Fintiv, Inc. v. PayPal Holdings, Inc.. decided April 30, 2025

Case Name: Fintiv, Inc. v. PayPal Holdings, Inc. Court: United States Court of Appeals for the Federal Circuit Case Number: 2023-2312 Decided: April 30, 2025 Judge: Prost, Circuit Judge (writing for the panel with Taranto and Stark, Circuit Judges)

Summary:

Fintiv appealed the District Court's ruling that certain claims in their patents related to a "cloud-based transaction system" were invalid as indefinite under 35 U.S.C. § 112 ¶ 6. The Federal Circuit affirmed the District Court's decision, agreeing that the disputed terms, specifically "payment handler" and "payment handler service," invoked § 112 ¶ 6 and that the patent specifications failed to disclose sufficient corresponding structure, particularly an algorithm, to perform the claimed functions.

Main Themes and Important Ideas/Facts:

1. Patent Infringement Lawsuit and Claim Indefiniteness: The case originated from Fintiv suing PayPal for patent infringement. The core issue revolves around the indefiniteness of certain claim terms in Fintiv's asserted patents under 35 U.S.C. § 112 ¶ 6 (pre-AIA). Indefiniteness means the patent claims are not sufficiently clear to inform a person skilled in the art what the invention is.

2. Disputed Claim Terms: "Payment Handler" and "Payment Handler Service": The focus of the appeal is the meaning and scope of the terms "payment handler" and "payment handler service" as used in Fintiv's patents. These terms appear in claims related to a "cloud-based transaction system."

3. Means-Plus-Function Claiming (§ 112 ¶ 6): The central legal framework for the indefiniteness analysis is 35 U.S.C. § 112 ¶ 6. This section deals with "means-plus-function" claim limitations, where a claim element is expressed as a "means" or equivalent for performing a specified function, without reciting the structure, material, or acts for performing that function. For such claims to be definite, the patent specification must disclose corresponding structure, material, or acts.

4. Two-Step Analysis for § 112 ¶ 6: The court applies a two-step analysis to determine if a claim is indefinite under § 112 ¶ 6:

5. Step 1: Does the claim term invoke § 112 ¶ 6? This involves determining if the claim term is in means-plus-function format. If the term does not use "means," there is a rebuttable presumption that § 112 ¶ 6 does not apply. This presumption can be overcome if the challenger shows the claim limitation recites "function without reciting sufficient structure for performing that function."

6. Step 2: Does the specification disclose adequate corresponding structure? If § 112 ¶ 6 applies, the court examines the patent specification to see if it discloses sufficient structure, material, or acts to perform the claimed function. If the function is performed by a general-purpose computer, the specification must typically disclose the algorithm.

7. District Court's Finding and Fintiv's Appeal: The District Court found that the payment-handler terms invoked § 112 ¶ 6 and that the specifications failed to disclose adequate corresponding structure, leading to the asserted claims being invalid as indefinite. Fintiv appealed this decision, arguing the District Court erred on both steps of the § 112 ¶ 6 analysis.

8. Federal Circuit's Agreement on Invoking § 112 ¶ 6 (Step 1): The Federal Circuit agreed with the District Court that the payment-handler terms invoke § 112 ¶ 6.

9. Rebutting the Presumption: While the terms do not use "means," the court found PayPal overcame the presumption of non-applicability.

10. Function Without Sufficient Structure: The court concluded that the payment-handler terms "recite function without reciting sufficient structure for performing that function."

11. Analogous to Nonce Terms: The term "handler" was likened to the nonce term "module," which is considered a generic description of software or hardware performing a function. The prefix "payment" was found to merely describe the function, not impart structure.

12. Connecting Terms: The court rejected Fintiv's argument that connecting terms like "that," "operable to," and "configured to" automatically suggest structure, stating that applicability of § 112 ¶ 6 depends on the specific context of the patent.

13. Distinguishing Dyfan: The court distinguished Fintiv's reliance on the Dyfan case, where "code" and "application" were found to connote a class of software structures, noting that in this case, neither expert testified that the payment-handler terms connoted structure to a POSA.

14. Insufficient Disclosure of Inputs, Outputs, and Operation: The court found that the claims and specifications, including the figures, did not provide "sufficiently definite structure to the ‘inputs, outputs, connections, and operation’ of the payment-handler terms."

15. Federal Circuit's Agreement on Lack of Adequate Corresponding Structure (Step 2): The Federal Circuit also agreed with the District Court that the asserted claims "fail to disclose sufficient structure to perform the functions" of the payment-handler terms.

16. No Disclosed Algorithm: The court emphasized that the specifications do not disclose an algorithm for performing the claimed functions of "us[ing] APIs of different payment processors" and "expos[ing] a common API for interacting with different payment processors."

17. Mere Recitation of Claim Language: Fintiv's proposed two-step algorithm was deemed a mere restatement of the claim language, lacking the necessary algorithmic details.

18. Generic Descriptions Insufficient: The specifications were found to merely refer to the "generic process of translating APIs" and lacked clarity on where this "wrapping" occurs or to what entity the "common API" is exposed.

19. Describing Results, Not Structure: The court reiterated that describing "the results of the operation of an unspecified algorithm" is not sufficient structure for a general-purpose computer function.

Key Quotes:

• "...the district court determined certain claim terms in the asserted patents were subject to 35 U.S.C. § 112 ¶ 6 and held the asserted claims invalid as indefinite."

• "The terms at issue are the payment-handler terms."

• "Here, the payment-handler terms obviously do not use the word “means.” Thus, there is a rebuttable presumption that § 112 ¶ 6 does not apply."

• "That presumption 'can be overcome and [§ 112 ¶ 6] will apply 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.’'" (quoting Williamson v. Citrix Online, LLC)

• "We agree with the district court that PayPal has overcome this presumption because the payment-handler terms recite function without reciting sufficient structure for performing that function."

• "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.'" (quoting Williamson)

• "Our case law does not provide for a blanket rule that these connecting words (i.e., 'that,' 'operable to,' and 'configured to') automatically suggest terms are structural."

• "As used in the claims, the payment-handler terms are no more than a 'black box recitation of structure' that can operate as a substitute for 'means,' and 'a POSA would not have understood how to implement the recited functions.'" (internal citation omitted)

• "In contrast, here, the claims and specifications, including the figures in the asserted patents, do not provide sufficiently definite structure to the 'inputs, outputs, connections, and operation' of the payment-handler terms."

• "We agree with the district court that the asserted claims 'fail to disclose sufficient structure to perform the functions...'"

• "In particular, the district court found that the specifications of the asserted patents do not disclose any algorithm to perform the recited function."

• "Without an algorithm to achieve these functionalities—and, more generally, given the specifications’ failure to disclose adequate corresponding structure—we hold the payment-handler terms indefinite."
  

Conclusion:

The Federal Circuit affirmed the District Court's finding that the asserted claims in Fintiv's patents were indefinite. The court's decision reinforces the requirement that when a claim term performs a function without explicitly defining structure and is subject to § 112 ¶ 6, the patent specification must provide sufficient corresponding structure, including an algorithm if the function is performed by a computer. The court found the terms "payment handler" and "payment handler service" were functional descriptions lacking adequate structural support in the specifications.

Full opinion here