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Summary
Claims of US patent 5,826,245 in the name of Card Verification
Services LLC were found to be patent eligible subject matter under 35 USC 101
because while they are drawn to the abstract idea of verifying transaction
information, which is a fundamental economic practice long prevalent in our
system of commerce, they are sufficiently limited by the plausible
transformation that occurs when a randomly-generated tag is added to the piece
of confidential information.
Comments
- Adding narrowing limitations to
a claims may confer patentability.
- While the patent is device
agnostic, as the claims are silent regarding machinery, to invalidate the patent
on the ground that it does not expressly require the use of a computer in its
claims would be overly formalistic.
Broad description of the invention
US Patent 5,826,245 (‘245) claims an
invention for providing verification information for a transaction securely.
Specifically, `245 discloses methods for passing confidential information over
an unsecured network with reduced risk of it being captured by an untrusted
party.
Characteristic Claim
1. A method for giving verification
information for a transaction between an initiating party and a
verification-seeking party, the verification information being given by a
third, verifying party, based on confidential information in the possession of
the initiating party, the method comprising:
on behalf of the initiating party,
generating first and second tokens each of which represents some but not all of
the confidential information,
sending the first token
electronically via a nonsecure communication network from the initiating party
to the verification-seeking party,
sending the second token
electronically via a nonsecure communication network from the initiating party
to the verifying party,
sending the first token
electronically via a nonsecure communication network from the
verification-seeking party to the verifying party,
verifying the confidential
information at the verifying party based on the first and second tokens, and
sending the verification information electronically via a nonsecure
communication network from the verifying party to the verification-seeking
party.
Dependent claims 4 through 6 require
the addition of randomly generated, identical tags to the first and second
pieces of the confidential information. The addition of the tags completes the
creation of the tokens. The verifying party proceeds to authenticate the
transaction by associating the first and second tokens with each other based on
the identical tags added to each token.
The tags are four-digit pseudorandom
strings of numbers and characters. The same tag is added to both pieces of the
confidential information (e.g, a credit card number), the tag being attached to
the end of one piece and to the beginning of the other piece. This attachment
procedure allows the verifying party to recognize which piece comes first in
reconstructing the confidential information. The `245 Patent states that use of
a pseudorandom tag reduces the chance that someone monitoring the output of the
device (e.g., a computer) for the purpose of attempting to steal the
confidential information will be able to predict what tag will be used. Using
the claimed process prevents the verification-seeking party from ever receiving
the entirety of the confidential information, instead only receiving a tagged
piece and an approval code. The confidential information is never available as
a whole except at the initiating party's computer and at the verifying party's
portal.
22. A method for use in relation to
providing verification information for a transaction between an initiating
party and a verification-seeking party, the verification information being
given by a third, verifying party, based on confidential information in the
possession of the initiating party, the method comprising:
on behalf of the initiating party,
generating first and second tokens each of which represents some but not all of
the confidential information,
on behalf of the initiating party,
sending the first and second tokens electronically via a nonsecure
communication network,
collecting the first and second
tokens at the verifying party,
verifying the confidential
information at the verifying party based on comparing the first and second
tokens, and
sending the verification information
electronically via a nonsecure communication network from the verifying party
to the verification-seeking party.
Details
Citigroup contends that the `245
Patent is invalid because it is directed to patent-ineligible subject
matter—specifically an abstract idea. Citigroup argues that the claims do not
recite the application of an abstract idea in a concrete setting, but instead
merely recite an idea that can be performed as a mental process. In particular,
Citigroup contends that the claimed method is invalid because the method (1)
can be performed by a human using pen and paper; (2) is not tied to a
particular machine or apparatus; and (3) does not require or result in the
transformation of one article into another. However, because the `245 Patent
plausibly sets forth a process instituting the application of an abstract idea,
Citigroup's Motion to Dismiss is denied.
An inventor may obtain a patent for
"any new and useful process, machine, manufacture, or composition of
matter, or any new and useful improvement thereof." 35 U.S.C. § 101.
Section 101 impliedly bars patents on" `[l]aws of nature, natural
phenomena, and abstract ideas.'" Alice Corp. Pty. Ltd. V. CLS Bank
Int'l, 134 S. Ct.
2347, 2354 (2014) (quoting Ass'n for Molecular Pathology v.
Myriad Genetics, Inc., 133 S. Ct. 2107, 2116 (2013); see also Mayo Collaborative Servs. V.
Prometheus Labs., Inc., 132 S. Ct. 1289, 1293 (2012). The Supreme Court has
explained that" `[a] principle, in the abstract, is a fundamental truth;
an original cause; a motive; these cannot be patented, as no one can claim in
either of them an exclusive right.'" Bilski v. Kappos, 561 U.S. 593, 130 S. Ct. 3218, 3230
(2010)
(alteration in original) (quoting Gottschalk v. Benson, 409 U.S. 63, 67 (1972) (internal quotation marks
omitted)); see also Mayo, 132 S. Ct. at 1301 ("`the basic tools of
scientific and technological work'" are not patentable) (quoting Benson, 409 U.S. at 67).
A fine line must be walked in
excluding patents that "pre-empt the use of an approach" that lead to
"a monopoly over an abstract idea," while also recognizing that
"all inventions ... embody, use, reflect, rest upon, or apply laws of
nature, natural phenomena, or abstract ideas." See Alice, 134 S. Ct. at 2354 (internal citations and quotation
marks omitted). Accordingly, an invention is not rendered ineligible for patent
merely because it involves an abstract concept. Id.; see also Diamond v. Diehr, 450 U.S. 175, 187 (1981). "[A]pplication[s]" of
such concepts "`to a new and useful end,'" remain eligible for patent
protection. Benson, 409 U.S. at 67. In applying the § 101 exception,
courts must distinguish between patents that claim the "building
blocks" of human ingenuity and those that integrate the building blocks
into something more, thereby transforming them into a patent-eligible
invention. See Mayo, 132 S. Ct. at 1294, 1303. The Supreme Court has set
forth a two-step framework for distinguishing patents that claim laws of
nature, natural phenomena, and abstract ideas from those that claim
patent-eligible applications of those concepts. First, courts must
"determine whether the claims at issue are directed to one of those
[patent-ineligible] concepts." Alice, 134 S. Ct. at 2355. If so, courts proceed to consider
the elements of the claims "to determine whether the additional elements
`transform the nature of the claim' into a patent-eligible application." Id;
Mayo, 132 S. Ct at 1297.The first step requires this Court to determine
whether the claims at issue are directed toward a patent-ineligible concept,
specifically, an abstract idea. They are. The claims recited in the `245 Patent
are drawn to the abstract idea of verifying a transaction.
Patents that merely claim
well-established, fundamental concepts fall within the category of abstract
ideas. Cyberfone Sys., LLC v. CNN Interactive Grp., Inc., 558 Fed. A'ppx
988, 991 (Fed. Cir. 2014). Both the Supreme Court and the Federal Circuit have
rejected attempts to patent basic financial and economic concepts. See Bilski, 130 S. Ct. at 3231 (holding that risk hedging is a
"fundamental economic practice long prevalent in our system of commerce
and taught in any introductory finance class"); Fort Props., Inc. v. Am. Master
Lease LLC, 671 F.3d
1317, 1318, 1322-23 (Fed. Cir. 2012) (enabling tax-free property exchanges); Bancorp Servs., L.L.C. v. Sun Life
Assurance Co. of Canada (U.S.), 687 F.3d 1266, 1277 (Fed. Cir. 2012); Dealertrack, Inc. v. Huber, 674 F.3d 1315, 1330-34 (Fed. Cir.
2012)
(applying for credit); CyberSource Corp. v. Retail
Decisions, Inc.,
654 F.3d 1366, 1367-68, 1376-77 (Fed. Cir. 2011) (method for detecting fraud in
credit card transactions, including simple strategies that can be performed
mentally, without the aid of a machine); In re Comiskey, 554 F.3d 967, 970-71, 981 (Fed.
Cir. 2009)
(conducting arbitration); In re Schrader, 22 F.3d 290, 291, 293-94 (Fed Cir.
1994)
(bidding at an auction).
It follows from these cases, and CyberSource
in particular, that the claims within the `245 Patent are directed to an
abstract idea. The very title of the `245 Patent is "Providing
Verification Information for a Transaction." Card Verification's claims
involve a method of passing along confidential information through a trusted,
third-party intermediary to ensure both that a consumer can complete the
transaction and that the necessary confidential information remains secure. On
their face, the claims are drawn to the concept of verifying transaction
information, and like the risk hedging in Bilski or verification of
similar information in CyberSource, the concept of transaction
verification is "a fundamental economic practice long prevalent in our
system of commerce." See Bilski, 130 S. Ct. at 3231. Even when looking at the patent in
the light most favorable to Card Verification, it is directed toward a
patent-ineligible abstract idea. Finding the abstract idea itself to be
ineligible subject matter is not the end of the inquiry. See Mayo, 132
S. Ct. at 1297 ("[D]o the patent claims add enough ... to allow the
processes they describe to qualify as patent-eligible processes that apply
natural laws?"). The second step in the § 101 analysis requires
determining whether "additional substantive limitations ... narrow,
confine, or otherwise tie down the claim so that, in practical terms, it does
not cover the full abstract idea itself." Accenture Global Servs., GmbH v.
Guidewire Software, Inc., 728 F.3d 1336, 1341 (Fed. Cir. 2013) (internal citations and quotation marks
omitted).
Citigroup argues that the `245
Patent is not patent eligible because it is merely a "mental process"
that can be performed by humans. Citigroup additionally contends that the
claims do not expressly require the use of a computer or any other specific
machine because the patent says that "the technique could be used in a
wide range of applications to protect confidential information." (`245
Patent, 4:8-10). Citigroup states that the entirety of the process can be
performed with pen and paper.
The `245 Patent is device agnostic,
as the claims are silent regarding machinery. However, a review of the diagrams
demonstrates incorporation of a computer, nonsecure network, and pseudorandom
tag generating software. A plausible interpretation of the patent is that computing
devices, software, keyboards, and credit card readers would be required to use
the invention. To invalidate the `245 Patent on the ground that it does not
expressly require the use of a computer in its claims would be to adopt an
"overly formalistic approach[] to subject-matter eligibility." See
CLS Bank Int'l v. Alice Corp. Pty.
Ltd., 717 F.3d
1269, 1281 (Fed. Cir. 2013).
Although simply implementing an
abstract idea on a computer is not a patentable application of the idea, see
Alice, 134 S. Ct. at 2357, a plausibly narrowing limitation is
that of required pseudorandom tag generating software. The question whether a
pseudorandom number and character generator can be devised that relies on an
algorithm that can be performed by a human with nothing more than pen and paper
poses a factual question inappropriate at the motion to dismiss stage. Without
discovery on the issue, the Court is bound to make all reasonable inferences in
favor of Card Verification. Here, an entirely plausible interpretation of the
claims include a limitation requiring pseudorandom tag generating software that
could not be done with pen and paper. Accordingly, Card Verification has
plausibly alleged a method that does not comprise a "mental process."
Citigroup additionally contends that
the `245 Patent cannot survive the "machine or transformation" test.
Although the Supreme Court rejected exclusive reliance on the test as unduly
rigid for measuring compliance with § 101, the test is nevertheless a "useful
and important clue" to patentability. See Bilski, 130 S. Ct. at 3227. Under the test, a process is
patent-eligible if it is "tied to a particular machine or apparatus"
or "transforms a particular article into a different state or thing."
SiRF Tech. v. Int'l Trade Comm'n, 601 F.3d 1319, 1332 (Fed. Cir.
2010)
(internal quotations omitted). For "a machine to impose a meaningful limit
... it must play a significant part in permitting the claimed method to be
performed." Id. at 1333. By contrast, "simply implementing an
abstract concept on a computer, without meaningful limitations to that concept,
does not transform a patent-ineligible claim into a patent-eligible one." Accenture, 728 F.3d at 1345.
Even under a liberal reading of the
`245 Patent, the claims are not tied to a particular machine. The claims are
entirely silent on the use of any physical apparatus, and although the diagrams
display use of computers and software, the claims universally fail to specify
how the computers are "specially programmed to perform the steps claimed
in the patent" and therefore claims nothing more than a general purpose
computer. Dealertrack, 674 F.3d at 1333.
But the claims may be sufficiently
limited by the plausible transformation that occurs when the randomly-generated
tag is added to the piece of confidential information. Typically, transforming
data from one form to another does not qualify as the kind of transformation
regarded as an important indicator of patent eligibility. See CyberSource, 654 F.3d at 1375 ("[T]he mere manipulation or
reorganization of data ... does not satisfy the transformation prong.").
But here, the claimed invention goes beyond manipulating, reorganizing, or
collecting data by actually adding a new subset of numbers or characters to the
data, thereby fundamentally altering the original confidential information. Contra
id. at 1372 (process of constructing "map" of credit card numbers
was no different than writing down a list of numbers and compiling
information).
The use of a credit card number
provides an illustrative example. Once the computer in the process splits up
the credit card number into two separate pieces, randomly generated tags are
added to the two pieces. The addition of the tag transforms what was once a
credit card number into an identifier for use by the verifying party. The
verifying party then matches up the two pieces of the information solely
because the randomly-generated tag is affixed to both. At least one of the
objects of the `245 Patent process is to transform data from one form into
another "that will be recognized by the intended recipient but secure
against decryption by unintended recipients." See, e.g., TQP Dev., LLC
v. Intuit, Inc., No. 2:12 CV 180 WCB, 2014 WL 651935, at *5 (E.D. Tex. Feb.
19, 2014). The claim requiring the addition of the tags plausibly does just
that. The patent not only recites a process for verifying transaction
information, it also involves a protocol for making the communication system
itself more secure. (`245 Patent, 2:14-20). Therefore, even though the method
does not result in the physical transformation of matter, see Diehr, 450 U.S. 175, it utilizes a system for modifying
data that may have a concrete effect in the field of electronic communications.
Accordingly, when viewing the patent in the light most favorable to Card
Verification, it plausibly recites a patent-eligible application of the abstract
idea of verifying a transaction. Citigroup's Motion to Dismiss is therefore
denied without prejudice. Citigroup is free to challenge the validity of the
`245 Patent after discovery and claim construction are completed in this case.