Fintiv, Inc. v. Paypal Holdings, Inc

Authored by: Jeremy J. Gustrowsky

In a significant decision for software patents, the Federal Circuit recently affirmed the invalidation of several Fintiv, Inc. patents for indefiniteness, holding that the term “payment handler” failed to provide enough structural detail in the patent claims. The case, Fintiv, Inc. v. PayPal Holdings, Inc., involved four patents (U.S. Patent Nos. 9,892,386; 11,120,413; 9,208,488; and 10,438,196) covering a “cloud-based transaction system” or “mobile wallet platform.” Fintiv had sued PayPal for infringement, but the district court—and now the Federal Circuit—found the claims invalid under 35 U.S.C. § 112 ¶ 6 because they did not sufficiently describe how the claimed “payment handler” actually worked.

The crux of the dispute was whether the “payment handler” terms described enough structure to avoid being treated as so-called “means-plus-function” claims, which require the patent to spell out how the function is performed. Although the claims used the term “payment handler” instead of “means,” the court found this was just a generic label, much like “module,” and did not explain what the handler actually was or how it performed its tasks. The court noted that simply saying the handler “uses APIs of different payment processors” or “exposes a common API” is not enough—there must be a clear description or algorithm in the patent explaining how these results are achieved.

Fintiv argued that terms like “handler” and “service” are understood in the software field and that their patents included enough context, but the court disagreed. It pointed out that the patent specifications merely repeated the claim language and failed to provide any details or algorithms that would allow a person skilled in the art to build or use the claimed invention. The court also rejected Fintiv’s reliance on technical dictionaries and outside protocols, finding that these sources did not supply the missing structural detail.

Ultimately, the Federal Circuit’s decision reinforces the need for software patents to clearly describe how claimed functions are performed, especially when using broad or generic terms. Without sufficient detail or an algorithm in the patent specification, claims risk being found indefinite and invalid, as happened here. This case serves as cautionary tale for patent drafters who may find themselves using broad terms of art without explaining the functions they provide.