Boom! You Can’t Patent an Escrow Method

Boom! Payments, Inc. v. Stripe, Inc. (Fed. Cir. 2021)

I used to play golf fairly regularly and got into the habit of announcing “BOOM!” on every drive.  It didn’t help my game.  BOOM!’s great name here also didn’t save its patent from dancing the Alice Two Step. (Note: I was 15 years old at the time–on my high-school freshman team getting free-rounds for the season). 

This case is another affirmance of a dismissal for lack of patent eligibility. Under Alice/Mayo, the Supreme Court’s patent eligibility analysis is a two step process.  At Step 1, the court asks whether the claims at issue are “directed to” a patent-ineligible concept, such as an abstract idea. Claims that fail Step 1 can be saved by Step 2, looks for “something more” beyond the ineligible concept sufficient to transform the claim’s nature into a patent eligible invention.

The claims at issue here are somewhat similar to the exchange-settlement process found ineligible in Alice. In particular, Boom’s patents all claim “methods for confirming that a transaction has been consummated prior to releasing electronic payment.”  U.S. Patents 8,429,084; 9,235,857; and 10,346,840. The ‘840 patent issued June 2019 and so the PTO should have gotten this one right.  The examiner initially rejected claims 1 as ineligible (then listed as claim 21).  The patentee made several minor “clarifying amendments” and the examiner then allowed the case.  In its reasons for allowance, the examiner wrote the following:

The claims as amended have been analyzed under 35 U.S.C.101, and although directed at some level to an abstract idea, confirming that a proposed sale transaction has been consummated, the claims as currently amended are found to integrate the abstract idea into a practical application sufficiently that they are patent-eligible under §101.  They do not amount merely to having a computer apply an abstract idea, or using communication between computers to carry out a commercial interaction that could plausibly be done without computers or telecommunication (“could not plausibly be done” does not require that there be no conceivable parallel without computers or telecommunication).

93219_16212317_05-23-2019_NOA.  Claim 1 is pretty long, but it is directed to a computer system “for confirming that a proposed sale transaction has been consummated.”  The system is programmed to do the following:

  • Receive/store a buyer’s payment information;
  • Receive a request from the buyer to purchase an item from an online store;
  • Generate a “transaction-specific buyer acceptance identifier” using human-readable characters
  • Provide the TSBA identifier to the buyer’s computer who apparently provides it to the seller when purchasing.
  • Receive from a seller an identifier of the transaction (as well as the buyer and seller identities);
  • Compare the transaction and identity information;
  • If everything corresponds, then charge an account associated with the buyer.

This is basically a passcode system or checksum.

In its decision, the district court found the claims directed to the abstract idea of authenticating sales through the use of a third-party intermediary, and without any sufficient additional inventive concept.  On appeal, the Federal Circuit affirmed:

Boom argues that the claims are not directed to an abstract idea, but rather to a technological improvement over prior art systems for confirming and processing online payments. Specifically, Boom argues that the elements of the claims provide specific steps for processing an online payment, and therefore are not directed to the general concept of escrow. . . .

We agree with Stripe that the claims are directed to the abstract idea of payment escrow. They only describe steps of passing information back and forth by a computer. The very purpose of the patents, as explained in the written description, is verifying consummation of a transaction before releasing payment by a third party, which is the definition of escrow. . . . Indeed, the claims are reminiscent of those at issue in Alice.

Slip Op.

The patentee also disputed whether the case was properly dismissed at the pleading stage. Although eligibility is a question of law, some aspects of the determination may require a fact-finder to consider evidence (and thus creating a genuine issue of material fact that precludes dismissal on the pleadings). Here, the patentee particularly amended its complaint to allege that the claimed invention was not routine or conventional at the time of the invention. On appeal, the Federal Circuit disregarded those statements as conclusory because they were not supported by particularly “plausible factual allegations.”

Drilling-in on this, the complaint makes the following allegations:

The particularized manner in which the ‘transaction specific buyer acceptance identifier’ and ‘transaction consummation completion identifier’ of the claims of the Asserted Patents are generated, stored, used, and related to other identifiers was not well-understood, routine, or conventional at the time of Mr. Bogaard’s inventions.

The Federal Circuit identifies the assertion here as conclusory and thus gives it no weight in determining whether the complaint generates disputed material facts.  This is a bit odd since we’re asking the patentee to prove a negative, but perhaps the patentee could have cited to the reasons-for-allowance within the complaint itself or submitted an affidavit from an expert on-point as an attachment to the complaint.  At that point though we’re getting pretty far from the “short and plain statement of the claim” required by Fed. R. Civ. Pro. 8.

28 thoughts on “Boom! You Can’t Patent an Escrow Method

  1. 9

    This is basically a passcode system or checksum.

    and this is basically a Gist and bypass of looking at the claim as a whole.

    But I will point out a “Better Practice” tip:

    Do more with your system claims than merely have a computer doing your method claims.

    Method claims can “get away with” not having computing elements affirmatively claimed.

    Leverage the affirmatively claimed physical elements of an actual system.

    1. 9.1

      For some case outcome research based “better practice” advice on how to write software related patent claims see on Gene’s blog “Drawing Software Patent Drafting Guidance in 2021 from an Unlikely Source: the Federal Circuit” By Michael Messinger on Jan 13, 2021 12:15 pm”

  2. 8

    This case illustrates that the USPTO Subject Matter Guidelines (January 2019 and October 2019 update) are useless and a waste for everyone. This case, and many others where the Federal Circuit determined (or upheld) the claims to be invalid, illustrates that incorporating an abstract idea or other judicial exception into a practical application is not sufficient to pass 101 according to current case law. While it might have been a great idea in order to reduce the number of 101 rejections that Applicants faced, what use is an issued patent when the claims are not defensible in court? The Federal Circuit has even noted in at least two cases that they are not bound by the USPTO Guidelines. The Courts have screwed this up so badly that only Congressional action can fix it.

    1. 8.1

      >>that incorporating an abstract idea or other judicial exception into a practical application is not sufficient to pass 101 according to current case law.

      This, of course, is mumbo jumbo. There is absolutely no way a test could ever be made to test such a thing. Every invention can be said to include an abstract idea or judicial exception. Every single invention.

    2. 8.2

      Dvan,

      Only partially correct — and importantly, you miss the fact that you are only partially correct.

      There are numerous cases where your statement is flat out wrong.

      This reflects what I describe (and what leaders of every branch of the government have agreed to my description) as the Gordian Knot.

      The Supremes have made a mess of things (blame STARTS with them), and the CAFC and district courts have added much rope to the knot.

      1. 8.2.1

        … the Gordian Knot can be cut by more than one branch of the government (the Judicial and the Legislative).

        Sadly, neither branch appears to be willing to do so.

      2. 8.2.2

        Sadly anon the Scotus has not made a mess of it. They achieved exactly what they wanted.

        The CAFC can invalidate any claim they don’t like and do whatever they want. That was the point.

        1. 8.2.2.1

          I hear you – and I realize that I was too harsh with Dvan when I stated “and importantly, you miss the fact that you are only partially correct.

          That would better read that is important when others miss why the statement is only partially correct.

          1. 8.2.2.1.1

            Anon, I assume what you mean to say is that including a practical application in a claim is sometime sufficient and sometimes it isn’t with respect to pass 101. The problem I see with your assertion about being only partially correct is that for those cases that pass 101, there is seldom a decision that says “this has a practical application, so it has patent eligible subject matter.” The Federal Circuit is seldom that clear. It could easily be that the “something more” from Alice is more than just a practical application of the abstract idea, etc. It’s impossible to parse the exact reason that some claims pass 101 and others fail because the courts are inconsistent and all over the place. It is too dependent one which panel of Fed Cir judges or DC judge gets assigned to the case. Once in a while a specific judge on a specific case writes a good decision on the analysis, but that is the rare exception, not the rule. That’s also why I suggested that only Congress can fix the problem. Asking the courts (mainly the Supreme Court) to come up with a clear and easily applied manner to make the 101 determination seems (IMO) beyond them. Granted, Congress might not do any better, but at least they would get much broader input from a large number of sources that might lead to a better result.

            1. 8.2.2.1.1.1

              It’s impossible to parse the exact reason that some claims pass 101 and others fail because the courts are inconsistent and all over the place

              Very much true.

              And this is part and parcel of the score board being broken.

              Of course, FIXING the score board will take an ability to be inte11ectually honest and place the blame squarely (first, but by no means only) on the Supreme Court.

              That’s also why I suggested that only Congress can fix the problem.

              I have explained that this is simply not so. The Supreme Court could (and I do agree with you if you posit that they likely will not) take a pair of scissors (>i.e., a pair of Kavanaugh Scissors) to the Gordian Knot.

              seems beyond them

              That is because they have CHOSEN not to fix the problem. Make no mistake – this is a clear and conscience choice.

              but at least they would get much broader input from a large number of sources that might lead to a better result.

              On that note, I will vehemently disagree. One does not need a “much broader input.” One needs to understand innovation and innovation protection. There are FAR too many “Rational Actors” in that ‘much broader input’ that only too willingly will NOT seek the optimum innovation protection setup.

              We have immediate proof of this with the Trojan Horse and derailment of the lastSenate attempt to fis eligibility.

              NONE of this is new.
              ALL of this has long been on the table of discussion here and across the patent blogosphere.

  3. 7

    >>They only describe steps of passing information back and forth by a computer.

    So judges, what is your job? You process information received by you and generate opinions and orders. So a computer that performs your job by your case law is ineligible for patentability.

    1. 7.1

      In view of my comment above, the laws pertaining to actual method claims have somehow been re-written such that methods involving data processing steps are treated differently than methods involving non-data processing steps.

      This is a gross application of the Gist/Abstract sword, and completely ignores the fact that claims need to be taken as a whole and read in light of the specification.

      We (the Royal We) surreptitiously move the method steps to be — as a whole — entirely and only in the mind.

      Anyone being inte11ectually honest knows that the claims are not so designed. This is ALSO not a “statutory subject” prong of 101 issue (even though THAT is where the Supreme Court stuck their own scrivining). If in 101 at all, this would attach to the utility prong of 101.

  4. 6

    Not surprising. Banking and hedge funds won’t let you patent anything in their field. Alice, KSR, etc. my advice is don’t waste your money trying to patent here ideas. Make them trade secrets.

    1. 6.1

      How ya gonna make a trade secret out of a process that’s only valuable because it’s users understand what it is doing?

      101 is an accelerating mess and Alice is a useless test for eligibility. It may be useful for a first pass at 103/112…

      Until the materiality of information- or non materiality- is recognized as a character of utility, nothing good will come of this ever-increasing pile of arbitrary outcomes.

      1. 6.1.1

        It may be useful for a first pass at 103/112…

        Wow, is that pregnant with meaning (twins, even).

  5. 5

    Not surprising. US patent law is completely screwed because banks and hedge funds won’t let you patent anything in their field. KSR, Alice, etc.

  6. 4

    “The ‘840 patent issued June 2019 and so the PTO should have gotten this one right.”

    It should not be a surprise that the PTO reached a different conclusion from the CAFC. The PTO announced their open defiance of the Supreme Court in January 2019. The Examiner in this case relied on the magic Iancu words which the CAFC does not recognize. Acting like the PTO’s deliberate policy was a mistake doesn’t help.

    1. 4.1

      Another good comment from Ben. I feel something is wrong.

      1. 4.1.1

        You may have missed the “S”’sign Ben was holding up.

        He is not saying that the patent office got it right.

        He is criticizing what Iancu put forth.

        Of course, he does not grasp ALL of what Iancu put forth, or why he put it forth.

        He never has.

  7. 3

    . . . and yet another inventor loses their hard-earned, well-deserved invention . . . to the unconstitutional hubris of the CAFC.

    Congress, like Atlas, shrugged.

  8. 2

    Reportedly as soon as the PTO covered business patents post-grant system sunsetted last fall [ending 101 challenges that way] a bunch of these business method patents were filed in D.C.s. So there should be more cases like this coming from D.C.s.

  9. 1

    One cannot prove a negative, but one can create a contrast by describing what was well-understood, routine or conventional at the time of the invention. Statements like the following might have raised a fact issue:

    * At the time of the invention, there was no concept of a “transaction specific buyer acceptance identifier”.
    * At the time of the invention, a “transaction specific buyer acceptance identifier” could only be used for square dancing.

    I suspect that the above factual statements are false and sanctionably so, but those allegations are hard to dismiss as conclusory. Simply stating that the “[summary of claim] was not well-understood, routine, or conventional” is substantively the same as alleging that the claims are patent eligible.

    1. 1.2

      I suspect that the above factual statements are false and sanctionably so, but those allegations are hard to dismiss as conclusory.

      But then they are not genuine issues of fact, so that wouldn’t save you from summary judgement.

      1. 1.2.1

        I am pretty sure that he meant that the particular statements (as quick examples) would not qualify, but that merely something more than the assertion — some facts — would move the needle.

    2. 1.3

      Wow NS II said something reasonable.

      1. 1.3.1

        That was why I was quick to give him a plus one.

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