“The service of offering customers a discounted transaction was ‘common among brick-and-mortar retailers’ and in the past, retailers offered financial incentives, such as coupons, to customers upon purchase…. [T]The ‘852 patent simply describes that this conventional business practice can be done by technology rather than by hand.
Last week, the U.S. District Court for the Southern District of New York granted Block, Inc. a motion to dismiss a complaint filed by AuthWallet, LLC against it for failure to report. The district court found that AuthWallet’s patent claims were invalid because they claimed subject matter ineligible for the patent under 35 USC § 101.
AuthWallet US 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 allow customers to earn and redeem rewards from multiple providers.
In its complaint, AuthWallet alleged that Block’s payment platforms infringe one or more of the 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 use (i.e. used them) and, therefore, Block benefited financially and commercially.
The doctrine of equivalents states that “a product or process which does not literally infringe the express terms of a patent claim may nevertheless be considered to infringe if there is ‘equivalence’ between the elements of the offending 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 not eligible for protection under Section 101 because they relate to the abstract concept of processing discounted payments in sales transactions. and that 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 not patentable as a law of nature, natural phenomenon, or abstract idea (the “Alice test”).
Alice First step: it’s abstract
In the first step, the courts determine whether the claims at issue relate to a non-patentable concept, such as an abstract idea.
The district court ruled that the claims of the ‘852 patent were not eligible for Alice first step, because the management of online financial transaction data processing using authorization requests and the granting of discounts and benefits to the consumer for future purchases are abstract ideas for the purposes of the article 101. and mortar retailers” and in the past, retailers offered financial incentives, such as coupons, to customers upon purchase. The court further concluded that the ‘852 patent merely describes that this conventional business practice can be performed 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 course of commerce. Specifically, the claims set forth a secure transaction method in which consumers can make credit card payments without physically presenting their cards and preventing credit card information from being transmitted to the retailer. For example, patents in Universal Secure Registry and the ‘852 patent both mitigate the transactional security issues of online credit cards by having an intermediary handle and transmit authentication requests, which are processes the Federal Circuit has deemed “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 address security and transaction fee issues in unsecured credit card transactions. physical. The narrow context cannot prevent him from concluding that the treatment of payments expected in sales transactions is an abstract idea.
Alice Second step: no inventive concept
The second stage of the Alice requires a court to ask whether there is an inventive concept, i.e. an element or combination of elements sufficient to ensure that the patent amounts in practice to much more than a patent on the concept inadmissible to it -same. A claim that states an abstract idea should include additional features to ensure that the claim is more than a drafting effort to monopolize the abstract idea. The district court found that the ‘852 patent failed to pass this stage.
Block argued that Representative Claim 1 “simply automates the long-standing 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 turns the abstract idea of payment transaction rebate processing into a patent-eligible application.
Again, the district court referred to previous cases to reach its conclusion. In In re Elbaum, the court held that the patent – which disclosed a method for an Internet seller to provide a point of sale with a code containing information about a particular product or service – did not mention any incentivizing concept. There, the patent stated “generic computer functions, which . . . are performed by conventional computer components.
Moreover, the patent of the online credit card mechanism in Universal Secure Registry also failed to provide an inventive concept because “verifying a user’s identity to facilitate a transaction is a fundamental economic practice”.
Here, the court noted that the two-factor authentication innovations of the ‘852 patent not only concerned generic computer functions to be performed by conventional computer components to produce discounted payment transactions, but also involved authorizing and to facilitate transactions, which are fundamental economic practices.
AuthWallet argued that the ‘852 patent claims overcome a specific problem in e-commerce, as they facilitate purchases from an online seller where the credit card is not physically presented to the seller, 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 Amdocsthe court evaluated two patents describing a “method that allows a device that cannot normally send a message to another device to do so”, which the court found “essentially identical to [the abstract idea of] a translator helping two people who speak different languages to communicate with each other. However, since the patents (1) contained solutions to unique problems between SMS 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 satisfies Alice second step.
On the other hand, the district court recognized that online fraud and consumer authentication issues are not unique to online discount sales. Physical retailers that offer coupons and other discount pricing schemes have long faced fraud and verification issues, and non-commercial transactions over the Internet and among other computer-based interactions easily involve fraud and verification issues. false statements.
Since the patent’s two-factor authentication and fraud reduction innovations only speak to the abstract idea regarding discounted payment transactions under Alice first step, the district court found that the claims of the ‘852 patent had failed Alice the second stage and therefore concluded that the 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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