IP Law Daily, PATENT—Fed. Cir.: Patent licensing entity’s infringement lawsuit against PayPal properly dismissed, (Apr 30, 2025)

By Saurabh Kashyap, B.A., LL.B., LL.M.

District court correctly held that the patent claim terms were indefinite under § 112 ¶ 6 for lacking required structural or algorithmic disclosure.

The U.S. Court of Appeals for the Federal Circuit affirmed a Texas district court’s decision dismissing a patent licensing entity’s infringement lawsuit against PayPal Holdings, Inc. and invalidating the licensing entity’s asserted mobile wallet patents. The appellate court found that the terms “payment handler” and “payment handler service” in the asserted patents triggered means-plus-function treatment under 35 U.S.C. § 112 ¶ 6 and were indefinite for failure to disclose any corresponding structure or algorithm in the specifications (Fintiv, Inc. v. PayPal Holdings, Inc., No. 23-2312 (Fed. Cir. Apr. 30, 2025)).

Background. The plaintiff/appellant, Fintiv, Inc., is a Texas-based patent licensing entity. It owns a portfolio of patents related to cloud-based mobile wallet systems. Its business centers on asserting and monetizing patents related to digital payments infrastructure. The defendant/appellee, PayPal Holdings, Inc., is headquartered in California. It is a globally recognized financial technology company operating widely used digital payment platforms, including PayPal and Venmo.

In this lawsuit, Fintiv asserted its U.S. Patent Nos. 9,892,386 (the ’386 patent), 11,120,413 (the ’413 patent), 9,208,488 (the ’488 patent), and 10,438,196 (the ’196 patent). The patents are directed to a "cloud-based transaction system" and include claims involving a software component referred to as a "payment handler" or "payment handler service." The claims described these components functionally as interacting with multiple third-party payment processors and exposing a common API to external applications.

Fintiv filed this lawsuit alleging that PayPal’s systems infringed its asserted patents. PayPal moved for summary judgment of invalidity, arguing that the claims were indefinite because they invoked § 112 ¶ 6 but lacked any structural disclosure. The district court agreed. Quoting Williamson v. Citrix Online, LLC, 792 F.3d 1339 (Fed. Cir. 2015), the court found that the "payment handler" terms did not recite sufficient structure and were, therefore, subject to means-plus-function treatment.

The district court then examined the specifications and determined that they failed to disclose any algorithm or software structure that a person of ordinary skill in the art could use to perform the claimed functions. Accordingly, the court found all asserted claims indefinite and granted summary judgment in favor of PayPal. Fintiv appealed.

Claim terms were subject to § 112 ¶ 6. On appeal, the Federal Circuit affirmed that the "payment handler" terms recited purely functional limitations and lacked any structural connotation in the context of the claims. Although the term "means" did not appear, the court held that the presumption against § 112 ¶ 6 was overcome because "handler" was a nonce term describing a function—interacting with multiple payment processor APIs.

The court cited Rain Computing, Inc. v. Samsung Elecs. Am., Inc., 989 F.3d 1002 (Fed. Cir. 2021), and Advanced Ground Information Sys., Inc. v. Life360, Inc., 830 F.3d 1341 (Fed. Cir. 2016), to support the conclusion that software terms defined solely by their function and lacking industry-recognized structure are subject to means-plus-function treatment. Fintiv’s reliance on the Internet Open Trading Protocol (IOTP) was found unpersuasive, as the cited standard did not define or limit the meaning of “handler” in the claimed context.

No structure or algorithm disclosed. Having concluded that the terms were means-plus-function limitations, the court next examined whether the patent specifications disclosed any algorithm or structure to perform the claimed functions. The claimed “payment handler” was said to “interface with APIs of multiple payment processors” or “expose a common API” to the system’s other components.

Fintiv argued that the specification described a two-step algorithm: wrapping various third-party APIs and exposing a single API for the mobile wallet system. However, the court held this was merely a restatement of the desired result, not an actual implementation. Citing Aristocrat Technologies Australia Pty Ltd. v. Int’l Game Technology, 521 F.3d 1328 (Fed. Cir. 2008), the appellate court reiterated that a function must be accompanied by a sufficient algorithm or structural explanation, not just a black-box diagram or a conceptual overview.

The court also noted that although some figures showed the “payment handler” in a block diagram, those figures failed to describe the logic or process steps involved in performing the claimed interfacing functions.

Distinguishing prior precedent. Fintiv relied on Dyfan, LLC v. Target Corp., 28 F.4th 1360 (Fed. Cir. 2022) to argue that terms describing software modules can have sufficient structure when interpreted in light of the specification and expert testimony. But the Federal Circuit distinguished Dyfan, observing that in that case, the patent owner had presented unrebutted expert evidence showing that the term "code" referred to specific types of software components. In contrast, Fintiv offered no such expert evidence, and PayPal's expert described "payment handler" as a term lacking accepted meaning in the field.

The Federal Circuit also rejected Fintiv's argument that connectors like "configured to" or "operable to" imparted sufficient structure. Relying on Media Rights Techs., Inc. v. Capital One Fin. Corp., 800 F.3d 1366 (Fed. Cir. 2015), the appellate court pointed out that such functional connectors do not convert a term into a structural one when the underlying noun lacks recognized structure.

Conclusion. Thus, the Federal Circuit affirmed the district court’s ruling that the “payment handler” terms invoked § 112 ¶ 6 and were indefinite for lack of corresponding structure or algorithm. As the asserted claims could not survive without those terms, the summary judgment of invalidity was upheld.

PTAB AIA decision. In view of its decision affirming invalidity of the patents in this case, the Federal Circuit concurrently issued a brief opinion (Fintiv, Inc. v. Apple Inc., No. 24-1345 (Fed. Cir. Apr. 30, 2025)) dismissing as moot Fintiv’s appeal of a PTAB decision finding that Apple Inc. showed that claims 1-3 of the’386 patent were invalid as indefinite.

The Case is No. 23-2312.

Judge: Prost, S.

Attorneys: Meredith Leigh Martic Addy (AddyHart P.C) for Fintiv, Inc. Robert N. Kang (Winston & Strawn LLP) for PayPal Holdings, Inc.

Companies: Fintiv, Inc.; PayPal Holdings, Inc.

Cases: Patent FedCirNews TexasNews