Patent on Method of Processing Payments in Sales Transactions Found Abstract | Knowledge
AuthWallet claimed a patent relating to financial transaction data processing methods and systems against Block. Specifically, the claims describe a method of processing financial transaction data using authorization requests and granting consumer discounts and benefits for use in future purchases from the retailer.
Block moved to dismiss. In finding that the claims were for non-statutory subject matter under 35 U.S.C. § 101, the U.S. District Court for the Southern District of New York applied the now familiar two-step method. Mayo/Alice analysis.
First step: are the claims directed towards an abstract idea?
To Alice In the first stage, the court found that the claims were directed at the abstract idea of ”dealing with payments in a sale transaction where a benefit, such as a reduced payment, is granted to the buyer for a use in future transactions”. The court concluded that the patent merely described conventional business practices, noting that “[f]or years, retailers have provided coupons and other financial incentives to customers upon purchase. The court further found that the fact that the claims require these conventional business practices to be performed on a computer did not make the idea patentable.
The court compared this case to others where patent claims were found to be directed to an abstract idea. Specifically, the court found that this case was comparable to In re Elbaum2021 WL 3923280 (Fed. Cir. September 2, 2021), Universal Secure Registry LLC v Apple Inc.10 F.4th 1342 (Fed. Cir. 2021), and RDPA, LLC v Geopath, Inc., 543 F. Supp. 3d 4, 16 (SDNY 2021).
In In re Elbaum, the Federal Circuit found that a patent for storing, receiving, analyzing, and processing data covered an abstract idea because it was a process “ordinarily performed in the course of commerce.” The court concluded that this was similar to the patent in this case, as both patents “describe[d] sales transaction activity that is “usually done” in the course of commerce. »
AuthWallet argued that the complaints were aimed at more than conventional methods performed on a computer, as the complaints provided a solution to problems unique to online transactions, such as credit cards not being physically present for the transaction and the lack of a physical card led to higher transaction fees. AuthWallet further argued that the claimed methods and systems provide access to discounts that otherwise would have been restricted to physical stores. In rejecting these arguments, the court relied on Universal Secure Registry and GDPR.
In Universal Secure Registrythe Federal Circuit found that a patent aimed at purchasing products securely without providing credit card information to the merchant was aimed at an abstract idea, because “the claims lay out conventional actions in a generic way – for example, authenticating a user using conventional tools and generate and transmit this authentication – without improvement[ing] any underlying technology. The court concluded that this was analogous to the patent in this case, as both patents “mitigate the transactional security concerns of online credit cards by allowing the intermediary to manage and transmit authentication requests”, what the Federal Circuit deemed conventional. Further, the court noted that the patent in this case, like the one in Universal Secure Registry“does not talk about specific or technical problems and solutions, but rather sets out generic steps and results.”
In GDPRthe Southern District of New York found that patents “to track exposure and reaction to public media displays were aimed at the abstract idea of collecting and analyzing data, despite the patents claiming to solve the problems data collection specifically in home media contexts using GPS technology.” In that case, the court concluded that “the fact that the patent seeks to address security and transaction fee issues in card transactions non-physical credit” cannot save it because, as in GDPRthe narrow context does not transform an abstract idea into a non-abstract idea.
Second step: is there an inventive concept?
Change to Alice second step, AuthWallet argued that the claims provide a specific enhancement to e-commerce through a “two-step authentication process performed by an intermediary service, where the intermediary service transmits a transaction notification to a mobile device, and the transaction notification message to provide information to continue the transaction.” The court disagreed, finding there was no inventive step because the claims “simply use two-step authentication processes and data storage mechanisms to handle payment transactions online with discounts”. The court held that this two-step authentication process related to “generic computer functions” performed by “conventional computer components” using “fundamental business practices”.
AuthWallet further argued that the patent overcomes a specific e-commerce problem where the credit card is not physically presented to the seller, resulting in reduced fees due to reduced fraud. The court rejected this argument, noting that “online fraud and consumer authentication are not unique to online discount sales” and that “AuthWallet does not connect the fraud to the claimed allegations”.
Finally, AuthWallet argued that preemption was not an issue because the claims were limited to e-commerce. The court disagreed, concluding that “e-commerce does not solve preemption problems due to the proliferation of online sales in the marketplace today.”
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