Federal Circuit Affirms 101 Invalidation of Secure Transaction System Patents in Victory for Apple and Visa

By Steve Brachmann
August 27, 2021

“In our view, the claims ‘simply recite conventional actions in a generic way’… and ‘do not purport to improve any underlying technology….” – Judge Kara Stoll

https://depositphotos.com/28667711/stock-photo-green-us-101-south-highway.htmlOn Thursday, August 26, the U.S. Court of Appeals for the Federal Circuit issued a precedential decision in Universal Secure Registry LLC v. Apple Inc. in which the appellate court affirmed the District of Delaware’s grant of a motion to dismiss Universal Secure Registry’s (USR) patent infringement allegations. In a decision that will be discouraging to some, though unsurprising, the Federal Circuit okayed the district court’s invalidation of all asserted claims from USR’s four patents-in-suit, finding that each patent was properly gunned down after being placed on the firing line of Section 101 subject matter ineligibility. The opinion was authored by Judge Stoll.

USR had appealed the District of Delaware’s invalidation of claims from the following patents:

  • S. Patent No. 8856539, Universal Secure Registry. It claims a secure registry system enabling transactions between a provider and entities with secure data stored in the secure registry system using a method that verifies the identity of individuals or entities seeking access to privileges and for selecting granting privileges in response to verification.
  • S. Patent No. 8577813, same title as the ‘539 patent. It claims an electronic ID device allowing a user to select a user account for a financial transaction comprising a biometric sensor, a user interface, a communication interface, and a processor activating the electronic ID device after a successful authentication and generating encrypted authentication information wirelessly transmitted by the communication interface to a point-of-sale (POS) device.
  • S. Patent No. 9100826, Method and Apparatus for Secure Access Payment and Identification. It claims a system for authenticating identities of a plurality of users comprising first and second handheld devices, each with a processor for receiving biometric and authentication information to authenticate users of either device over a network.
  • S. Patent No. 9530137, same title as, and a continuation of, the ‘826 patent. It claims a system for authenticating user identities that involves the generation of an enablement signal transmitted to a first device in response to a second device’s approval of a transaction.

District Court Judge Ignores Magistrate’s Report that USR Patents Survive 101

USR first filed its complaint for patent infringement back in May 2017 against Apple and Visa. USR asserted that claims of these patents were infringed by Apple Pay, a system that was allegedly developed by Apple and Visa after both of them rebuffed USR, a company founded by information systems security expert Dr. Kenneth P. Weiss that had contacted both defendants as early as 2010 seeking to develop a commercial implementation of USR’s patented mobile secure transaction technologies.

Last June, U.S. District Judge Colm F. Connolly granted Apple and Visa’s motion to dismiss USR’s complaint after invalidating asserted claims of all four patents as directed to abstract ideas unpatentable under 35 U.S.C. § 101. In granting the motion to dismiss, Judge Connolly rejected a report and recommendation filed in September 2018  by U.S. Magistrate Judge Sherry R. Fallon finding that USR’s patent claims survived the Section 101 analysis at the first step of Alice/Mayo as “the plain focus of the claims is on an improvement to computer functionality itself, not on economic or other tasks for which a computer is used in its ordinary capacity.”

The 101 Firing Squad Ends USR Patent Claims

Applying Alice/Mayo in its own way, the Federal Circuit began by noting that “[i]n cases involving authentication technology, patent eligibility often turns on whether the claims provide sufficient specificity to constitute an improvement to computer functionality itself.” After looking at representative claim 22 of the ‘539 patent, the Federal Circuit agreed with Judge Connolly that the claim was directed to an unpatentable abstract idea just like similar claims that were invalidated by the CAFC’s 2016 decision in Prism Technologies v. T-Mobile USA. In Prism, challenged patent claims reciting steps of receiving and authenticating data identity, authorizing a client computer and permitting access were directed to an abstract idea because the claims didn’t cover a “concrete, specific solution.”

In our view, the claims ‘simply recite conventional actions in a generic way’… and ‘do not purport to improve any underlying technology… While we appreciate that the claims here are closer to the demarcation line between what is abstract and non-abstract than the claims in Prism, we conclude that, at Alice step one, the asserted claims are directed to a method for verifying the identity of a user to facilitate an economic transaction, for which computers are merely used in a conventional way, rather than a technological improvement to computer functionality itself.

At Alice step two, the Federal Circuit found no inventive concept transforming the abstract idea of the ‘539 patent into a patent-eligible application. Although USR argued that the claims recited time-varying codes and data sent to a third-party instead of a merchant, both of which rose to the level of an inventive concept, the Federal Circuit found that the ‘539 patent claimed that the generation of time-varying codes for user authentication was conventional and long-standing. Further, the use of a third-party intermediary in a financial transaction was too close to the claims invalidated in Alice, undermining USR’s argument that such was an inventive concept like the Internet content filtration system found patent-eligible by the CAFC in BASCOM Global Internet Services v. AT&T Mobility (2016).

Moving on to representative claim 1 of the ‘813 patent, USR argued on appeal that the claimed encrypted authentication information invention was like the improvement to computer functionality upheld by the Federal Circuit in 2018’s Finjan v. Blue Coat Systems. However, where Finjan involved the claimed use of a “behavior-based” virus scan improving a previous method of identifying virus based on previously identified viruses, “the claimed ‘encrypted authentication data’ here is merely a collection of conventional data combined in a conventional way that achieves only expected results,” the Federal Circuit found.

At Alice step two, the Federal Circuit found nothing in the ‘813 patent’s specification that suggested the claimed combination of conventional authentication techniques “achieves more than the expected sum of the security provided by each technique.” Citing to Electronic Communication Technologies v. ShoppersChoice.com (2020), the Federal Circuit further explained that “verifying the identity of a user to facilitate a transaction is a fundamental economic practice that has been performed at the point of sale well before the use of POS computers and Internet transactions.”

No Specific Technical Solution Sinks Secure Access Payment Patent Claims

Looking at representative claim 10 of the ‘826 patent, the Federal Circuit agreed with Judge Connolly that the ‘826 patent is directed to the abstract idea of multi-factor authentication of a user’s identity using two devices to enable a transaction. “There is no description of a specific technical solution by which the biometric information is generated, or by which the authentication information is transmitted,” Judge Stoll wrote. At Alice step two, the Federal Circuit found nothing suggesting that the claimed combination of conventional authentication techniques “achieves more than the expected sum of the security provided by each technique.”

The last patent laid to rest was the ‘137 patent, which, as a continuation of the ‘826 patent, fell under a very similar Alice/Mayo analysis as the ‘826 patent. Although representative claim 12 of the ‘137 patent included more detail than the ‘826 patent, “claim 12 does not tell a person of ordinary skill what comprises the secret information, first authentication information, and second authentication information.” While the Federal Circuit acknowledged that dependent claims provided more specificity on those aspects, the ‘137 patent’s specification identified each of those types of information as conventional. “[N]othing in the claims is directed to a new authentication technique; rather, the claims are directed to combining longstanding, known authentication techniques to yield expected additory amounts of security,” Judge Stoll wrote.

The significant drubbing experienced by USR at the Federal Circuit is only part of the story. Having filed a single patent infringement suit against Apple and Visa in U.S. district court, USR’s temerity in asserting its patent rights earned the company, a pioneer in wireless secure electronic transactions, a total of 26 inter partes review (IPR) and covered business method (CBM) review proceedings at the Patent Trial and Appeal Board (PTAB). Each of those petitions were filed by either Apple or Visa (save for one IPR filed by PTAB profiteer Unified Patents), and nine of those petitions included both Apple and Visa. Two of those petitions ended in mixed claim findings, one in findings of all challenged claims being unpatentable, and six of the petitions were settled prior to institution and can hardly be considered a win for the patent owner, even if the patent owner evades the added expense of the post-institution trial phase.

Image Source: Deposit Photos
Author: miflippo
Image ID: 28667711 

The Author

Steve Brachmann

Steve Brachmann is a freelance journalist located in Buffalo, New York. He has worked professionally as a freelancer for more than a decade. He writes about technology and innovation. His work has been published by The Buffalo News, The Hamburg Sun, USAToday.com, Chron.com, Motley Fool and OpenLettersMonthly.com. Steve also provides website copy and documents for various business clients and is available for research projects and freelance work.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author as of the time of publication and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 17 Comments comments. Join the discussion.

  1. TFCFM August 27, 2021 10:04 am

    The federal government ought to consider this tremendous cost-saving idea:

    Make and distribute rubber stamps to
    – patent examiners
    – PTAB ALJ’s
    – district court judges; and
    – Fed. Circuit judges
    that read, simply:

    You can’t validly claim ‘anything and everything that achieves the purpose I want to achieve’ unless you adequately disclose the full scope of that ‘anything and everything’.

    It fits here. It fits equally well yesterday’s Juno Therap. v. Kite Pharma. If equally fits many, many recent decisions on this same point.

    As part of the generation of patent attorneys who have trained the current younger crops, I think our generation bears a large measure of responsibility for letting the youngsters get away with the incredibly-sloppy-thinking that “if I can predict that some unknown thing will be able to achieve a certain function, then I have sufficiently ‘described’ that unknown thing in a 101 sense.

  2. concerned August 27, 2021 10:47 am

    “the plain focus of the claims is on an improvement to computer functionality itself, not on economic or other tasks for which a computer is used in its ordinary capacity.”

    So if the cure to cancer involved a computer, and millions of patients survived, yet the computer’s function do not increase, a patent is not possible? Where is such reasoning in s101 black letter law?

    And should the USPTO be renamed United States Computer Functionality Patent and Trademark Office, all other improvements to people’s lives need not apply?

    The joke of course is the SCOTUS said abstract ideas can be patented if a new and useful result occurred. When those court references are argued, been there done that, the same is simply ignored.

  3. Anon August 27, 2021 10:54 am

    TFCAM,

    Your mantra DOES NOT fit here. There is a world of difference along the lines of ‘predictability’ central to this case and explicitly distinguishing from the Juno case.

  4. mike August 27, 2021 11:43 am

    the asserted claims are directed to a method for verifying the identity of a user to facilitate an economic transaction, for which computers are merely used in a conventional way, rather than a technological improvement to computer functionality itself.

    Hear that? This means that, no matter how you improve the identification verification process for economic transactions, if your improvement is done on a computer and doesn’t provide a technological improvement to the computer itself, your invention is nothing but an abstract idea. Let that sink in.

    All the while, the Federal Circuit fails to identify how the claimed “electronic ID device” would preempt all fields, and in doing so, the CAFC continues to swallow all of patent law with this nonsense. Which is exactly what the SCOTUS warned against in Alice.

    Congress, are you listening?

    There is no “securing to Inventors the exclusive Right to their Discoveries” anymore. What we have is a smaller entity bringing a single suit to defend the intellectual property they filed for and earned from the USPTO that was “secured”, and them getting stabbed in the back 26 times by the USPTO’s PTAB and then taken out to the shed and shot in the back of the head by the Federal Circuit 4 times.

    With this, the incentive to pursue a patent has been gutted. Thus, there is no “promot[ing] the Progress of Science and useful Arts” here. Look elsewhere.

    What a train wreck for USR, and a warning for anyone who desires to enforce their intellectual property in today’s US patent system.

    Why invent and seek a patent if what is granted by the USPTO is undermined by the CAFC and the USPTO’s very own PTAB?

    Congress, good luck in your antitrust quest to break up the Big Tech monopolies. You knew what to do with Section 101 when 45 witnesses testified in the 2019 Senate hearings, but you sided with big tech (while crying “consensus”) and did nothing. You knew what to do. And you knew what to do for small businesses and independent inventors when the USPTO ignored the voices of the underrepresented inventors who testified in the SUCCESS Act hearings in 2019, and you still haven’t listened.

    Learn Chinese, everyone. I know I’m enrolling my kids in Chinese, and I’m not exaggerating.

  5. Pro Say August 27, 2021 12:19 pm

    Yet another shameful, innovation-killing, non-Alice / Mayo compliant decision among oh, so many.

    JurisIMprudence to the nth degree.

    SCOTUS: Your worst innovation eligibility fear has come true — patent law has indeed been swallowed.

    Congress: Where? Are? You? You could fix this with a simple stroke of your pens. Why don’t you? Why?

    . . . as the same country that brought the world the millions-dead, economies-crushed Corona virus . . . rejoices.

  6. Curious August 27, 2021 4:27 pm

    TFCFM:
    “You can’t validly claim ‘anything and everything that achieves the purpose I want to achieve’ unless you adequately disclose the full scope of that ‘anything and everything’.”
    Translated: “I’ve got nothing to write except the same stuff I’ve written for years confirming that I know little about claim language.”

    As part of the generation of patent attorneys who have trained the current younger crops
    In all honestly, I feel bad for anybody you’ve trained and for the clients you serve.

  7. box7003 August 27, 2021 5:00 pm

    Judges are not “skilled in the art” the examiners are. Good judges recuse themselves. All these judges are oath breakers to the Constitution, no pension should go to them or to anyone who voted for
    the AIA.

  8. Moderate Centrist Independent August 28, 2021 5:30 pm

    Which of you have actually written your Congressperson about Section 101?

  9. Concerned August 30, 2021 11:35 am

    @8: I called him. Told him a perfect s101 case (bias) was mine.

    USPTO and PTAB both said I solved a long standing business problem, PTAB agreed I met law as passed by Congress (not as ruled by judges) and we proved in the Official Record no one uses our process (documents from every end using authority.)

    Moreover, the USPTO and PTAB keep changing their rejection story again and again.

    Response: Crickets.

    Seems to me Congressman should have called USPTO and demanded answers, especially on the part that judges overruled Congress.

  10. TFCFM August 30, 2021 11:45 am

    Following up on:

    TFCFM@#1: “As part of the generation of patent attorneys who have trained the current younger crops, I think our generation bears a large measure of responsibility for letting the youngsters get away with the incredibly-sloppy-thinking that “if I can predict that some unknown thing will be able to achieve a certain function, then I have sufficiently ‘described’ that unknown thing in a 101 sense.”

    in light of subsequent comments, it dawns on me that the older/wiser generation of patent attorneys may not bear all the blame, given the tendencies of youngsters to:

    – cite an irrelevant collateral issue and wave hands vigorously (per #3) and

    – substitute hurling of attempted insult in place of counter-argument (per #6).

  11. Anon August 30, 2021 12:49 pm

    MCI,

    I have.

  12. Anon August 30, 2021 12:52 pm

    Pointing out that your desired mantra does not fit the cases at hand is hardly “cite an irrelevant collateral issue and wave hands vigorously.”

    Why would you think otherwise?

    I have to wonder as well, who taught you?

  13. Curious September 1, 2021 10:46 am

    “You can’t validly claim ‘anything and everything that achieves the purpose I want to achieve’ unless you adequately disclose the full scope of that ‘anything and everything’.”

    What is the adequate disclosure of the full scope of anything and everything that performs as a light? as an electrical switch? as mixing component A with component B?

    There are an infinite number of combinations that can perform as a “light,” an “electrical switch,” and “mixing component A with component B.” How does one adequately disclose the full scope of these limitations?

  14. Mark Tornetta September 1, 2021 2:01 pm

    I just posted a collection of arguments on the federal register web site about 101. I quoted many legal sources. Please see my post.
    Panel dependent and validity goulash.

  15. Anon September 1, 2021 9:24 pm

    Mark,

    Link…?

  16. Mark Tornetta September 3, 2021 8:28 am

    Anon – please see:
    https://drive.google.com/file/d/1EIJ-6PhP8JW0kb6tawqx1rp_GXsDTT8N/view?usp=sharing

    and please let me know if the link is good and please tell me your feelings about the document. Pass it on, please.

    Thanks

  17. box7003 September 8, 2021 1:30 pm

    Mark T.
    that’s a great document, especially the summary. Software, websites, apps are all in trouble. just last week I found a way to compete with chess .com but then realized without patent reform I may waste my time.

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