Finnavations v. Payoneer: A Case Study Into a Broken Patent System

By Gau Bodepudi
November 25, 2019

“The court refused to accept Finnavations‘ reliance on the USPTO’s analysis of Section 101 and Alice. The court reasoned that ‘[p]atent examiners are non-lawyers, [thus] an examiner’s opinion on the legal question of patent eligibility does not relieve a patent attorney from her obligation to make an independent assessment based on an evaluation of the relevant law.”

Editor’s Note: the author acted as a licensing advisor to Finnavations in the case discussed here.

https://depositphotos.com/71178913/stock-illustration-patented-grunge-retro-red-isolated.htmlIf you innovate and invest more than $10,000 to obtain patent protection on your idea, do you trust a government-issued patent to be a valid one?

And if you believe you have a valid patent, would you trust that government’s judicial system to protect you from sanctions for believing in its validity?

These underlying assumptions provide the foundation to any system. If you purchase and obtain title to a car, stock, or real estate, you expect that title to be valid. And you expect not to be penalized for believing in that title’s validity.

For patents, it’s quite the opposite. It has become so commonplace for government-issued patents to be invalidated after issuance, we hardly bat an eye. But with the development of Section 101 law, the patent system has turned down a twisted path—one that sanctions patent holders for believing their patent to be valid.

The Finnavations Example

In Finnavations LLC v. Payoneer, Inc., the U.S. District court for the District of Delaware unfortunately advanced our patent system down this path. It invalidated the patent-at-issue under Section 101 and sanctioned Finnavations solely on the basis of filing the lawsuit.

Of course, this isn’t the first instance of a court sanctioning a patent holder for filing a lawsuit. But the court’s reasoning for doing so should give us pause to reflect where we currently stand with our patent system.

In the case, Finnavations filed a lawsuit for infringement of U.S. Patent 9,569,755 (‘755 Patent) against Payoneer, for its online Billing Service platform. The claim-at-issue was:

     1. A method for transferring payment information to a personal financial management program comprising:

invoking a financial assistant operating on a network device upon a determination of a transmission of transaction data to a commercial web server configured to conduct online financial transactions;

intercepting, by the financial assistant on the network device, the transaction data in a first data structure comprising a plurality of components of transaction data, the first data structure compatible with conducting an online transaction with the commercial web server;

copying, by the financial assistant on the network device, each component of the transaction data into a second data structure compatible with the personal financial management program, wherein the second data structure differs from the first data structure;

entering, by the financial assistant on the network device, additional transaction data not included in the transmitted transaction data into the second data structure including at least one of a category and remarks; and

transmitting, by the network device, the copied transaction data and the additional transaction data to the personal financial management program.

At first glance, Section 101 is the elephant in the room. The patent is entitled “Financial management system” and its field of invention “was designed to facilitate the record keeping associated with online transactions.“ This certainly falls under subject matter relevant to Section 101 under Alice, and Section 101 eligibility was front and center during the patent litigation.

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Section 101 in the Prosecution History

But what stands out is that Section 101 was the primary and repeated issue during examination of the ‘755 patent application. In nearly five years of examination over the course of five office action rejections, the USPTO maintained numerous Section 101 eligibility rejections, forcing Finnavations to amend its claims numerous times to craft Section 101-eligible claims.

When the USPTO issued its first office action rejection in October 2014, Alice had been decided four months earlier. The USPTO’s sole rejection was over Section 101, in light of Alice. The examiner contended the claims were directed to the abstract idea of “performing a business payment transfer,” and “amount(s) to no more than using computer technology to provide a common knowledge transaction.” ‘755 Patent application, Office Action mailed Oct. 20, 2014, pg. 2.

Two months after the USPTO’s rejection, the Federal Circuit decided DDR Holdings, providing guidance regarding Section 101 eligibility. In March 2015, Finnavations responded to the rejection by submitting the DDR Holdings opinion, amending the claims, and arguing the claims were allowable in light of DDR Holdings. But in July 2015, the examiner maintained the Section 101 rejection.

Over the course of the next 11 months in four exchanges between Finnavations and the USPTO, the applicant further amended the claims to add a“financial assistant” element, arguing the element provided a specialized computer component, and the claims solved a problem unique to the realm of computer networks. But the USPTO maintained its Section 101 rejection.

After that point, the Federal Circuit issued Enfish, Bascom, and Rapid Litigation Management, all of which further clarified Section 101 eligibility requirements. Relying on the new Federal Circuit opinions, Finnavations amended the claims to limit when the financial assistant is invoked, the financial management program data structure was required to be different from the structure of the transaction data structure, and it entered additional data that wasn’t included in the transmitted transaction data (“Data Structure Amendment“).

Considering the claim amendments in light of the Federal Circuit law, the examiner determined the claims were Section 101 eligible:

Claims 1-21 have been viewed in light of Alice . . . and are not deemed invalidated by such. Also, it is noted that the United States Court of Appeals for the Federal Circuit court cases “Enfish,” “MCRO” and Bascom Global . . . have been reviewed in light of the claim language.  The claim language is viewed favorably in view of “Alice” and the other court cases. Applicant’s September 13, 2016 Amendment and REMARKS are convincing with regard to the “101” rejection.

Examiner Opinions Aren’t Relevant

Fast forward to the Finnavations patent litigation, in which the district court invalidated the ‘755 Patent on Section 101 and considered sanctioning Finnavations for filing the lawsuit. In its defense, Finnavations cited its reliance on the USPTO’s extensive consideration of Section 101 eligibility in light of Alice and other Federal Circuit case law, and noted that no new Federal Circuit law had issued that would impact the USPTO’s reasons for allowance.

The court refused to accept Finnavations‘ reliance on the USPTO’s analysis of Section 101 and Alice. The court reasoned that “[p]atent examiners are non-lawyers. An examiner’s opinion on the legal question of patent eligibility does not relieve a patent attorney from her obligation to make an independent assessment based on an evaluation of the relevant law.“ Finnavations Memorandum, pgs. 3-4, Mar. 18, 2019.

The court boldly stated, “I have rarely been more confident in the patent ineligibility of a set of claims or more confident in the unreasonableness of a Plaintiff‘s decision to sue on a patent.“ Finnavations Memorandum, pgs. 2-3, Mar. 18, 2019. The court held “[a]ny reasonable patent attorney with an understanding of §101 law could have predicted the outcome.“ Finnavations Memorandum, pg. 4, Mar. 18, 2019.

Time for Reflection

Thus, another patent invalidated on Section 101 and another plaintiff sanctioned for filing a lawsuit. Before we simply take a mental note and move on, I’d like for us to fully appreciate the implications of the court’s reasoning.

Following the court’s logic, a reasonable patent attorney would have known:

  1. It is unreasonable to believe the USPTO issued a patent eligible under Section 101.
  2. There is no reasonable basis to independently agree with the USPTO’s reasons for allowance and analysis of the claims in light of Federal Circuit case law.
  3. There is no reasonable basis to independently believe the USPTO’s reasons for allowance regarding the Data Structure Amendment had any foundation in Federal Circuit case law.

A corollary to this logic: there is no reasonable basis to believe the USPTO was competently equipped to analyze and issue patents in light of Section 101.

In this case, believing the USPTO was competently equipped to analyze and issue patents over Section 101 was sanctionable.

The court’s logic and reasoning here should give us pause to reflect on where we currently stand with our patent system.

Has the Judiciary’s development of Section 101 case law cannibalized the legitimacy of the USPTO, the very government agency responsible for analyzing claims and issuing patents?

If the Judiciary’s development of Section 101 case law makes the USPTO illegitimate, has the Judiciary itself demonstrated competency in developing Section 101 case law?

Or is it finally time for the Legislative branch to intervene and retake the reins on Section 101, and reestablish integrity in our U.S. patent system?

Image Source: Deposit Photos
Vector ID: 71178913
Copyright: Aquir014b

The Author

Gau Bodepudi

Gau Bodepudi Is the Managing Director at and co-founder of IP EDGE LLC. He has more than 12 years experience in all aspects of patent management and monetization, including strategic prosecution, litigation, licensing, brokering, and portfolio management within various technological fields such as ecommerce, consumer electronics, networking, financial services, mobile communications, and automotive technologies. Mr. Bodepudi also created a patent monetization blog, InvestInIP.com, where he writes on patent reform and policy

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 25 Comments comments. Join the discussion.

  1. Concerned November 25, 2019 8:01 am

    Now a person just does not get the patent. For example my prosecution:

    Did the process solve a very long time problem in the field? Yes with no dispute. Result: No patent.

    A problem that existed before and after the advent of computers? Yes. Result: No patent. God help us if the cure to cancer uses a computer.

    Did the process use an approach never used in his field? Yes with no dispute. Result: No patent.

    Did the process use an approach used In ANY field to include outside his field of technology? Yes with no dispute. Result: No patent.

    Did the examiner use court cases for rejection in the applicant’s field of technology? No and not disputed. Result: No patent.

    Did the examiner ever include the meaningful limitation in his analysis that are clearly reflected in the claims and specifications in ANY office action throughout the prosecution? No. Result: No patent.

    Did the examiner follow his Director’s own guidelines? Clearly no. Result: No patent.

    I have also spent $10,000+ to get educated on the fine points of our current patent system. The only differences between your situation and mine is the timing of the education and I have not been sanctioned for inventing a process that my colleagues have congratulated me.

    It might be helpful if someone explained why we even have a patent system as the perceived real reasons in my mind are very negative.

  2. Night Writer November 25, 2019 8:42 am

    A good framing of the problem. We should be able to trust that an issued patent is valid to a reasonable certainty.

  3. Model 101 November 25, 2019 8:51 am

    Has the Judiciary’s development of Section 101 case law cannibalized the legitimacy of the USPTO, the very government agency responsible for analyzing claims and issuing patents?

    Duh!

  4. Anon November 25, 2019 9:46 am

    The main problem I have with this article is actually a problem with the underlying use of Common Law law writing for the statutory law of 35 USC 101: the scrivining of that Common Law has left a Gordian Knot of conflicting case law.

    The author here naturally attempts to use only a portion of that case law, with the sides of the Gordian Knot that speak to protecting the underlying innovation. Unfortunately, there is a whole other set of case law that ties THIS innovation to be unprotectable.

    The problem is bigger than this case.

  5. Bemused November 25, 2019 9:48 am

    Isn’t it ironic that in this instance an Article III court glibly dismisses the expertise/analysis of the examiner(s)/USPTO while in instances of claims invalidation as a result of inter partes review, Article III courts (yeah, I’m looking at you CAFC) kowtow like subservient b**ches to the PTAB/USPTO?

  6. fellowtraveler November 25, 2019 10:02 am

    In addition to the chilling effect on innovators asserting their patents, there is also the continued demoralization of the patent examiner corps. Most patent examiners are trying their best with the resources they are given. But the constant attack on them makes them wonder “why” are they even bothering to put in the effort? I mean, it seems that every way they turn they are being denigrated as incompetent or lazy, gaming the system or ignoring the law, etc., etc. So now we have a court that outright says that whatever examiners do, it is of no legal consequence. Basically, according to the court, examiners could pick their nose, wipe it on the application, and send it out as a patent, and it would have the same effect. Yay?

    A corollary, what if the examiner were an attorney? Many are, even though the position does not require it. Should examiners start adding “esq” after their names in the Office actions to identify their opinions as legally relevant, so the courts can know?

  7. Anon November 25, 2019 10:06 am

    Applicants shouldn’t be awarded for being able to do prosecution Jiu-Jitsu to cover up patent ineligible subject matter in order to confuse non-savvy Examiners and/or drag prosecution long enough to break down Examiners who want to clear cases off the docket.

    The point is that, although this application was filed pre-Alice, Finnavations’ attorney(s) ought to have known after Alice came down that these claims were directed to patent ineligible subject matter and, even if allowed by the Examiner, would almost certainly be invalidated by the courts if ever challenged the patent. Therefore, Finnavations should have abandoned the application well before before they managed to finagle an allowance in 2017.

    Not saying that the patent system isn’t broken, but this is a poor case to hang your hat on as evidence of a broken patent system.

  8. Pro Say November 25, 2019 12:17 pm

    Thanks Gau.

    Wow. Sanctioned for doing no more than just exactly what our laws permit.

    And yet, only the latest eligibility poster child court case among so many.

    Posters which have now wall-papered all the walls of our formally world-leading American patent house.

    Congress — what the heck are you waiting for? Where is that eligibility-restoring bill you have agreed our Country desperately needs?

    See that calendar in your office? That’s right — it’s almost the dawn of a new decade.

    Where? Are? You?

  9. Pro Say November 25, 2019 12:26 pm

    Fake “Anon” @7: You’re missing Gau’s primary point here.

    It isn’t that this judge found that this claim(s) don’t pass muster under the (unconstitutional) judicially-created eligibility limit.

    It’s that this wayward judge sanctioned the patent owner for trusting and accepting what the Patent Office explicitly agreed with and confirmed.

    Which — at least for this proposition — makes this an excellent case indeed to hang one’s hat on . . . as further evidence of a broker patent system.

  10. Paul Cole November 25, 2019 12:47 pm

    Judge Richard C Andrews apparently has an arts degree followed by experience as a district attorney and state prosecutor for the State of Delaware.

    While these may be suitable qualifications for many aspects of general law even outside the criminal justice system, it is by no means self-evident that the opinion of an individual without significant experience in our legally and technically specialised area of law is to be preferred to that of USPTO examiners who deal with this issue on a daily basis. The mere possession of a law degree does not in itself confer miraculous and oracular powers of judgment on an individual otherwise lacking in relevant knowledge and experience.

    That being said, this was obviously not the strongest claim to resist a section 101 challenge. That does not mean, however, that the experience of USPTO examiners, many of whom I believe are legally qualified, should be dismissed so lightly.

  11. Paul Cole November 25, 2019 12:51 pm

    Anon @ 7

    I am forced to agree, notwithstanding my previous general comment.

  12. Anon November 25, 2019 1:03 pm

    sister Anon @ 7,

    Your views here clash with the views that I would support.

    May I suggest that you use a slightly different pseudonym?

    Thanks,

  13. angry dude November 25, 2019 1:37 pm

    HIGH TREASON

    Where is Special Prosecutor ???

  14. angry dude November 25, 2019 1:46 pm

    @Anon

    Dude,

    Please stop talking with both sides of your lawyery mouth

    It does not work like this anymore

    The article is 100% correct despite your poor attempt at legal mumbo jumbo

    Time to take sides, dude

    I understand that you are in efficient infringer’s camp

  15. Anon November 25, 2019 2:28 pm

    Angry Dude @14,

    I see that the new “Anon” has confused you (my post asking my sister to adopt a slightly different pseudonym was obviously held up in processing).

    I would hope that my posts sufficiently distinguish from Same-Use-But-Clearly-Different-Viewpoint posters, and I assure you that my views are consistent — and consistently Pro-Patent.

  16. Ben Thar Dundat November 25, 2019 3:03 pm

    fellowtraveler @ 6

    “Most patent examiners are trying their best with the resources they are given.”
    FYI, what they are given, the MPEP, is edited by an examiner who went to law school (but as far as could be determined has not practiced).

    “A corollary, what if the examiner were an attorney?”
    It would be frustrating to be such an examiner. See above.

  17. Jam November 25, 2019 4:21 pm

    @ 7

    Prosecution Jiu-Jitsu to cover up patent ineligible subject matter?

    What about judicial Jiu-Jitsu to deny claims that are rightfully eligible under the plain meaning of the statute? If prosecution Jiu-Jitsu is a sanctionable act, then shouldn’t judicial Jiu-Jitsu also be sanctionable?

    The courts have steadfastly refused to identify a rule for eligible subject matter. Instead we get never-ending subjective nonsense about abstract ideas and natural laws. Are we at the point where, in order to enforce a patent, you have to first file for a declaratory judgment of eligibility or be sanctioned?

    It’s as if the judges writing these opinions do not have smartphones and somehow use abstract ideas or other mental telepathy to call their significant others and do online banking. Perhaps most judges don’t do online banking with their phones and still pay their bills by check. Thus, to them online banking truly is nothing more than a figment of their imagination.

  18. Jonathan R Stroud November 25, 2019 4:50 pm

    This is an IP Edge subsidiary

  19. Paul Morinville November 25, 2019 5:49 pm

    Bemused @5. Errors all in the same direction are not errors. They drive for a result. The result is obviously the destruction of the US patent system with the (perhaps) unintended consequences of pushing tech inventions and startups to other countries like China and thereby seriously and permanently harming our national security and economic growth. God help us if the consequences are intentional, but as much data as is out there now showing tech leave the US, I’m having a harder and harder time believing the there is not intention.

  20. concerned November 26, 2019 3:15 am

    Paul Morinville: “Errors all in the same direction are not errors. They drive for a result.”

    Exactly. The dissent in American Axis implied the majority was looking for a way to invalidate. In my prosecution, the examiner is doing more of the same in a very disturbing fashion.

    If Congress wants to allow the burning down of our patent system, just write the same into law and allow us to get on with our life.

  21. Paul Johnson November 26, 2019 9:12 am

    Judge Richard G. Andrews has a B.A. and no STEM experience. Thank goodness we have a judge uniquely positioned to expose Examiners as non-lawyers, unable to understand when an invention is patent eligible.

  22. angry dude November 26, 2019 9:46 am

    concerned @20

    “If Congress wants to allow the burning down of our patent system, just write the same into law and allow us to get on with our life”

    You understand that burning down US Patent System and codifying it into Law constitutes a HIGH CRIME against the Constitution of the United States of America ?

  23. Concerned November 26, 2019 12:27 pm

    Angry Dude:

    To some degree I understand. Codifying the current modus operandi would be a public acknowledgment of what is currently happening.

    I could then forget about any hope of inventing a helpful process and get on with life (or fishing). And the other side would not have to win at all costs, ethical or otherwise.

  24. angry dude November 26, 2019 2:42 pm

    “HIGH TREASON” I meant

    Where is Special Prosecutor ?

  25. angry dude November 26, 2019 3:50 pm

    How much $$$ do they need to be paid to wipe out what Founding Fathers wrote in the US Constitution ?
    Is everything for sale nowadays ???

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