District Court Finds Mobile Payment Patents Not Invalid Under 35 U.S.C. § 101
Published: September 19, 2022
In Mobile Equity Corp. v. Walmart Inc., 2-21-cv-00126 (EDTX Sep. 8, 2022) (Roy S. Payne), the Court found that the asserted claims were not directed towards an abstract idea and did not encompass unpatentable subject matter and therefore were not invalid under 35 U.S.C § 101.
Pursuant to 35 U.S.C § 101, “whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.” A claim falls outside of 35 U.S.C § 101 where (1) it is directed to a patent-ineligible concept, i.e., a law of nature, natural phenomenon, or abstract idea, and (2), if so, the particular elements of the claim, considered both individually and as an ordered combination, do not add enough to transform the nature of the claim into a patent-eligible application.
And specifically, in cases involving improvements to computing technology and networks, the Federal Circuit has identified “two inquiries of significance here:  whether the focus of the claimed advance is on a solution to a problem specifically arising in the realm of computer networks or computers; and  whether the claim is properly characterized as identifying a specific improvement in computer capabilities or network functionality, rather than only claiming a desirable result or function.”
In this case, the patents at issue relate to “electronic commerce and more particularly to using mobile communication devices to execute a commercial transaction.”
Plaintiff Mobile Equity argued that the asserted claims are eligible at Step 1 because the claims are directed to a specific improvement addressing a problem arising in the realm of computer networks, specifically mobile payment networks. Defendant Walmart argued that the asserted claims: (1) are directed to an economic problem related to financial transactions, not a technical problem; (2) if they address a technical problem, they fail to provide a specific solution because they resemble other claims found ineligible or rely on conventional methods and hardware; or (3) merely automate a human activity.
Turning to Step 1, the Court noted the “directed to” inquiry begins by asking “what the patent asserts to be the ‘focus of the claimed advance over the prior art.’” For patents related to computer networks or computers, like the asserted patents here, the first question in determining whether the asserted advance over the prior art is directed towards eligible subject is to determine “whether the focus of the claimed advance is on a solution to a problem specifically arising in the realm of computer networks or computers.”
Mobile Equity argued that the claimed advance addresses a problem arising from computer networks, specifically the security of mobile payment transactions. According to Mobile Equity, the specification of the asserted patents identifies security of mobile transactions as an issue the patents seek to solve. Thus, Mobile Equity argued that, because mobile payment networks are computer networks and the asserted patents address an issue related to these networks, the asserted patents address a problem arising in the realm of computer networks. Walmart responded by arguing the problem identified by Mobile Equity is fundamentally a business problem, rather than a problem that is specifically arising in the realm of computer networks or computers.
However, the Court found that the asserted patents are addressing a problem arising in the realm of computer networks, which is related to the problem of security as argued by Mobile Equity. Specifically, the Court found that Claim 1 addresses the problem of how to allow a customer to use a mobile communications device to initiate and execute a transaction that occurs over a mobile payment network. The Court also noted that this finding is consistent with the Court’s claim construction, where the Court found that “Claim 1 of each patent is directed to the steps preceding and including initiating the transaction, which is consistent with how the patent describes the advancement over the prior art.”
Thus, the Court concluded that the asserted patents are addressing the problem of how to allow a customer to use a mobile communications device to initiate and execute a transaction that occurs over a mobile payment network, without having to rely upon the presence or even the existence of a credit card, all of which increases the security of the process.
Next, Mobile Equity argued that the claims are drawn to a specific new “reverse” software architecture that is a specific improvement to the operation of merchant-payment networks. Walmart argued that the reverse flow is not a specific solution because the claim (1) resembles claims deemed ineligible at Step 1 by the Federal Circuit and (2) the claims rely on generic computer hardware and functionally-claimed limitations, thus not a specific solution. The Court found Walmart’s first argument unpersuasive because the asserted patents clearly purport to solve a problem with the “conventional method” of initiating transactions. The Court also found Walmart’s second argument unpersuasive because the Court finds that the asserted patents are directed to non-abstract improvements to the functioning of mobile payment networks.
Thus, the Court found that the asserted claims are directed to reversing the conventional transaction flow, and thus allowing a customer’s mobile device to initiate a mobile payment transaction. This is a specific improvement in payment network functionality. Therefore, the Court found the asserted claims are eligible at Step 1 as they are directed to eligible subject matter. And, because the Court found the asserted claims eligible at Step 1, the Court did not address Step 2.