1 November 2014
What a difference six months can make. A two-judge panel of the U.S. Court of Appeals for the Federal Circuit ruled in September that a method for guaranteeing online financial transactions is not patent-eligible under Section 101 of the Patent Act. Suddenly the abstract idea test is becoming concrete.
Although BuySAFE v. Google reads as a routine application of settled law, just six months ago the case prompted a stormy argument session that pointed toward another in a long line of divisive Section 101 rulings from the Federal Circuit. But a lot has happened since then. The U.S. Supreme Court issued its 9-0 decision in Alice v. CLS Bank, and Chief Judge Randall Rader, a passionate critic of Supreme Court Section 101 jurisprudence, has retired from the Federal Circuit.
Rader had led the charge against Google at the argument in March. "I think if you win on this case, Google loses its page rank patent," Rader warned Mayer Brown partner Andrew Pincus at one point. Pincus said that the Section 101 precedents were on Google's side in both instances, prompting another blast from Rader.
"You say 101, but of course you're not talking about 101, are you?" the judge said. "You mean the judicial exception to 101. … If we just apply the statute, you lose."
"[Section] 101 as it has been interpreted by the Supreme Court," Pincus acknowledged.
But all of that skirmishing was absent from the September decision, as was Rader himself, who resigned in June, just a few days before the Supreme Court issued its Alice decision. With Judges Richard Taranto and Todd Hughes agreeing that Alice controlled, the court issued a no-frills 2-0 decision, saying BuySAFE's patented method "is not even arguably inventive."
"Given the new Supreme Court authority in this delicate area, and the simplicity of the present case under that authority, there is no need to parse our own precedents here," Taranto wrote.BuySAFE bills itself as a leading guarantor of online transactions. The company patented a computerized process for guaranteeing such transactions, but not everyone was impressed. U.S. District Judge Leonard Stark of Delaware ruled for Google in 2013, saying 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 computer technology and the Internet."
Before the Federal Circuit, Schiff Hardin partner Stephen Hankins argued for eligibility because computers are "primary and central" to the technology. But Pincus argued that BuySAFE was trying to patent an abstract idea. He said the concept of performance guarantees is "an abstract idea at its core," similar to the financial hedging concept that the Supreme Court ruled ineligible in 2010's Bilski v. Kappos.
Rader disagreed vehemently, and at one point Judge Hughes seemed to side with him. "I don't want to call it an abstract idea, because I don't think it is," Hughes said, preferring to label it "a notion."
The jousting ended with Rader raising the issue of Google's page rank. "It's something you could do on a pad and paper," Rader said. If Rader was preparing a dissent, we'll never see it. He left a handful of cases unfinished on leaving the court. Around the same time, the Supreme Court ruled in Alice that tying an abstract concept to conventional computer programming does not confer patent eligibility.
For Taranto and Hughes, two of the newest members of the court, Alice made the BuySAFE decision relatively simple. The financial guarantee is an abstract idea under Bilski, Taranto wrote, and the invocation of computers adds no inventive concept under Alice.
"In short," Taranto concluded, "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."
Reprinted with permission from the 1 Novermber 2014 edition of Corporate Counsel © 2014 ALM Properties, Inc. All rights reserved. Further duplication without permission is prohibited.”