The Software IP Report

Patent-Eligibility Rejections of Transaction Verification Claims Reversed

By Charles Bieneman

Categories: Patent Eligibility, The Software IP Report

After finding that representative patent claims were “directed to the abstract idea of generating a verification value in response to a transaction,” the Patent Trial and Appeal Board went on to reverse the patent examiner’s rejection under 35 U.S.C. § 101 because

the claimed transaction authentication, while abstract itself, improves the underlying technology involved with fraud-prevention, and therefore adds “significantly more” than merely implementing the abstract idea of generating a verification value.

Ex parte Faith, Appeal 2017-004510, Application 13/919,900 (PTAB Sept. 20, 2017).

The claims were directed to verifying an electronic transaction.  Example recitations included a “plurality of candidate verification values [that is unique to a corresponding candidate dynamic data element of the plurality of candidate dynamic data elements” such that “the transaction is thereafter authenticated whenthe verification value matches any of the plurality of candidate verification values.

The examiner had alleged that the claims were drawn to fundamental economic practices.  The Appellants  argued that the examiner had oversimplified, and had ignored many features in the claims.  But the PTAB here agreed with the examiner, because transaction verification was indeed a fundamental economic practice.

But turning to the second prong of the Mayo/Alice patent-eligibility test, the PTAB found that the

claimed invention generates a verification value in response to a transaction involving a portable consumer device and sends the verification value and a portion of a dynamic data element to a service provider that determines whether the verification value matches any of a plurality of candidate verification values and, if a match is determined, the transaction is authenticated, thus helping to reduce transactional fraud.

This was enough to demonstrate that the claims recited “significantly more” than the abstract idea.

Lessons for Practice

First, as always, patent-eligibility decisions are subjective and unpredictable.  Surely this case could have gone a different way with other panels, or if it involved issued claims being litigated in a U.S. District Court. And the PTAB here offered little analysis to bely accusations of subjectivity.  But second, this case shows that Section 101 analysis can be subtle.  I often express my view that in practice the two prongs of the Mayo/Alice test are collapsed into one inquiry – are the claims “abstract” or not?  Yet here the PTAB took pains to find the claims directed to an abstract idea yet still patent-eligible as directed to “significantly more.”  The simple lesson, then, is to argue both prongs of the test in detail.