Fed. Cir. Issues Precedential Opinion in Apple Electronic Payment Transaction Case

Last Thursday, a panel of appellate judges affirmed the District of Delaware court ’s decision to dismiss a patent infringement suit Universal Secure Registry LLC (USR) filed against Apple Inc., Visa Inc., and Visa U.S.A. Inc. (collectively, Apple). The decision found that the four asserted patents claim unpatentable subject matter.

USR reportedly sued Apple for infringing all claims of U.S. Patent Nos. 8,856,539, 8,577,813, 9,100,826, and 9,530,137. The intellectual property at issue reportedly relates generally to securing electronic payment transactions. The patents address technology needed to allow consumers to conveniently make card-based transactions without a magnetic-stripe reader and with a high degree of security, according to the opinion. 

The trial court held all claims of the four asserted patents owned by USR ineligible under 35 U.S.C. § 101. The Federal Circuit affirmed after concluding that “all claims of the asserted patents are directed to an abstract idea and that the claims contain no additional elements that transform them into a patent-eligible application of the abstract idea.”

At the outset of its analysis, the court noted that in disputes involving authentication technology, patent eligibility often depends on whether the claims “provide sufficient specificity to constitute an improvement to computer functionality itself.” The court analyzed eligibility under the Supreme Court’s 2014 decision Alice Corp. v. CLS Bank Int’l.

The Federal Circuit applied the two-step test to each of the contested patents, like the ’813 patent, which discloses the combined use of a user device, a point-of-sale (POS) device, and a universal secure registry to facilitate financial transactions. “In our view, the claims are directed to an electronic ID device that includes a biometric sensor, user interface, communication interface, and processor working together to (1) authenticate the user based on two factors—biometric information and secret information known to the user—and (2) generate encrypted authentication information to send to the secure registry through a point-of-sale device,” the court explained.

Under Alice step 1, the court ruled that the claims are directed to an abstract idea, rather than a technological solution to a technological problem. According to the opinion, the patent lacked descriptions of “a specific technical solution by which the biometric information or the secret information is generated, or by which the authentication information is generated and transmitted,” and as such, its claims simply recited “‘conventional actions in a generic way.’”

At Alice step 2, the panel agreed with the trial court that ‘813 patent’s claims fail to disclose an inventive concept sufficient to transform an abstract idea into patentable subject matter.  Encrypted authentication data, the panel reasoned, “is merely a combination of known authentication techniques that yields only expected results.”

USR is represented by Quinn Emanuel Urquhart & Sullivan LLP, Apple by Wilmer Cutler Pickering Hale and Dorr, and Visa by Gibson, Dunn & Crutcher LLP.