On October 23, 2014, ICAP Patent Brokerage will sell a portfolio of patents relating to systems and methods for secure identity authentication for electronic funds transfer. The patents owned by Payment Pathways, Inc., related back for priority purposes to a provisional patent application first filed in the United States on February 28, 2003.
One of the inventors named on all four of the patents up for auction is Richard O’Brien, who spoke with me on the record on August 13, 2014. I asked him how he got involved doing research and development on payment gateway systems and processes and he explained that while he was doing some basic patent research he stumbled across a 401(k) patent that provided a system that would allow individuals to take loans from themselves. “I thought that was the coolest idea in the world,” O’Brien said.
O’Brien would visit the owner of the patent rights and the rest is history. O’Brien struck up a working relationship with Franco Modigliani, the first named inventor on U.S. Patent No. 7,831,490, which is the earliest of the patents in the portfolio that will be auctioned. “It takes a genius to see simplicity when other people see complexity,” O’Brien said. “Franco always kept in mind what money really is – money is only a ledger entry unless you can withdraw it.”
But how can you facilitate trusted, verified, secure transactions in real time in a way that doesn’t open accounts up to malicious actors? In order to be a useful innovation it would have to provide certainty to both the sender and receiver, be fast and secure, be low cost and transparent, and be versatile enough to be used for both personal and business transactions. Of course, it would have to be a solution that would be scalable and capable of near universal acceptance. The problems facing the inventors were formidable, particularly so when the innovation was being developed some 12+ years ago.
The Solution to the Problem
The big problem that that needed to be solved was how can you instantaneously lock out bad actors? To accomplish this, the chain of innovations developed sought to address a fundamental weakness with DNS. “DNS was never designed to do revocations instantly, which is a flaw when you are talking about bank accounts. So at a basic level the innovation was to get the bad actors out of the system instantly, which is critical,” O’Brien explained.
The ‘490 patent explains in the Detailed Description that from a high level overview the “invention relates to establishing and using a linked credit account (LCA). In a preferred embodiment of the present invention, a central directory and/or processor is established and made public. When a payer wishes to send a payment to a payee, the payer need give only the payee’s unique identifier, which the central directory/processor translates into the client’s linked credit account number and/or location of the appropriate financial institution. The central directory can act essentially as the definitive root directory to all forms of LCAs… The banks or other payment entities are responsible for verifying the true identity of the account holders. Conformance to enrollment rules by all banks and third party payment processing institutions insures that the linkage information is accurate and thus can be trusted by all parties.”
It is the verified linking of accounts in a manner that secures the bank accounts but still allows all parties involved to rely on the accuracy of the transactions and identity of the parties that makes these innovations so valuable. The invention makes it possible to publicly disclose payment addresses that can only receive deposits, which secures the accounts from malicious actors who might otherwise seek to gain access to drain funds from the account. Such a safeguard is essential in order to facilitate instantaneous transactions suitable for today’s fast paced digital economy. Public payment addresses can be linked to any kind of financial account for safe public discoverability and interoperability. This means that the innovations disclosed can be incorporated into both current and future mobile payments systems and solutions.
Additional patents also extend the core concept and teach trust functions for transfers of digital assets, access control permissions, and rules and instructions for transfers.
The patents in the Payment Gateway portfolio have the potential to be extremely attractive to the right party because the UK Payments Council is, in essence, looking to establish a federated registry service that deals with instant cross-border payments in Europe. In fact, the UK Payments Council recently issued a Request for Proposal for a centralized payment infrastructure platform, explaining that the so-called SEPA IBAN?Only (SEPAIO) project “has been initiated and is tasked with identifying suitable solution options for the provision of a central, publically accessible source of payment routing data for the UK which will facilitate the automated processing of SEPA payments.
On August 18, 2014, the U.S. Federal Reserve System released the Payment System Improvement Summary of Town Hall Discussions that detailed how the Fed has committed itself to a near-term upgrade of the country’s payment infrastructure.
Of course, with any multi-stakeholder effort there will be multiple proposals and there is no telling exactly which direction any standards will head, but there is at least some reason to believe that the technology and innovation disclosed in the patents in this Payment Gateway portfolio could be at the center of any platform adopted. Those interested in acquiring the portfolio should, of course, do their own due diligence.
About the Portfolio
The chain of innovations divulged in this portfolio creates a security-by-design Trust Framework by binding payment addresses, ownership, and provenance to a collection of identity attributes such as access control permissions, rules and instructions to expedite and increase net deposits in recipient accounts. The patents that will be sold are:
U.S. Patent No. 7,831,490, which is titled Enhanced system for electronic funds transfer and elimination of the payee’s need for encryption and privacy. The underlying application was filed on February 26, 2004, but with a priority filing date relating back to a provisional patent application filed on February 28, 2003. The patent includes claims to a computer-implemented method, but unlike so many software patents the specification provides concrete explanation and claim 1 incorporates the technical disclosure in a meaningful way to define a process that prior to the disclosure had not existed.
U.S. Patent No. 7,945,511, which is titled Methods and systems for identity authentication. The underlying application resulting in this patent was a continuation-in-part filed on the ‘490 patent application. The filing date of the ‘511 patent is November 3, 2006, but with a priority date that traces at least in part back to the February 28, 2003, provisional patent application mentioned above. The claims in this patent are to a system. The invention more particularly relates to the system of verifying identity attributes necessary for making transactions, such as making payment deposits, or for obtaining access to restricted information, without the need for security or encryption devices. Again, unlike with so many “software patents,” the disclosure is particularly robust. I am a big critic of patents of this type filed with minimal flowcharts. The flowcharts accompanying this disclosure are detailed and do meaningfully disclose the algorithms in play.
U.S. Patent No. 8,271,381, which is also titled Methods and systems for identity authentication. The underlying patent application was filed on April 5, 2011 and is a continuation of the application that ultimately issued as the ‘511 patent. Therefore, at least part of the disclosure would be entitled to priority going as far back as February 28, 2003. Like the ‘511 patent, the ‘381 patent includes system claims drawn to the same disclosed invention of a discovery & verification system for payments but adds other attribute bindings to verify and protect the transfer of information assets to and from repositories for various communities of interest.
U.S. Patent No. 8,447,630, which is titled Systems and methods for managing permissions for information ownership in the cloud. This application is a continuation-in-part from the application that ultimately issued as the ‘511 patent application, which again means that at least a portion of this disclosure can claim priority at least as far back as the February 28, 2003 filing of the provisional patent application previously mentioned. This patent includes both computer-implemented method claims, as well as systems claims and non-transitory computer-readable storage medium claims. The innovation disclosed “relates generally to information transfer, storage and retrieval, and more specifically, to a networked based computer system and method for establishing explicit permissions and/or privacy preferences and for implementing the transfer, storage and retrieval of select information based on these permissions and preferences.”