Third Circuit District Courts Take Aim at Non-Patent Eligible Patents Under § 101
In a pair of recent decisions issued just days apart, the District of Delaware and the District of New Jersey have found patents relating to online transaction guaranties and financial services to be non-patent eligible pursuant to 35 U.S.C. § 101. Practitioners may wish to take heed ….
In buySafe, Inc. v. Google, Inc., C.A. No. 11-1282-LPS, Dkt. 69 (D. Del. July 29, 2013) (Stark, J.), buySafe asserted its online transaction guaranty patent, and Google moved for judgment on the pleadings pursuant to Rule 12(c). Ultimately, Judge Stark of the Delaware District Court granted defendant’s motion on the grounds that the patent-in-suit was invalid under 35 U.S.C. § 101 because it is directed to non-patent-eligible subject matter. In so ruling, the Court noted that on the face of the patent, it described that the entire inventive process could be performed by a human. Moreover, the Court found that the patent “describes a well-known, and widely-understood concept — a third party guarantee for a sales transaction — and then applies that concept using conventional computer technology and the Internet. Merely using a computer to perform more efficiently what could otherwise be accomplished manually does not confer patent-eligibility.”
The following week, in Content Extraction and Transmission LLC v. Wells Fargo Bank, et al., No. 12-2501 (MAS)(TJB), Dkt. 64 (D.N.J. July 31, 2013) in a “Not For Publication” Memorandum Order, the District of New Jersey granted defendant’s motion to dismiss Content’s four financial services-related patents under Rule 12(b)(6), on the basis that the asserted patents claimed unpatentable subject matter. In doing so, Judge Shipp specifically rejected plaintiff’s argument that the motion was premature because claim construction had not taken place. Here, the Court specifically noted the Federal Circuit’s holding in Bancorp Servs., L.L.C. v. Sun Life Assur. Co. of Canada (U.S.), 687 F.3d 1266, 1273-1274 (Fed. Cir. 2012) that “claim construction is not an inviolable prerequisite to a validity determination under § 101.” The Court ruled that the “basic character of the claimed subject matter” was clearly evident without requiring claim construction, and this subject matter “encapsulate[d] invalid abstract ideas ….”
Of note, in both decisions, the courts applied the “machine-or-transformation” test set forth in In re Bilski, 545 F.3d 943, 954 (Fed. Cir. 2008), which is often used to scrutinize whether a claimed process patent passes initial muster as to subject matter eligibility, followed by additionally considering the “abstract nature of [the] claim” as described in CyberSource Corp. v. Retail Decisions, Inc., 654 F.3d 1366, 1371 (Fed. Cir. 2011). In the above decisions, the courts found that although the method claims at issue recited elements requiring participation by a computer or other machine, the machines did not play a significant role in performing the claimed methods and thereby did not place meaningful limits on claim scope. These findings provided each court with a basis for invalidation under both the “machine-or-transformation” and “abstract nature” tests.
As illustrated by these two decisions, a validity challenge under 35 U.S.C. § 101 to a computer-implemented business or data processing method may provide defendants with a substantial tool for obtaining early and favorable disposition in the early stages of a patent infringement case, or at the least, may be a viable challenge on summary judgment. Moreover, defendants to a patent suit qualifying under the Transitional Program for Covered Business Methods of the America Invents Act may alternatively or additionally challenge patent validity under 35 U.S.C. § 101 before the Patent Trial and Appeal Board (PTAB) of the U.S. Patent & Trademark Office . To defendants’ advantage, a successful petition may result in a stay of litigation until the trial before the PTAB has been completed.
The Gibbons IP Law Alert will continue to monitor and report on notable decisions from the district courts and PTAB regarding validity challenges under 35 U.S.C. § 101.