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100% Discount on Unpatentable Claims: Judge Liman Holds System for Processing Discounts in Financial Transactions to be Ineligible for Patenting Under Section 101

On May 3, 2022, Judge Lewis J. Liman found patent claims directed to the computerized processing of financial transaction data that splits the transaction cost between payment methods and awards or discounts to be directed to an abstract idea ineligible for patenting under 35 U.S.C. § 101. 

Plaintiff AuthWallet, LLC alleged that defendant Block Inc. (formerly known as Square, Inc.) infringes claims of U.S. Patent No. 9,292,852 describing methods and systems for “processing financial transaction data” by, e.g., “receiving an authorization request generated as a result of a transaction . . . at a point of purchase,” “receiving an indication from a user of [a] mobile device that at least one stored value item should be applied . . . to pay a first portion of the transaction amount,” and “initiating a payment process to pay a remaining portion of the transaction amount.” 

At Alice step one, the Court noted that “The Federal Circuit has provided specific guidance for assessing patents involving computer technology,” which “requires a court to ‘articulate with specificity what the claims are directed to, and ask whether the claims are directed to an improvement to computer functionality.’”  In addition, any “asserted improvement in computer functionality must have ‘the specificity required to transform a claim from one claiming only a result to one claiming a way of achieving it.’”

Here, Judge Liman found that the claims do not describe any improvement in computer technology that provides a specific “way of achieving” the claimed functionality.  Instead, the claims merely used computers to provide “an electronic form of a discounted transaction that is common among brick-and-mortar retailers.”  As such, they were directed to an abstract idea at step one.

At Alice step two, the Court found that the claimed invention “merely automates the longstanding business practice of discounted payment transactions using conventional, generic computer technology,” such as “two-factor authentication.”  Accordingly, the claim elements alone and in combination did not include an “inventive concept sufficient to transform the claimed abstract idea into a patent-eligible application.”

AuthWallet, LLC v. Block Inc., No. 21-cv-5463 (LJL) (S.D.N.Y. May 3, 2022)