“The service of providing customers a discounted transaction has been ‘common among brick-and-mortar retailers’ and in the past, retailers have provided financial incentives, such as coupons, to customers during purchase…. [T]he ’852 patent simply describes that this conventional business practice may be effected by technology rather than by hand.”
Last week, the U.S. District Court for the Southern District of New York granted Block, Inc.’s Motion to Dismiss a complaint brought by AuthWallet, LLC against it for failure to state a claim. The district court found that the claims of AuthWallet’s patent were invalid because they claimed patent ineligible subject matter under 35 U.S.C. § 101.
AuthWallet’s U.S. Patent No. 9,292,852 relates to systems and methods for processing financial transaction data. Block provides online platforms, products, and services that facilitate financial transaction data. Specifically, Block offers mobile payment options that provide a means for customers to earn and redeem rewards for multiple vendors.
In its complaint, AuthWallet alleged that Block’s payment platforms infringe on one or more of claims of the ’852 patent, either literally or under the doctrine of equivalents. Specifically, AuthWallet alleged that Block put the inventions claimed by the ’852 patent into service (i.e., used them) and, therefore, Block benefited financially and commercially.
The doctrine of equivalents states that “a product or process that does not literally infringe upon the express terms of a patent claim may nonetheless be found to infringe if there is ‘equivalence’ between the elements of the accused product or process and the claimed elements of the patented invention.”
In its motion to dismiss, Block argued that the claims of the ’852 patent are ineligible for protection under Section 101 because they are directed to the abstract concept of processing discounted payments during sales transactions and the claims implement this abstract idea using computer technology. The district court applied the Supreme Court’s two-part test for determining whether an idea is unpatentable as a law of nature, natural phenomenon, or abstract idea (the “Alice test”).
Alice Step One: It’s Abstract
Under step one, courts determine whether the claims at issue are directed to a patent-ineligible concept, such as an abstract idea.
The district court held the claims of the ’852 patent were ineligible at Alice step one because managing the processing of online financial transaction data using authorization requests and conferring discounts and benefits to the consumer for future purchases are abstract ideas for the purposes of Section 101. The service of providing customers a discounted transaction has been “common among brick-and-mortar retailers” and in the past, retailers have provided financial incentives, such as coupons, to customers during purchase. The court further found that the ’852 patent simply describes that this conventional business practice may be effected by technology rather than by hand.
The court compared the ’852 patent to patents in In re Elbaum and Universal Secure Registry LLC v. Apple Inc. and found claims in the ’852 patent to describe sales transaction activity that is “ordinarily performed” in the stream of commerce. Specifically, the claims recite a secure transaction method where consumers can make credit card payments without physically presenting their cards and preventing the credit card information from being relayed to the retailer. For example, the patents in Universal Secure Registry and the ’852 patent both mitigate the online credit card transactional security concerns by having an intermediary manage and transmit authentication requests, which are processes that the Federal Circuit found to be “conventional” and “generic.”
The court added that its conclusion that the ’852 patent speaks to an abstract idea is not undermined by the fact that the patent seeks to solve security and transaction fee issues in non-physical credit card transactions. The narrow context cannot save it from the conclusion that processing discounted payments in sales transactions is an abstract idea.
Alice Step Two: No Inventive Concept
The second step of the Alice test requires a court to ask whether there is an inventive concept—i.e., an element or combination of elements that is sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the ineligible concept itself. A claim that recites an abstract idea must include additional features to ensure that the claim is more than a drafting effort designed to monopolize the abstract idea. The district court found the ’852 patent did not pass this step.
Block argued that representative claim 1 “merely automates the longstanding business practice of discounted payment transactions using conventional, generic computer technology.” The district court agreed and pointed out that the claims of the ’852 patent simply use two-step authentication processes and data storage mechanisms to manage online payment transactions with discounts. AuthWallet failed to recite an inventive concept that transforms the abstract idea of processing discounts on payment transactions into a patent-eligible application.
Again, the district court referred to past cases to reach its conclusion. In In re Elbaum, the court found that the patent—which disclosed a method for allowing an internet seller to provide a retail location with a code that contains information about a particular product or service—did not recite any incentive concept. There, the patent recited “generic computer functions, which . . . are carried out by conventional computer components.”
Additionally, the online credit card mechanism patent in Universal Secure Registry also failed to supply an inventive concept because “verifying the identity of a user to facilitate a transaction is a fundamental economic practice.”
Here, the court noted that the ’852 patent’s two-factor authentication innovations not only concerned generic computer functions to be carried out by conventional computer components to produce discounted payment transactions, but also involved authorizing and facilitating transactions, which are fundamental economic practices.
AuthWallet argued that the ’852 patent claims overcome a specific problem in electronic commerce since they facilitate purchases from an online vendor where the credit card is not physically presented to the vendor, ultimately allowing users to process a secure credit card transaction and reducing instances of fraud. To support its argument, AuthWallet cited Messaging Gateway Sols., LLC v. Amdocs, Inc., but the district court ultimately distinguished the present facts from Amdocs.
In Amdocs, the court assessed two patents that outlined a “method that enables a device that ordinarily cannot send a message to a different device to do so,” which the court found to be “essentially the same as [the abstract idea of] a translator assisting two people who speak different languages to communicate with each other.” However, because the patents (1) contained solutions to problems unique between text-message communications between a mobile device and a computer, and (2) were rooted in computer technology to overcome a problem arising in computer networks, the court found that the patents satisfied Alice step two.
On the other hand, the district court acknowledged that problems of online fraud and consumer authentication are not unique to online discounted sales. Brick-and-mortar retailers who provide for coupons and other discounted pricing schemes have long faced fraud and verification issues, and non-commercial transactions across the internet and among other computer interactions readily involve issues of fraud and misrepresentation.
Because the patent’s two-factor authentication and reduced fraud innovations speak solely to the abstract idea concerning discounted payment transactions under Alice step one, the district court found that the claims of the ’852 patent failed Alice step two and thus found dismissal was appropriate.
The team representing Block, Inc. included Daniel Block, Chandrika Vira, Michael Specht and William Milliken of Sterne, Kessler, Goldstein & Fox.
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26 comments so far.
concernedMay 11, 2022 04:28 pm
And the PTAB on page 13 of their decision said no patent because it did not improve “another” technology, it only was an improvement to SSDI eligibility. Which I might add is an improvement through the Social Security Administration network, the Social Security Administration does not use pen and paper. The PTAB implied SSDI eligibility and their networks are a technology by use of the word “another.”
Since when do patents have to improve another technology other than the one targeted? Sure, confining a truly abstract process to one technology does not make an abstract process patent eligible, but it does not disqualify a truly eligible patent process either. If a process prevents airplane crashes, does it get no patent because car crashes still happen?
BMay 11, 2022 03:34 pm
@ Primary Examiner “With all due respect, SSDI is not a technology.”
The Supreme Court (Bilski) has already declared that s 101 includes business methods, and TC3600 is evidence that the USPTO examines business methods
concernedMay 11, 2022 02:46 pm
Why are physical improvements to a SSDI computer network not eligible for a patent?
Considering every citizen has a Social Security number, that is one big network I am improving.
primary examinerMay 11, 2022 02:18 pm
With all due respect, SSDI is not a technology.
If your invention provided physical improvements to a computer network as you say it does, I honestly do not think we would be having this discussion now.
Again, wish you all the best, we do not seem to be on the same wavelength on this one. And that’s ok too.
ConcernedMay 11, 2022 02:04 pm
The insanity of the patent system is obvious.
The PTAB says I met the law as written by Congress, solved a long standing problem and made a technological improvement to my field of SSDI and still no patent because of so-called mental steps.
The technological improvement for those wondering is my process finds errors and omissions that the Administrating Agency’s very own computer system and personnel could not find. In other words, their computer will rise to a level of operation never achieved before.
Alleging mental steps, even though not logically possible that mental steps could perform such a physical improvement to a computer network, is very interesting to inventors who solve problems.
concernedMay 11, 2022 01:42 pm
Inventive Concept. 2106.05
A ii: An improvement to another technology
The PTAB already stated in writing I improved the technical field of SSDI. In the blue brief we point out that PTAB admission and others.
I am assuming my process does not have to improve all fields of technology, just mine. Obviously, no invention improves all fields of technology.
In any event, Washington v Glucksberg states when a statute can have words added to it from a court. I do not think this is a case to be adding words to statutes.
primary examinerMay 11, 2022 01:25 pm
Have you looked at MPEP 2106.05?
I’m sure you have. I’m not trying to start or continue an argument here, maybe we have different interpretations of the MPEP, and that’s ok too.
I wish you best of luck with your endeavors, however my personal (and professional opinion) is that, based on the current MPEP, your claim does not pass 101 eligibility.
concernedMay 11, 2022 01:18 pm
Where specifically in the MPEP is “inventive concept” and significantly more” defined. Please a dictionary type definition, no circular reasoning.
I thought Bilski stated business methods are patentable, Diehl and others are patented?
Perhaps Congress should remove process and method from Section 101? In the meantime, the everyday meaning of process and method shall be used per Diamond v Diehl and other SCOTUS case law. Hence, a due process argument as only Congress has that authority to define its words.
And I have a new and useful process per the ordinary definition of those words.
It seems to me the patent system has taken its eyes off solving society’s problems and improving people’s lives, and is involved with gamesmanship.
primary examinerMay 11, 2022 12:44 pm
A mental process can be performed mentally or using pen and paper. Performing it on/using a generic processing element still falls under the mental process category. This is what is stated in the PEG and MPEP, not a personal opinion.
With all due respect, your claimed steps, as Groan noted, fall in this category.
As for the inventive concept/significantly more, again, as per the Guidance and the MPEP, these do not refer to business related improvements. You may argue that they should, and I get that.
While I truly admire you for your efforts, I subscribe to Groan’s earlier post and opinion.
concernedMay 11, 2022 11:58 am
I have people in my field that know what I accomplished remark “Mental steps?” in a state of confusion.
There is no way my process can be done mentally under any definition, legal or otherwise. If the problem could have been solved mentally, it would have been solved on day 2 of the program rollout back in 1956.
Many of the people in my field are well educated, to include attorneys and administrators. They find this whole patent thing bizarre.
BMay 11, 2022 11:35 am
@Anon “There seems to be a serious (and historical) misunderstanding as to just what the Mental Steps theory was.”
“It was never about parsing a claim and determining whether any subset of elements could be performed in a person’s mind.”
Anon, yes and no – as you are perfectly aware
Benson absolutely blurred the line in the discussion of claim 8 – the one with a reentrant shift register – and I literally argued this with Judge Chen last week. Also, Justice Stevens’ dissent in Diehr is all “muy mental steps!!!”
AnonMay 11, 2022 11:00 am
There seems to be a serious (and historical) misunderstanding as to just what the Mental Steps theory was.
It was never about parsing a claim and determining whether any subset of elements could be performed in a person’s mind.
concernedMay 11, 2022 10:12 am
Do you have the definition of inventive concept and significantly more? Abstract ideas are patentable if the same meet these definitions. Would a process doing significantly more than millions of professional and experts in my field could ever accomplish be significantly more?
What are your thoughts about Alice defining abstract as well known, routine and conventional based on evidence from a 1890s textbook? Can you cite one instance where my claims individually or collectively have ever been used in commerce as the USPTO and Solicitor sure have not been able?
Or is your post based on opinion, not evidence?
BMay 11, 2022 10:04 am
@ Groan “However, your claims are clearly directed to an abstract idea. Steps (c)-(g) can all be done by looking at physical data records and using pen/paper. Steps (a)-(b) of providing computer processing means, a computer readable [medium], and access to a [database] do not add significantly more to the abstract idea recited in steps (c)-(g). . . . blah blah blah blah”
Forgetting for a moment that his claims do something no one ever did before, and no one knew how to do, you’ve really downed a lot of the Kool-Aid
No one in the entire USPTO knows what “inventive concept” or “significantly more” mean. You realize that, correct?
Compare the claims of Diamond v Diehr, which involved generic collection of data, and providing an output signal to open a mold – done for hundreds of years.
Soooo incredibly generic, right?
Further, all the processing in Diehr could be done with pen and paper (assuming that you ignored the fact that the claims require a computer), and the Arrhenius equation was known for over 130 years prior to the Diehr decision.
Don’t the claims of Diehr preempt rubber molding using the Arrhenius equation?
Where’s the inventive concept?
I’m going to excuse the vast gaps in your critical thinking to being a lifelong government employee.
concernedMay 10, 2022 06:17 pm
B in my blue brief skillfully argues that SCOTUS in both Alice and Mayo determined abstract from evidence that the process in question was in commerce for a long, long time. The written decisions say as much. End of story at step 1.
Thank you for your kind remarks and support! It is hard to believe I have to make a federal case out of my circumstances, a joke we said often as kids on the playground: “Oh yea, you don’t have to make a Federal case out of it!”
Everything I learned in life, I learned in Kindergarten. That would make a great book concept. ?
BMay 10, 2022 06:01 pm
@ Pro Say “That the Solicitor Office’s attorney’s would support this clearly and unquestionably craptastic rejection shocks the conscience.”
Everything is abstract, and there’s nothing enough to be an inventive concept. It was the inevitable result once the SCOTUS penned Alice Corp.
I get it now.
BMay 10, 2022 05:44 pm
Alice-Mayo – step one: Declare that the claims are directed to something absurdly broad, and therefore abstract, while ignoring 99% of the details of the claims.
Alice-Mayo – step two: Declare that there’s no “inventive concept,” never provide a single limiting principle to the phrase “significantly more,” and never discuss the claim language beyond the usual cliche broad strokes
From ChargePoint Inc. v. SemaConnect, Inc., 920 F.3d 759, 773 (Fed.Cir. 2019)
“Where a claim is directed to an abstract idea, the claim must include “’additional features” to ensure ‘that the [claim] is more than a drafting effort designed to monopolize the [abstract idea].’ These additional features cannot simply be “’well-understood, routine, conventional activit[ies]” previously known to the industry.” Indeed, adding novel or non-routine components is not necessarily enough to survive a § 101 challenge. See Ultramercial, 772 F.3d at 715 (disagreeing with the patent owner’s argument that “the addition of merely novel or non-routine components to the claimed idea necessarily turns an abstraction into something concrete”).”
GroanMay 10, 2022 05:32 pm
Concerned: I have some pity in that you filed your patent application soon after Alice was decided.
However, your claims are clearly directed to an abstract idea. Steps (c)-(g) can all be done by looking at physical data records and using pen/paper. Steps (a)-(b) of providing computer processing means, a computer readable [medium], and access to a [database] do not add significantly more to the abstract idea recited in steps (c)-(g). Solving a longstanding problem can only be used as evidence of non-obviousness. A novel and non-obvious abstract idea is still an abstract idea.
Why have you been wasting your time appealing to PTAB, requesting a PTAB rehearing, and appealing to the CAFC? This should have died before being appealed to PTAB. I sincerely hope that you are a pro bono client as all of this is just lighting $$$ on fire.
Pro SayMay 10, 2022 05:03 pm
concerned, I’ve said it before, and I’ll say it again:
Your claims are eligible. And it’s not even close. Not even.
That the Solicitor Office’s attorney’s would support this clearly and unquestionably craptastic rejection shocks the conscience.
Anyone’s conscience but theirs, that is.
Shame on them.
concernedMay 10, 2022 04:46 pm
Thank you. If this case forces dictionary type definitions it will make everyone’s job easier.
primary examinerMay 10, 2022 04:34 pm
I’ll spare you my opinion, as it’s irrelevant.
I admire all inventors, everyone that goes through the invention and patent application process has my respect.
Model 101May 10, 2022 04:26 pm
More crook stuff.
concernedMay 10, 2022 04:24 pm
As an aside, the 2 university studies submitted on the Official Record show professionals with 35 years of experience and 25 years of experience could not should this longstanding problem with physical steps. How could a problem be solved mentally that professionals could not solve physically? The one professional, Thomas Bush, is considered THE expert in this field. He holds national seminars.
I am sure that any definition of significantly more or inventive concept my process would meet at Step 2, other than an unspecified body of law. Considering I solved a longstanding problem, I am entitled to the definition of significantly more and inventive concept from this aspect also (in addition to meeting the everyday language of the law.)
Thank you for your interest.
primary examinerMay 10, 2022 03:18 pm
Concerned: is your application published? If so, I’d be interesting in taking a look, I’ve noticed you reference your process numerous times.
Pro SayMay 10, 2022 01:20 pm
concernedMay 10, 2022 08:13 am
At step one of this patent, the claim was routine, well understood and conventional. The practice had been used for years.
Funny, the PTAB and Solicitor calls my process abstract even though they cannot get past step 1: Not routine, not well known and not conventional, the process never has been used (never disputed).
PTAB and the Solicitor say mental steps. Really? Meet them anywhere and bet them a considerable dollar amount they cannot do my steps in their mind.
At 6:52 of my CFAC oral arguments, one of the judges suggest that SCOTUS should be asked the questions we brought forth. And both the Court and Solicitor did not offer any definition of inventive concept or significantly more.
Seems to me if PTAB said I met the law as written but not their legal version, then I am entitled to know exactly what is that legal definition.