Online payment patent dispute. BOOM v. STRIPE

Online payment patent dispute. BOOM v. STRIPE

A patent is a set of exclusive rights granted to the inventor of a new invention.  To be granted a patent in the United States an inventor must file a patent application with the United States Patent and Trademark Office.  The patent application must describe the aspects of the invention that the inventor claims, and demonstrate that the invention is new, useful and not obvious. The United States Patent and Trademark Office will review the patent application and if all the requirements are met, grant the inventor a patent.  A patent grants the owner of the patent the exclusive right to make, use, sell and import the invention in the United States.  If someone other than the patent owner attempts to exercise one of these exclusive rights, that can be considered patent infringement.

To be granted a patent an invention must be patent eligible subject matter. 35 U.S.C. 101 defines the four categories of invention that Congress deemed to be the appropriate subject matter of a patent: processes, machines, manufactures and compositions of matter.  There are also three judicial exceptions which makes an invention not eligible for patent protection.  Judicial exceptions are subject matter that the courts have found to be outside of, or exceptions to, the four statutory categories of invention, and are limited to abstract ideas, laws of nature and natural phenomena (including products of nature).

Software patents present a special set of issues.  On one hand software is a set of computer instructions that can be considered a process and eligible for patent protection.  On the other hand a set of computer instructions can be considered an algorithm, which is an abstract idea and not eligible for patent protection.  Alice Corp. v. CLS Bank International, 573 U.S. 208, 134 S. Ct. 2347 (2014),  in patents on a computer-implemented, electronic escrow service for facilitating financial transactions were held to be invalid because the claims were drawn to an abstract idea, and implementing those claims on a computer was not enough to transform that idea into patentable subject matter.  While the Alice decision did not explicitly make software unpatentable, it did make it much more difficult for software based inventions to be found eligible for patent protection.

BOOM! PAYMENTS, INC., vs. STRIPE, INC.; SHOPIFY INC., 5:19-cv-00590 (N.D.CA. 2019) is a case that will have to demonstrate that the patents are more than abstract ideas implemented with a computer.  The plaintiff in this case is an online payment processor.  The plaintiff owns U.S. Patent No. 8,429,084, which was granted on April 23, 2013, and U.S. Patent No. 9,235,857, which was granted on January 12, 2016.  Both patents are titled “CONFIRMING LOCAL MARKETPLACE TRANSACTION CONSUMMATION FOR ONLINE PAYMENT CONSUMMATION”.  The patents describe an online payment system that allows a buyer and seller to consummate a sale without personal information, like a credit card number, being transmitted to the seller.  The essential feature of the patent is, the buyer sends personal information to the payment processor, the buyer completes a sale with the seller, the seller requests confirmation from the payment processor and the payment processor confirms the sale by sending a text message to the buyer.  The patents are intended to increase privacy and reduce fraud.

The defendants in this case are online payment processors which process payment data in a way which resembles the process described in the plaintiff’s patents.  The plaintiff discussed its patented technology with representatives of Stripe in 2013, with the goal of partnering with the defendant to develop a payment authentication product.  Stripe later declined to license the technology from the plaintiff and implemented its own version of the process.  The defendant Shopify implemented its own checkout process which is similar to the plaintiff’s patent in 2017.

The facts in the complaint make a strong argument that the plaintiffs were infringed by the defendant.  The defendants’ payment processes strongly resemble the plaintiff’s patented payment process.  However, the plaintiff’s challenge will be convincing the court that its patent is valid.  If the court determines that the plaintiff’s patent are abstract ideas implemented using a computer, than the patents will be deemed unenforceable.

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