BuySAFE, Inc. v. Google, Inc. and Loyalty Conversion Systems Corp. v. American Airlines, Inc.

Addressing subject matter eligibility of claims purporting to apply abstract mental processes directed to business transactions using computers, the U.S. Court of Appeals for the Federal Circuit affirmed the dismissal of the patentee’s method claims, finding the claims drawn to ineligible subject matter after finding a lack of “inventive concept” in any asserted claims.  BuySAFE, Inc. v. Google, Inc., Case No. 2013-1575 (Fed. Cir., Sept. 3, 2014) (Taranto, J.).  The same day, Judge Bryson, sitting by designation in the U.S. District Court for the Eastern District of Texas, dismissed a patentee’s transaction-based system and composition claims for the same reasons.  Loyalty Conversion Systems Corp. v. American Airlines, Inc., Case No. 2:13-CV-655 (E.D. Tex., Sept. 3, 2014) (Bryson, Cir. J., sitting by designation).

The alleged inventions in BuySAFE were directed to methods and machine-readable media encoded to perform steps for guaranteeing a party’s performance of its online transaction.  In analyzing the claims, the Court acknowledged the general categories of subject matter ineligibility: claims drawn to of laws of nature, natural phenomena and abstract ideas.  But, the Court emphasized that “Section 101 also excludes the subject matter of certain claims that by their terms read on a human-made physical thing (machine, manufacture, or composition of matter) or a human-controlled series of physical acts (process) …”  For example, “[s]uch 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.” For purposes of analysis, “[t]his two-stage inquiry requires examination of claim elements ‘both individually and ‘as an ordered combination.’”

The Federal Circuit in BuySAFE found that the claimed functionality of a computer receiving a request for a guarantee and transmitting an offer of guarantee in return with no further specification “is not even arguably inventive.”  Instead, it is “[a]t best, [a] narrowing [that] is an ‘attempt[] to limit the use’ of the abstract guarantee idea ‘to a particular technological environment,’ which has long been held insufficient to save a claim in this context.”

In Loyalty Conversion Systems, the asserted claims from two patents were directed to a system by which non-negotiable credits earned in an awards program (such as airline frequent flyer miles or hotel loyalty award points) can be converted into credits that can be used to purchase goods or services from a vendor other than the issuing entity, and a graphical user interface, such as a website, for performing such a conversion.  The court found that the claimed inventions were not fundamentally different from the kinds of commonplace financial transactions that were the subjects of the Supreme Court’s Bilski (IP Update, Vol. 13, No. 7) and Alice (IP Update, Vol. 17, No. 7) decisions and that the claims contained only functional limitations of the abstract idea.  The court found the claims did not provide detail describing how the functions associated with the conversion process are performed and that there is no suggestion that those functions are performed in any novel or unusual manner rather than routine functions that can readily be performed by a generic computer with conventional programming.  The court similarly dismissed the dependent claims finding that they added nothing of substance to the basic currency-conversion concept other than to provide that the steps of the currency conversion are performed by computers or various components thereof with enhanced speed and convenience.

The court further eschewed the claims for their preemptive effect caused by the broad functional limitations.  The court found that although the field of use is narrow—the conversion of one entity’s loyalty award points into those of another entity—the preemptive effect of Loyalty’s claims within that field of use is broad.  That is, all that is disclosed is the ultimate objective.  The court found that there was no disclosure of the precise method by which the computer performs those functions.  As a result, the claims would read on virtually any computerized method of performing that function, even if the method used were quite different from any conventional computer-based means.  For that reason, the court found that the asserted claims have the potential to foreclose future innovation disproportionately “relative to the contribution of the inventor.” 

The court provided a general characterization of patents similar to those asserted in Loyalty that would not be eligible for patenting noting that patent claims are not eligible if they recite methods for performing a commonplace business function—such as currency conversion, hedging or employing intermediated settlement in a financial transaction—typically by using a computer system or computer components to perform those methods;  if they are aspirational in nature in that they describe the business function, but do not describe any novel manner of performing that function other than referring to the use of routine operations performed by a specially programed computer; and if the recitations referring to the use of a computer do not include any inventive measure that “purport[s] to improve the functioning of the computer itself.”  The court described that the principal flaw in these patents is that they do not contain an “inventive concept” that solves practical problems and ensures that the patent is directed to something “significantly more than” the ineligible abstract idea itself.