In the U.S. District Court for the District of Delaware, a patent directed to electronic gift card distribution was found to be directed to patent-ineligible subject matter.

Coqui filed related patent infringement actions claiming infringement of U.S. Patent No. 7,580,864, entitled "Method for Circulating an Electronic Gift Certificate in Online and Offline System," which claims a method of circulating electronic gift certificates and managing sales of electronic gift certificates according to requests made through wired and wireless networks.

The '864 patent describes that a gift certificate database and a gift certificate service server manage sales of the electronic gift certificates according to requests by a communication terminal through wired and wireless networks.  A user provides a purchase request from a communication terminal, and the server determines if proper funds were supplied for the gift certificate.  If so, the purchased electronic gift certificate is provided to the user and stored in the gift certificate database.  A user can buy a desired product at an online shopping mall through a terminal such as a subscriber's computer, and perform an online settlement with the user's electronic gift certificate.  Here, the electronic gift certificate circulation system can authenticate the user by using a telephone number of the subscriber's communication terminal and an electronic gift certificate password through the online shopping mall, and then settle the corresponding electronic gift certificate.

Claim 1 of the '864 patent is representative and is reproduced below:

1.  A gift certificate service system for managing sales, gifting, and usage of electronic gift certificates according to a request by a user's communication terminal through a wired network, wireless network, or both, comprising:
    a gift certificate service server for managing purchase, gifting, and usage operations on the electronic gift certificates from the communication terminal;
    a gift certificate database, accessed by the gift certificate service server, for storing electronic gift certificate information prior to transferring the gift certificate to a transferee, and processing a reply to an inquiry of electronic gift certificate usage from the gift certificate service server; and
    a network server, accessed by the gift certificate service server and accessed by the user's communication terminal through the wired network, wireless network, or both, for performing a client interface function with the purchase, gifting, and usage of the electronic gift certificates, and transmitting the user's gift certificate purchase particulars and gift certificate information for usage of the corresponding gift certificate to the communication terminal,
    wherein the electronic gift certificate is a multimedia message including barcode data, wherein the network server is responsive to use of the electronic gift certificate occasioned by displaying the barcode data on the communication terminal, and wherein the electronic gift certificate information stored by the gift certificate database includes at least one of a gifting history of the gift certificates or a usage history of the gift certificates.

The '864 patent describes that by unifying an electronic gift certificate management system and a mobile communication system into a single system, the invention simplifies an electronic gift certificate circulation system and allows the electronic gift certificates to be quickly and accurately purchased, gifted, and used.

Defendants filed motions to dismiss for failure to state a claim upon which relief can be granted pursuant to Federal Rule of Civil Procedure 12(b)(6).  According to Defendants, Coqui's complaint fails to state a claim because the patents-in-suit are ineligible for patent protection under 35 U.S.C. § 101.

The Court followed the two-step framework for distinguishing patents that claim laws of nature, natural phenomena, and abstract ideas from those that claim patent-eligible applications of those concepts.

A.    Step 1

In step 1, the Court determined whether the claims at issue are directed to a patent-ineligible concept.  Applying the first step of the framework to the asserted claims, the Court concluded that the claims are directed to the abstract idea of selling, gifting, and using electronic gift certificates over a network, which is a longstanding commercial practice.

Coqui argued that claims of the '864 patent represent patent eligible material unique to the Internet directed to a concrete method of purchasing and using an electronic gift card-in the form of a barcode received via a MMS message and displayed on a display device with Internet access-as well as tracking the usage and gifting history of the particular electronic gift card.  In addition, Coqui argued that the additional security provided by the patented method's authentication of gift certificate membership and usage histories is not an established commercial practice defeating Defendants' abstract idea allegation.

However, the Court found that the claims of the '864 patent relate to the abstract idea of selling, gifting, and using an electronic gift certificate.  The preamble of claim 1 identifies a gift certificate service system for managing sales, gifting, and usage of electronic gift certificates according to a request by a user's communication terminal through a wired network, wireless network, or both.  Claim 1 subsequently lists the following elements:  (1) a gift certificate service server; (2) a database; and (3) a network server.  Each of the subsequent claim 1 limitations refer back to either managing the purchase, gifting and usage operations or the gifting or usage history of electronic gift certificates.

The Court noted that a gift certificate is defined in the '864 patent as a bill that has an exchangeable value so that a user may give it to a shop to make a purchase or get a discount on a desired product.  Applying the Internet and computer components to the commercial practice of electronic gift certificates does not preclude a finding that the '864 patent is abstract.

The Court highlighted that the claims of the '864 patent do not improve the functioning of a computer or any of the other components involved in the method.  Instead, the asserted claims add conventional computer components to well-known business practices.

The Court found that the '864 patent's alleged security benefits do not confer patent eligibility because the authentication of a gift certificate transaction could be performed by a human with a pen and paper.  The preferred embodiment of the '864 patent describes a database that stores a gifting history and usage history as well as a history of gift certificates bought by the client to authenticate that the client's gifting or usage of the electronic gift certificate is fair.  Such authentication could be performed using a pen and paper; therefore, the Court found that the '864 patent is directed to an abstract idea despite the added security benefits that might result from using a computer to perform authentication.

In addition, authenticating and verifying the balance of the electronic gift certificate was found to be abstract because it relates to the "organizing of human activity."

B.    Step 2

Because the '864 patent was found to be directed to the abstract idea of selling, gifting, and using electronic gift certificates, the Court turned to the inventive concept analysis in step 2.

The '864 patent claims implement the longstanding commercial practice of selling, gifting, and using gift certificates by using a generic computer and networking components in conventional ways.

Coqui argued that the '864 Patent offers a useful, non-conventional and non-generic arrangement of components and functionality, namely, an inventive configuration of components that solve problems associated with conventional gift certificate circulation like the requirement of being physically present to purchase a gift certificate and additional settlement processes.

But the computer components described in the '864 patent are generic and function in conventional ways.  The communication terminal is used as a "mobile user interface."  The service server is used for "managing purchase, gifting, and usage operations."  The database is used "for storing electronic gift certificate information."  The network server is used for "transmitting . . . gift certificate information . . . to the communication terminal."  These components, as described in the '864 patent, operate in their typical capacities in conventional ways and do not embody an inventive concept.  The '864 patent does not specify precise devices that must be used in the method or provide any explanation about how the software solves a technological problem.

Coqui also did not explain or argue that the arrangement of the components or some type of configuration unique to the '864 patent improves the functionality of a generic computer or solves a technical problem.

The Court noted that the application of barcodes, MMS messages, and devices with Internet access to a system comprising generic computing components for circulating electronic gift certificates is not an inventive concept.

The Court discounted the idea that the '864 patent improves the electronic gift certificate process by facilitating the purchase, usage, and gifting of certificates without requiring the customer to be physically present in the store as not being an inventive concept because it was found that the claims at issue here do not solve a technological problem.  Instead, the claims provide a conventional technological environment (i.e., computers and the Internet) in which to carry out the abstract idea of using electronic gift certificates.

Because the claims were found to be directed to an abstract idea without an inventive concept, the Court recommended to grant defendants' motions to dismiss pursuant to Rule 12(b)(6).

Coqui Technologies, LLC v. Gyft, Inc. (D. Del. 2018)
Report and Recommendation by U.S. Magistrate Judge Sherry R. Fallon