Court Opinion

ID: 9393466
Source: CourtListenerOpinion
Date Created: 2023-05-10 15:01:04.432623+00
Date Added: 2024-06-11T17:18:53.580055
License: Public Domain

Case: 22-1842     Document: 44    Page: 1   Filed: 05/10/2023

        NOTE: This disposition is nonprecedential.

   United States Court of Appeals
       for the Federal Circuit
                  ______________________

                IN RE: AUTHWALLET, LLC,
                     Plaintiff-Appellant

                  ______________________

                        2022-1842
                  ______________________

    Appeal from the United States District Court for the
 Southern District of New York in No. 1:21-cv-05463-LJL,
 Judge Lewis J. Liman.
                  ______________________

                  Decided: May 10, 2023
                  ______________________

     WILLIAM PETERSON RAMEY, III, Ramey LLP, Houston,
 TX, for plaintiff-appellant.
                    ______________________

      Before DYK, SCHALL, and CHEN, Circuit Judges.
 SCHALL, Circuit Judge.
                          DECISION
     AuthWallet, LLC (“AuthWallet”) is the owner of U.S.
 Patent No. 9,292,852 (“the ’852 patent”). It sued Block,
 Inc., (“Block”) in the United States District Court for the
 Southern District of New York for infringement of the pa-
 tent. In a decision dated May 3, 2022, the district court
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 2                                     IN RE: AUTHWALLET, LLC

 granted Block’s motion to dismiss under Fed. R. Civ. P.
 12(b)(6) and dismissed AuthWallet’s complaint. It did so
 after finding that the claims of the ’852 patent are directed
 to ineligible subject matter under 35 U.S.C. § 101.
 AuthWallet, LLC v. Block, Inc., 602 F. Supp. 3d 620
 (S.D.N.Y. 2022). Following the entry of final judgment,
 AuthWallet appealed. 1 We have jurisdiction pursuant to
 28 U.S.C. § 1295(a)(1). For the reasons set forth below, we
 affirm.
                         DISCUSSION
                               I
     The ’852 patent is titled “System and Method for Ap-
 plying Stored Value to a Financial Transaction.” The pa-
 tent is directed to a “computer-implemented method for
 processing financial transaction data” in which customers
 use “stored value items”—in this context, the digital equiv-
 alent of coupons or vouchers—when making a purchase.
 ’852 patent col. 32 l. 46–col. 33 l. 13, Abstract. Independent
 claim 1 is representative of the ’852 patent’s 40 claims. It
 provides as follows:
     1. A computer-implemented method for pro-
     cessing financial transaction data in a computing
     system including a processor and a storage area,
     the method comprising:
     receiving an authorization request generated as a
     result of a transaction by a purchaser at a point of
     purchase via an acquirer configured to receive au-
     thorization requests from a plurality of points of
     purchase, wherein the authorization request

     1   Following the completion of briefing in this appeal,
 Block filed an unopposed motion to withdraw from the case
 pursuant to a settlement agreement between the parties.
 See Dkt. No. 41. We granted the motion on April 3, 2023.
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 IN RE: AUTHWALLET, LLC                                      3

     includes a purchaser identifier and transaction in-
     formation, the transaction information including a
     transaction amount, and wherein the purchaser
     identifier identifies the purchaser that initiated
     the transaction;
     based on the authorization request, determining
     one or more stored value items to apply to the
     transaction, wherein each stored value item in-
     cludes an associated value,
          wherein the one or more stored value items
          are selected from a plurality of stored value
          items stored in the storage area, and
          wherein the plurality of stored value items
          includes stored value items provided by a
          plurality of different third parties;
     transmitting a transaction indication message to a
     mobile device associated with the purchaser iden-
     tifier, wherein the transaction indication message
     includes information about the determined one or
     more stored value items;
     receiving an indication from a user of the mobile
     device that at least one stored value item should be
     applied against the transaction;
     applying the indicated at least one stored value
     item to pay a first portion of the transaction
     amount; and
     initiating a payment process to pay a remaining
     portion of the transaction amount by providing a
     modified transaction amount to the acquirer for
     submission to a payment association.
 Id. col. 32 l. 46–col. 33 l. 13.
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 4                                      IN RE: AUTHWALLET, LLC

                               II
      After AuthWallet filed suit, Block moved to dismiss,
 contending that the ’852 patent is directed to patent ineli-
 gible subject matter because it claims “a computer-imple-
 mented version of a longstanding economic practice:
 processing a financial transaction that includes a discount
 for the purchaser.” J.A. 98; see also id. at 90–91. Block
 argued that the ’852 patent thus failed the two-step analy-
 sis set forth in Alice Corp. v. CLS Bank International, 573
 U.S. 208 (2014). The district court agreed.
     The first step of the Supreme Court’s Alice analysis is
 to determine whether a patent claim is directed to an un-
 patentable law of nature, natural phenomenon, or abstract
 idea. Alice, 573 U.S. at 217. If so, Alice’s second step is to
 consider whether the claim nonetheless includes an “in-
 ventive concept” sufficient to “transform the nature of the
 claim into a patent-eligible application.” Id. (internal quo-
 tation marks and citation omitted). The first stage of the
 Alice inquiry looks at the focus of the claims or their char-
 acter as a whole; the second stage looks more precisely at
 what the claim elements add. SAP Am., Inc. v. InvestPic,
 LLC, 898 F.3d 1161, 1167 (Fed. Cir. 2018) (internal quota-
 tion marks and citations omitted).
     The district court began its Alice step one analysis by
 stating that the ’852 patent is “directed to the . . . well-es-
 tablished business practice of processing payments during
 a sales transaction where a benefit, such as a discounted
 payment, is given to the purchaser for use in future trans-
 actions.” AuthWallet, 602 F. Supp. 3d at 631. The court
 noted that “[f]or years, retailers have provided coupons and
 other financial incentives to customers during purchase.”
 Id. The court observed, “[t]he ’852 Patent simply describes
 that that conventional business practice may be effected by
 technology rather than by hand.” Id. The district court
 found that the sales transaction activity contemplated by
 the ’852 patent involved “the abstract concepts of an
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 IN RE: AUTHWALLET, LLC                                    5

 intermediary managing and authenticating a transaction
 between a consumer and a retailer as well as that interme-
 diary managing discounts and benefits—such as coupons—
 that are conferred to the consumer during the transaction,
 which the consumer can then use on a future occasion.” Id.
 at 632. The court concluded that because managing the
 processing of online financial data using authorization re-
 quests and conferring discounts and benefits to the con-
 sumer for future purchases are abstract ideas for the
 purposes of 35 U.S.C. § 101, the claims of the ’852 patent
 failed under Alice step one. Id. at 634.
      Turning to Alice step two, the district court sought to
 determine whether the authentication processes and data
 storage mechanisms to manage online payment transac-
 tions with discounts claimed in the ’852 patent constitute
 an inventive concept sufficient to transform the abstract
 idea claimed in the patent into a patent eligible applica-
 tion. Id. at 634. The court held that they do not. The dis-
 trict court agreed with Block that representative claim 1
 “merely automates the longstanding business practice of
 discounted payment transactions using conventional, ge-
 neric computer technology.” Id. The court stated that no
 claim of the ’852 patent “recites an inventive concept that
 transforms the abstract idea of processing discounts on
 payment transactions into a patent-eligible application.”
 Id. Accordingly, the district court granted Block’s motion
 to dismiss and entered judgment for Block dismissing
 AuthWallet’s complaint.
                             III
     We review the grant of a Rule 12(b)(6) motion to dis-
 miss under the law of the regional circuit. Nalco Co. v.
 Chem-Mod, LLC, 883 F.3d 1337, 1346 (Fed. Cir. 2018). The
 Second Circuit reviews Rule 12(b)(6) dismissals for failure
 to state a claim de novo. Conopco, Inc. v. Roll Int’l, 231
 F.3d 82, 86 (2d Cir. 2000).
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 6                                     IN RE: AUTHWALLET, LLC

     Patent eligibility under § 101 is a question of law based
 on underlying facts. SAP Am., 898 F.3d at 1166. Section
 101 disputes “may be resolved on a Rule 12(b)(6) motion
 when there are no factual allegations that, taken as true,
 prevent resolving the eligibility as a matter of law.” Uniloc
 USA, Inc. v. LG Elecs. USA, Inc., 957 F.3d 1303, 1306 (Fed.
 Cir. 2020) (internal quotation marks and citation omitted).
                              IV
      We understand AuthWallet to be making two main ar-
 guments on appeal. First, AuthWallet argues that the dis-
 trict court improperly overgeneralized the “focus” of the
 claims in its Alice step one analysis. Appellant’s Br. 8–9.
 AuthWallet contends that “abstractness is determined by
 analyzing the claim as a whole, not whether each element
 standing alone is abstract.” Id. at 9. According to
 AuthWallet, the proper focus of the claims is either “provid-
 ing increased fraud security for financial transactions
 when a physical device, the credit, debit, or gift card, can-
 not be presented to the merchant by the purchaser by
 providing out-of-band confirmation,” id. at 6, or it is “a se-
 curity protocol where [a] purchaser initiates a transaction,
 an authorization request is generated and sent to an inter-
 mediary service, the intermediary service generates an in-
 formation request that is sent back to a mobile device, [and]
 the user of the mobile device in turn confirms the authori-
 zation request, typically by selecting a stored value item,”
 id. at 10.
     Looking at the claims of the ’852 patent, we disagree
 with AuthWallet’s asserted “focus” and instead agree with
 the district court that the claims are directed to a method
 for processing financial transaction data that implements
 authorization requests and confers discounts and benefits
 upon the consumer. To the extent AuthWallet is arguing
 that the court improperly emphasized the “discount” aspect
 of the claims, we disagree. Although the claims recite a
 step of receiving an “authorization request” pertaining to a
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 IN RE: AUTHWALLET, LLC                                         7

 purchase, the method as a whole is directed to steps involv-
 ing “stored value items,” e.g., “determining one or more
 stored value items to apply,” “transmitting a transaction
 indication message [that] includes information about the
 . . . stored value items,” “receiving an indication . . . that at
 least one stored value item should be applied,” “applying
 the indicated at least one stored value item,” and then “in-
 itiating a payment process to pay a remaining portion of
 the transaction.” ’852 patent col. 32 l. 46–col. 33 l. 13. We
 have held to be abstract claims directed to “longstanding
 commercial practice[s],” such as collecting and relaying re-
 wards program points, cxLoyalty, Inc. v. Maritz Holdings
 Inc., 986 F.3d 1367, 1377 (Fed. Cir. 2021), and also “act[s]
 ordinarily performed in the stream of commerce,” such as
 “the economic act of paying a finder’s fee for a purchase,”
 In re Elbaum, No. 2021-1719, 2021 WL 3923280 (Fed. Cir.
 2021). We hold similarly here.
     To the extent AuthWallet is arguing that the district
 court failed to give the “security” aspects of the claims any
 weight whatsoever, we disagree. The court clearly ad-
 dressed AuthWallet’s “security” argument. The court
 noted that the claims “recite a secure transaction method
 where consumers can make credit card payments without
 physically presenting their cards,” and that the claims “al-
 low[] access to discounts in transactions where a credit
 card is not presented.” AuthWallet, 602 F. Supp. 3d at 633.
 The court correctly concluded that this “security” feature
 would not render the claims non-abstract “for the same rea-
 son that the patents in Universal Secure Registry were
 found to speak to abstract ideas.” Id.; see Universal Secure
 Registry LLC v. Apple Inc., 10 F.4th 1342, 1354–55 (Fed.
 Cir. 2021) (finding claims that “generically provide[d]” for
 the collection of information to perform authentication of a
 user in a manner that was “conventional” to be directed to
 an abstract idea). Moreover, as the court noted, the claims
 of the ’852 patent “do[] not speak to specific or technical
 problems and solutions but rather recite[] generic steps
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 8                                      IN RE: AUTHWALLET, LLC

 and results.” AuthWallet, 602 F. Supp. 3d at 633. The ad-
 dition of another abstract idea does not render the claims
 non-abstract. RecogniCorp, LLC v. Nintendo Co., 855 F.3d
 1322, 1327 (Fed. Cir. 2017). We therefore agree with the
 district court that the claims of the ’852 patent are directed
 to abstract ideas.
      AuthWallet’s second argument is that the court erred
 in its Alice step-two analysis “by not considering the intrin-
 sic evidence of record when analyzing for an inventive con-
 cept.” Appellant’s Br. 5. AuthWallet contends that “the
 inventive aspects of the claimed inventions are evident in
 the claims,” which provide “enhanced security . . . based . . .
 on the access to a linked mobile device that is not available
 on the face a credit card [sic] and where the user of the mo-
 bile device confirms the transaction by selecting a value
 item.” Id. at 11. We agree with the district court that the
 claims fail to recite an inventive concept that would trans-
 form the abstract idea into patentable subject matter. The
 claims recite well-known and conventional ways to perform
 authentication and to apply discounts, concepts that are
 not inventive. See Universal Secure Registry, 10 F.4th at
 1355. 2
                         CONCLUSION
    We have considered AuthWallet’s remaining argu-
 ments and find them unpersuasive. For the reasons given
 above, we affirm the court’s decision.

     2   The claims are therefore unlike those at issue in
 CosmoKey Solutions GMBH & Co. Kg v. Duo Security LLC,
 15 F.4th 1091, 1098 (Fed. Cir. 2021). In CosmoKey, claims
 directed to a “specific improvement to authentication that
 increases security, prevents unauthorized access by a third
 party, is easily implemented, and can advantageously be
 carried out with mobile devices of low complexity,” were
 held to recite an inventive concept.
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 IN RE: AUTHWALLET, LLC                                     9

                          AFFIRMED
                            COSTS
 No costs.