PayPal, Apple Succeed in Scrapping Fintiv’s Patent Claims at CAFC

The U.S. Court of Appeals for the Federal Circuit (CAFC) issued a precedential decision Wednesday affirming a district court’s finding for PayPal Holdings, Inc. that certain claims of Fintiv, Inc.’s patents for a mobile wallet payment system were invalid as indefinite.

Fintiv sued PayPal for infringement of its U.S. Patent Nos. 9,892,386; 11,120,413; 9,208,488; and 10,438,196. Following claim construction, the district court found that the “payment handler terms” in the claims were indefinite, and specifically that the asserted claims were “means-plus-function” terms that failed to disclose adequate corresponding structure.

In its discussion on appeal, the CAFC first assessed the payment handler terms for means-plus-function format under pre-America Invents Act (AIA) Section 112, paragraph 6. That paragraph says:

“An element in a claim for a combination may be expressed as a means or step for performing a specified function without the recital of structure, material, or acts in support thereof, and such claim shall be construed to cover the corresponding structure, material, or acts described in the specification and equivalents thereof.”

The CAFC first noted that none of the payment handler terms included the word “means” and thus enjoyed a rebuttable presumption that Section 112, paragraph 6 does not apply. That presumption can be overcome if “the challenger demonstrates that the claim term fails to ‘recite[] sufficiently definite structure’ or else recites ‘function without reciting sufficient structure for performing that function.’”

The ’386 and ’413 patent claims at issue recite “a payment handler [service] [operable/configured] to use APIs of different payment processors including one or more APIs of banks, credit and debit cards processors, bill payment processors,” while the ’488 and ’196 patents recite “a payment handler that exposes a common API for interacting with different payment processors.”

The CAFC agreed with the district court that PayPal satisfied this standard to overcome the presumption because the relevant claim language of the patents is “drafted in a format consistent with traditional means-plus function limitations” and “merely replace[] the term ‘means’ with the [payment-handler terms].”

The district court also pointed to PayPal’s expert testimony, which explained that the payment-handler terms “provide[ ] no structure beyond a blank box, and critically, that a [person of ordinary skill in the art (“POSA”)] would not have understood how to implement the recited functions” to further bolster its holding.

While Fintiv argued that “both the ‘handler’ terms by themselves and the payment-handler terms as a whole identify structure,” the CAFC said the “district court correctly analogized ‘handler’ with the nonce term ‘module,’ which we have determined was ‘simply a generic description of software or hardware that performs a specified function.’”

The district court also found that “handler” does not provide sufficient structure for a POSA according to technical dictionary definitions, and that the prefix “‘payment’…does not impart structure onto ‘handler’ and merely describes the function of the handler: to perform payment functions.” The CAFC also dismissed Fintiv’s arguments that extrinsic sources supported the view that the payment-handler terms as a whole connote structure.

Fintiv also argued that the claims’ “connecting terms—’that,’ ‘operable to,’ and ‘configured to’… are ‘more often used with structural terms rather than non-structural ones.’” Fintiv cited case law in which such terms were used, but the CAFC dismissed the relevance, finding that “[n]one of the cases cited by Fintiv discuss the payment-handler terms, much less in the context of the asserted patents.” The court further rejected Fintiv’s assertion that CAFC precedent in Dyfan, LLC v. Target Corp., 28 F.4th 1360, 1369–70 (Fed. Cir. 2022) controlled in this case because “the payment-handler terms are a class of software structures under Dyfan.” There, the CAFC found the patent challenger failed to overcome the rebuttable presumption that the claims were not means-plus-function, but here, the court distinguished Dyfan:

“Unlike in Dyfan, where the expert’s testimony that the term ‘code’ / ‘application’ connoted software structure to a POSA was unrebutted, here, neither expert testified that the payment-handler terms connoted structure.”

Fintiv’s argument that, under Apple Inc. v. Motorola, Inc., 757 F.3d 1286 (Fed. Cir. 2014), the “claim language defines the ‘inputs, outputs, and operation of the ‘payment handler,’” also failed, said the CAFC. There, the claim language and specification outlined the rules that the term followed, whereas here, “the sole textual support in the specifications for the payment-handler terms merely parrots the claim language,” said the opinion.

Finding the claims therefore invoked Section 112, paragraph 6, the CAFC turned to the next step in the analysis, which requires identifying a corresponding structure in the specification. But, like the district court, the CAFC said the specifications failed to disclose “any algorithm to perform the recited function” and said Fintiv’s argument on appeal that the claims identify a two-step algorithm for a payment handler failed because the purported algorithm “merely recites the asserted claims’ language.”

The CAFC thus ultimately affirmed the district court’s holding that the claims are indefinite.

In a separate opinion issued Wednesday, the court also delivered a win for Apple when it dismissed Fintiv’s appeal of a Patent Trial and Appeal Board holding that found claims 1–3 of the ‘386 patent unpatentable. Since the court held those claims invalid as indefinite in Fintiv’s appeal with PayPal, it dismissed Fintiv’s appeal from the PTAB as moot.