it. Claim 39 is an independent claim to a
computer-readable medium encoded with instructions to
carry out the Claim 1 method, with claim 44 a dependent
claim bearing the same relation to claim 39 as claim 14
does to claim 1. The parties agreed that the analysis of
* Randall R. Rader, who retired from the position of
Circuit Judge on June 30, 2014, was a member of the
panel but did not participate in this decision.
BUYSAFE, INC. v. GOOGLE, INC. 3
claims 1 and 14 would control the analysis of claims 39
and 44, so we discuss only the method claims here.
Claim 1 recites a method in which (1) a computer op-
erated by the provider of a safe transaction service re-
ceives a request for a performance guarantee for an
“online commercial transaction”; (2) the computer pro-
cesses the request by underwriting the requesting party
in order to provide the transaction guarantee service; and
(3) the computer offers, via a “computer network,” a
transaction guaranty that binds to the transaction upon
the closing of the transaction. Specifically:
1. A method, comprising:
receiving, by at least one computer application
program running on a computer of a safe transac-
tion 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 com-
mercial 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.
Claim 14 narrows the claim 1 method to a guaranty “in
one form of: a surety bond; a specialized bank guaranty; a
4 BUYSAFE, INC. v. GOOGLE, INC.
specialized insurance policy; and a safe transaction guar-
anty.”
The district court granted Google’s motion for judg-
ment on the pleadings, holding that the asserted claims
fall outside section 101. The court concluded that the
patent “describes a well-known, and widely-understood
concept—a third party guarantee of a sales transaction—
and then applied that concept using conventional comput-
er technology and the Internet.” buySAFE, 964 F. Supp.
2d at 335–36. It makes no difference, the court added,
that the guarantee of the underlying transaction attaches
only when that transaction closes. Id. at 336. Moreover,
the claimed computer “is used only for processing—a basic
function of any general purpose computer.” Id. Finally,
the court explained, the claims “do not require specific
programming” and are not “tied to any particular ma-
chine.” Id. In these circumstances, the court ruled, the
claims are outside section 101.
We have jurisdiction over buySAFE’s appeal under 28
U.S.C. § 1295(a)(1). We review the grant of judgment on
the pleadings de novo. See Allergan, Inc. v. Athena Cos-
metics, Inc., 640 F.3d 1377, 1380 (Fed. Cir. 2011); M.R. v.
Ridley School Dist., 744 F.3d 112, 117 (3d Cir. 2014).
DISCUSSION
The Supreme Court has “interpreted § 101 and its
predecessors . . . for more than 150 years” to “‘contain[] an
important implicit exception: Laws of nature, natural
phenomena, and abstract ideas are not patentable.’”
Alice, 134 S. Ct. at 2354, quoting Association for Molecu-
lar Pathology v. Myriad Genetics, Inc., 133 S. Ct. 2107,
2116 (2013) (further internal quotation marks and brack-
ets omitted). Under that interpretation, laws of nature,
natural phenomena, and abstract ideas, no matter how
“[g]roundbreaking, innovative, or even brilliant,” Myriad,
133 S. Ct. at 2117, are outside what the statute means by
“new and useful process, machine, manufacture, or com-
BUYSAFE, INC. v. GOOGLE, INC. 5
position of matter,” 35 U.S.C. § 101. See Alice, 134 S. Ct.
at 2357; Myriad, 133 S. Ct. at 2116, 2117.
In identifying the three types of excluded matter, the
Court has explained that the underlying “concern” is
“‘that patent law not inhibit further discovery by improp-
erly tying up the future use’ of these building blocks of
human ingenuity.” Alice, 134 S. Ct. at 2354, quoting
Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132
S. Ct. 1289, 1301 (2012). The Court has invoked the
concern to justify and inform understanding of, but not to
identify section 101 exclusions beyond, the three recog-
nized categories.
In defining the excluded categories, the Court has
ruled that the exclusion applies if a claim involves a
natural law or phenomenon or abstract idea, even if the
particular natural law or phenomenon or abstract idea at
issue is narrow. Mayo, 132 S. Ct. at 1303. The Court in
Mayo rejected the contention that the very narrow scope
of the natural law at issue was a reason to find patent
eligibility, explaining the point with reference to both
natural laws and one kind of abstract idea, namely,
mathematical concepts.
[O]ur cases have not distinguished among differ-
ent laws of nature according to whether or not the
principles they embody are sufficiently narrow.
See, e.g., [Parker v.] Flook, 437 U.S. 584 [(1978)]
(holding narrow mathematical formula unpatent-
able). And this is understandable. Courts and
judges are not institutionally well suited to mak-
ing the kinds of judgments needed to distinguish
among different laws of nature. And so the cases
have endorsed a bright-line prohibition against
patenting laws of nature, mathematical formulas
and the like, which serves as a somewhat more
easily administered proxy for the underlying
‘building-block’ concern.
6 BUYSAFE, INC. v. GOOGLE, INC.
Mayo, 132 S. Ct. at 1303.
Based on the three implicit exclusions, the Court has
created a framework for identifying claims that fall out-
side section 101. Alice, 134 S. Ct. at 2355; Mayo, 132 S.
Ct. at 1296–97. A claim that directly reads on matter in
the three identified categories is outside section 101.
Mayo, 132 S. Ct. at 1293. But the provision also excludes
the subject matter of certain claims that by their terms
read on a human-made physical thing (“machine, manu-
facture, or composition of matter”) or a human-controlled
series of physical acts (“process”) rather than laws of
nature, natural phenomena, and abstract ideas. Such 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 (internal quotation marks
omitted); see Mayo, 132 S. Ct. at 1294, 1299, 1300. This
two-stage inquiry requires examination of claim elements
“both individually and ‘as an ordered combination.’”
Alice, 134 S. Ct. at 2355.
Several decisions of the Court have involved the “ab-
stract idea” category, which is at issue here. Two aspects
of those decisions are important for present purposes:
what type of matter the Court has held to come within the
category of “abstract idea”; and what invocations of a
computer in a claim that involves such an abstract idea
are insufficient to pass the test of an inventive concept in
the application of such an idea.
As to the first question: The relevant Supreme Court
cases are those which find an abstract idea in certain
arrangements involving contractual relations, which are
intangible entities. Bilski v. Kappos, 561 U.S. 593 (2010),
BUYSAFE, INC. v. GOOGLE, INC. 7
involved a method of entering into contracts to hedge risk
in commodity prices, and Alice involved methods and
systems for “exchanging financial obligations between two
parties using a third-party intermediary to mitigate
settlement risk,” Alice, 134 S. Ct. at 2356. More narrow-
ly, the Court in both cases relied on the fact that the
contractual relations at issue constituted “a fundamental
economic practice long prevalent in our system of com-
merce.” Bilski, 561 U.S. at 611; see Alice, 134 S. Ct. at
2356, 2357.
In simultaneously rejecting a general business-
method exception to patent eligibility and finding the
hedging claims invalid, moreover, Bilski makes clear that
the recognition that the formation or manipulation of
economic relations may involve an abstract idea does not
amount to creation of a business-method exception. The
required section 101 inquiry has a second step beyond
identification of an abstract idea. If enough extra is
included in a claim, it passes muster under section 101
even if it amounts to a “business method.”
As to the second question: The Court in Alice made
clear that a claim directed to an abstract idea does not
move into section 101 eligibility territory by “merely
requir[ing] generic computer implementation.” Alice, 134
S. Ct. at 2357. 1 In so holding, the Court in Alice relied on
1 The Court in Alice noted that in Diamond v.
Diehr, 450 U.S. 175 (1981), the patent applicants added
more than a computer to a mathematical equation in
claiming an arguably “inventive application” in the tech-
nology of curing synthetic rubber. 134 S. Ct. at 2358
(internal quotation marks omitted). Diehr explains that
the claimed contribution to the art was the step of “con-
stantly measuring the actual temperature inside the
mold” for the synthetic rubber products. 450 U.S. at 178,
179 n.5.
8 BUYSAFE, INC. v. GOOGLE, INC.
Mayo for the proposition that “ ‘[s]imply appending con-
ventional steps, specified at a high level of generality,’
was not ‘enough’ to supply an ‘ “inventive concept.” ’ ” Id.
(quoting Mayo, 132 S. Ct. at 1300, 1297, 1294). Neither
“attempting to limit the use of [the idea] to a particular
technological environment” nor a “wholly generic comput-
er implementation” is sufficient. Id. at 2358 (internal
quotation marks omitted). The Court found nothing
sufficient in Alice Corp.’s claims.
The Court explained that the method claims in Alice
invoke “the use of a computer to create electronic records,
track multiple transactions, and issue simultaneous
instructions,” id. at 2359; “electronic recordkeeping,” id.;
and “the use of a computer to obtain data, adjust account
balances, and issue automated instructions,” id. They “do
not, for example, purport to improve the functioning of the
computer itself. See [CLS Bank Int’l v. Alice Corp. Pty.
Ltd., 717 F.3d 1269, 1286 (Fed. Cir. 2013) (Lourie, J.,
concurring)] (‘There is no specific or limiting recitation of
. . . improved computer technology . . .’); Brief for United
States as Amicus Curiae 28–30.” Alice, 134 S. Ct. at 2359.
They do not “effect an improvement in any other technol-
ogy or technical field,” and they merely invoke “some
unspecified, generic computer.” Id. at 2359–60. The
system claims in Alice are “no different,” the Court added,
explaining that they invoke a “‘data processing system’
with a ‘communications controller’ and ‘data storage
unit,’” which are “purely functional and generic” compo-
nents for “performing the basic calculation, storage, and
transmission functions required by the method claims.”
Id. at 2360. Finally, the Court viewed the claims to a
computer-readable medium for the methods as indistin-
guishable for section 101 purposes. Id.
Given the new Supreme Court authority in this deli-
cate area, and the simplicity of the present case under
that authority, there is no need to parse our own prece-
dents here. The claims in this case do not push or even
BUYSAFE, INC. v. GOOGLE, INC. 9
test the boundaries of the Supreme Court precedents
under section 101. The claims are squarely about creat-
ing a contractual relationship—a “transaction perfor-
mance guaranty”—that is beyond question of ancient
lineage. See Willis D. Morgan, The History and Econom-
ics of Suretyship, 12 Cornell L.Q. 153 (1927). The de-
pendent claims’ narrowing to particular types of such
relationships, themselves familiar, does not change the
analysis. This kind of narrowing of such long-familiar
commercial transactions does not make the idea non-
abstract for section 101 purposes. See Mayo, 132 S. Ct. at
1301. The claims thus are directed to an abstract idea.
The claims’ invocation of computers adds no inventive
concept. The computer functionality is generic—indeed,
quite limited: a computer receives a request for a guaran-
tee and transmits an offer of guarantee in return. There
is no further detail. That a computer receives and sends
the information over a network—with no further specifi-
cation—is not even arguably inventive. The computers in
Alice were receiving and sending information over net-
works connecting the intermediary to the other institu-
tions involved, and the Court found the claimed role of the
computers insufficient. See also CyberSource Corp. v.
Retail Decisions, Inc., 654 F.3d 1366, 1370 (Fed. Cir.
2011) (use of Internet to verify credit-card transaction
does not add enough to abstract idea of verifying the
transaction). And it likewise cannot be enough that the
transactions being guaranteed are themselves online
transactions. At best, that narrowing is an “attempt[] to
limit the use” of the abstract guarantee idea “to a particu-
lar technological environment,” which has long been held
insufficient to save a claim in this context. See Alice, 134
S. Ct. at 2358; Mayo, 132 S. Ct. at 1294; Bilski, 561 U.S.
at 610–11; Diehr, 450 U.S. at 191.
In short, with the approach to this kind of section 101
issue clarified by Alice, it is a straightforward matter to
conclude that the claims in this case are invalid.
10 BUYSAFE, INC. v. GOOGLE, INC.
CONCLUSION
For the foregoing reasons, we affirm the judgment of
the district court.
AFFIRMED