IP Law Daily, PATENT—Fed. Cir.: District court properly found payment processor patent was directed to abstract idea, (May 10, 2023)

By Kevin M. Finson, J.D.

The patent was directed to the well-established business practice of processing payments during a sales transaction where a benefit, such as a discounted payment, is awarded to the purchaser.

The federal district court in New York City did not err in finding that a patent directed to a system of payment processing including associating digital discount offers was unpatentable as an abstract concept because it performed longstanding business processes using generic and conventional computer components, the U.S. Court of Appeals for the Federal Circuit has determined. Finding no error in the district court’s analysis, the appeals court rejected the patent holder’s argument that the district court improperly overgeneralized the “focus” of the claims in its Alice step one analysis and failed to give the “security” aspects of the claims any weight whatsoever in its Alice step two analysis (In re: AuthWallet, LLC, May 10, 2023, Schall, A.).

AuthWallet, LLC (AuthWallet) was the owner of U.S. Patent No. 9,292,852 (the ’852 patent), titled “System and Method for Applying Stored Value to a Financial Transaction.” The patent is directed toward methods for processing financial transaction data, including associating digital discount offers or coupons, with particular customers when making a purchase. AuthWallet filed suit against a competitor, Block, Inc., (Block) alleging that Block’s payment processing services infringed the ’852 patent. Block offers mobile payment options that provide a means for customers to earn and redeem rewards for multiple vendors.

In May 2022, the district court granted Block’s motion to dismiss on the ground that the ’852 patent was directed to an abstract idea, namely, the well-established business practice of processing payments during a sales transaction where a benefit, such as a discounted payment, is awarded to the purchaser for use in a future transaction. Moreover, the patent’s claims—reciting authentication processes and data storage mechanisms to manage online payment transactions with discount—merely depended on generic computer functions carried out by conventional computer components. AuthWallet appealed.

Overgeneralization. AuthWallet argued that the district court erred by over-generalizing the “focus” of the claims on the first step of the Alice test, and that the court should have seen the patent claims as directed at technological improvements to credit card processing security rather than being directed to conventional payment processing. The Federal Circuit reviewed the claim language and found no error in the trial court’s analysis. In addition, the court pointed out where the trial court had specifically considered and properly rejected AuthWallet’s arguments that the security elements were patentable.

Intrinsic evidence. AuthWallet further argued that the district court erred in step two of the Alice test by not finding evidence of an inventive concept for the claims’ “security” aspects in the intrinsic evidence of record; specifically, in the claim language itself. The court reviewed the claim language and agreed with the lower court that the patent merely recited well-known and conventional ways to perform authentication and apply discounts in transactions.

The Federal Circuit affirmed the district court’s judgment.

The Case is No. 22-1842.

Attorneys: William Peterson Ramey, III (Ramey LLP) for AuthWallet, LLC.

Companies: AuthWallet, LLC; Block, Inc.

Cases: Patent FedCirNews NewYorkNews