“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
On 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.
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