Buysafe, Inc. v. Google, Inc.

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