On January 13, 2021, the Court of Appeals for the Federal Circuit (CAFC) decided a non-precedential case, Boom Payments, Inc. v. Stripe, Inc. Despite being a non-precedential case, there are a few 35 USC §101 lessons that can be gleaned from the case.
The background is such that Boom Payments owned three patents: U.S. Patents 8,429,084 ("'084 patent”), 9,235,857 ("'857 patent”), and 10,346,840 ("'840 patent”). Boom believed Stripe and Shopify, Inc. (hereinafter "Stripe") to be infringing on the patents and asserted their rights. Generally, the patents are directed towards an e-Commerce solution that allows a purchaser to submit payment information to the online hosting service (e.g., Craigslist) without the transaction being finalized until the purchaser has a chance to examine and accept the goods as satisfactory. In order to finalize the transaction, the purchaser's device generates a unique identifier, which can be transferred to the seller to redeem the identifier for payment.
During its Alice Two-Step Analysis, the district court determined that the patents were directed to computerized escrow (i.e., an abstract idea), and then dismissed Boom's lawsuit under a Rule 12(b)(6) motion. There are problems with dismissing one or more patents that have been challenged under §101 using Rule 12(b)(6) motions (e.g., as discussed in this Patently-O article), which are only briefly be discussed below.
One problem with the case that I would like to discuss in more detail is illustrated by the dicta provided by the CAFC in reaching its determination of invalidity. During the appeal to the CAFC, Boom argued that the claims were not directed to an abstract idea but were directed to a technological improvement of systems for making computerized payments. Alternatively, Stripe argued that the representative claims were routine or conventional and did not include an inventive step. The CAFC agreed with Stripe and in dicta said, "But use of an identification code known only to the buyer and the third party to verify a transaction could be performed just as readily without the use of computers and cannot be said to be a 'technological' solution that improves the functioning of a computer system." This portion of the dicta provided by the CAFC is significant because when processes are able to be performed without the use of computers, then under the Alice Two-Step Analysis, it is a fairly good indicator that the proposed process/invention may be an abstract idea rather than a practical application of an inventive concept. (See, e.g., MPEP §2106.04(a)(2)(III)).
Taking a closer look at the representative claim used by the CAFC and the district court, we can see that the CAFC's reasoning as exemplified by the portion of the dicta above is likely incorrect. For example, the representative claim from the '840 patent is as follows:
1. An Internet-based computer system for confirming that a proposed sale transaction has been consummated, said Internet-based computer system including a payment processor system comprising at least one computer device programmed to:
receive a buyer’s payment information and store said payment information; prior to a sale of an at least one item associated with an online store of a seller to said buyer, receive, at said payment processor system, a request transmitted from a buyer computer device for said buyer to be able to purchase at least one item offered for sale by said online store;
in response to said request, generate a transaction-specific buyer acceptance identifier comprising a combination of human-readable characters;
provide said transaction-specific buyer acceptance identifier to said buyer computer device;
store in computer-accessible memory associated with said payment processor system a record comprising a relationship between said transaction-specific buyer acceptance identifier, a buyer-specific identifier, and a seller-specific identifier;
receive from a seller computer device an identifier of the transaction, an identifier of the buyer, and an identifier of the seller;
compare the identifier of the transaction with the transaction-specific buyer acceptance identifier;
compare the identifier of the buyer with the buyer-specific identifier;
compare the identifier of the seller with the seller-specific identifier; and
if said identifier of the transaction corresponds to the transaction-specific identifier, said identifier of the buyer corresponds to the buyer-specific identifier, and said identifier of the seller corresponds to the seller-specific identifier, charge an account associated with the buyer for an amount associated with the request to purchase at least one item offered for sale by said online store.
Admittedly, most of these steps could likely be performed without the use of a computer. However, as emphasized in bold and underlining, there is a step that includes creating a "...record comprising a relationship...." Relying on claim construction principles, one would have to look to the intrinsic record to determine the meaning of this step and the term "relationship".
In at least one embodiment, the specification describes the relationship as one between a random hash string, to identify the transaction, and both the buyer's cell phone and the seller's cell phone. This type of relationship cannot be done by pen and paper without the use of a computer.
Not knowing how much weight the CAFC placed on this factor, one cannot be sure how much error was actually committed. However, since this point does not seem to have been raised by Boom, one takeaway from this case is that in §101 cases, always emphasize functionality within a claim that cannot be performed using pen and paper. This helps to show that your invention is not merely a mental process and strengthens an argument (if made) that it is an improvement to a computer system.
Another takeaway can be gleaned from a second portion of the CAFC's dicta, where the Court said that the claims in this case were similar to those in Alice, which attempted to claim exchanging financial obligations between two parties using a third-party intermediary to mitigate settlement risk. The takeaway is this, if you're claiming a financial transaction that is in any way similar to the transaction found in Alice, then you'll have to work hard to differentiate your claims from those found in Alice.
The final takeaway is instead of only arguing substantively, one should also argue legal procedure. For example, Stripe attacked the substance of the claims under §101, saying that the claims included ineligible subject matter because the subject matter is merely routine and conventional, and Boom only argued in return that the claims were not routine and were not conventional. Boom should have also argued that the use of a Rule 12(b)(6) motion should be improper in a case where a federal agency (the USPTO) has already determined the patent claims to be valid, meaning that they already passed §101 scrutiny at least once. Therefore, Rule 12(b)(6), which preemptively dismisses the case before factual arguments are heard, should be improper.
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