Patents & the Financial Services Industry

On cross-motions for summary judgment in this patent case between Every Penny Counts, Inc. and Bank of America, Judge Paul A. Magnuson of the U.S. District Court for the Middle District of Florida ruled that Every Penny Counts’ patent is invalid in light of In re Bilski.

EPC’s patent 6,112,191 is directed to a system that allows consumers to save a portion of a credit or debit transaction.  As Judge Magnuson describes the patent:

This patent claims a system whereby consumers can save and/or donate a portion of a credit or debit transaction. For example, a consumer can determine that any credit or debit transaction will be rounded up to the nearest dollar, and the difference between the actual transaction price and the rounded price will go to the consumer’s savings account, or to a charitable organization, or a portion to each. A consumer can also select a particular amount to be added to each transaction, rather than rounding the transaction to the nearest dollar.

Bank of America’s original motion had two grounds: (1) BOA’s “Keep the Change” program does not infringe the patent, and (2) the patent is invalid because of EPC’s inequitable conduct before the PTO.  However, after the motion was briefed, BOA asked the Court to postpone the hearing on the motion and to reopen discovery in order to allow the parties to examine the effect of the Federal Circuit’s In re Bilski decision.  The Court allowed the additional discovery, and in response EPC filed its own motion, seeking a judgment of validity under § 101.

Claim 15 of the patent provides:

A system, comprising:

        a network;

        entry means coupled to said network for entering into the network an amount being paid in a transaction by a payor;

        identification entering means in said entry means and coupled to said network for entering an identification of the payor;

        said network including computing means having data concerning the payor including an excess determinant established by the payor for the accounts;

        said computing means in said network being responsive to said data and said identification entering means for determining an excess payment on the basis of the determinant established by the payor, and

        said computing means in said network being responsive to the excess payment for apportioning, at least a part of the excess payment amount said accounts on the basis of the excess determined and established by the payor and on the basis of commands established by the payor and controlled by other than the payee.

EPC argued that the patent does not claim a process, but rather claims a system, which is analogous to a machine, and therefore Bilski should not apply in the first place.  However, the court disagreed and found the patent invalid under §101:

Simply because the process at issue requires machines or computers to work, however, does not mean that the process or system is a machine. . . The “system” described by the 191 patent “has no substantial practical application except in connection with” computers, cash registers, and networks, but it is not comprised of those devices. The 191 patent is a process, not a machine. [emphasis added]

 

The involvement of the machine in the process is insignificant extra-solution activity and thus the process is not patentable under § 101.

 

. . . EPC does not argue that the 191 patent transforms any article into something different. Thus, the patent is valid only if it is tied to a particular machine. Because it is beyond question that the patented process is not tied to a particular computer or other device, the process embodied by the 191 patent is invalid under § 101.

On May 26, 2009, Marshall, Texas-based Actus LLC filed a complaint seeking an injunction and damages in the U.S. District Court for the Eastern District of Texas for infringement of U.S. Patent Nos. 7,328,189, 7,249,099, 7,177,838, and 7,376,621, all titled “Method and Apparatus for Conducting Electronic Commerce Transactions Using Electronic Tokens.”  The defendants’ accused products, including prepaid cards and payment services, allegedly infringe the four patents which cover Internet commerce and electronic payment systems.

The complaint identifies fifteen defendants that offer prepaid gift cards or online payment options for customers, including: Amazon.com, Amdocs, American Express Company, Apple, Barnes & Noble, Best Buy, Cabela’s, CitiGroup, eBay, FirstView, Marketing Technology Concepts, NetSpend, Officemax, U.S. Bancorp, and ViVOtech, Inc.

Back in April, Actus filed another suit, also in Marshall, Texas, asserting the same four e-commerce patents against 20 defendants, including Visa, Wal-Mart, Disney, Google, and various credit card issuers.

In the complaints, Actus asserts that it is the owner by assignment of the four patents, but the assignments have not yet appeared on the USPTO’s Patent Assignment Database.  Each of these four patents was last assigned to PayByClick Corporation – Texas, which is the owner of 5 total patents.  The lone, non-asserted patent is U.S. Patent 6,876,979, “Electronic Commerce Bridge System.”

Actus is represented in both suits by William E. “Bo” Davis, III of The Davis Firm.

Tax advice Patent Issues

On May 26, 2009, U.S. Patent 7,539,635, entitled System and method for generating a personalized tax advice document, issued to H&R Block:

The present invention is a system and method for generating personalized tax advice documents. . . . A set of financial recommendations or statements is developed from which applicable statements may be selected for the tax advice documents. Categories and priorities are associated with each financial statement as well as specific financial triggers and calculations. The triggers are evaluated based on tax return data. If the conditions of a trigger are met, a calculation is performed to determine the actual benefit to the taxpayer. The specific financial recommendation or statement associated with the trigger is then added to a tax advice document. The taxpayer is then provided with a printed copy of the tax advice document comprising the specific statements selected for the taxpayer.

Interestingly, each of the three independent claims is a method claim, and each has a similarly formed preamble:

A computerized method for generating a tax advice document from a tax return preparation program executing on a computer comprising:

An unpublished continuation application was filed from the 7,539,635 patent, and perhaps alternative claim strategy is being employed in that continuation.

Also on May 26, 2009, U.S. Patent 7,539,636 issued to ITG Software Solutions and is entitled, “System and method for estimating transaction costs related to trading a security.”  Claim 1 reads:

  A computer-implemented method for creating a database, said method comprising:

        at one or more computers, collecting security transaction data for a preselected period of time, for a plurality of institutional investors, said transaction data including identity of securities being traded, transaction order sizes, execution prices and execution times;

        grouping said transaction data into groups of orders, wherein each group of orders consists of a plurality of orders each associated with a common category from a plurality of common categories;

        calculating a plurality of cost benchmarks for each group of orders;

estimating transaction costs for each institutional investor from said transaction data relative to each of said calculated cost benchmarks for each category of said plurality of common categories; and

        storing said data for said calculated benchmarks and said estimated transaction costs;

        wherein the grouping of transaction data into groups of orders includes combining discrete transaction data which form an order into each order.

Kaitlin Mara is an Associate Editor at Intellectual Property Watch, which is an independent journal covering issues of international intellectual property policymaking, with a particular focus on Geneva institutions such as the World Trade Organization, the World Intellectual Property Organization, and the World Health Organization.

In an article this month, “EPO Looks To Future Technologies, 2010 Leadership Change,” she writes about the upcoming challenges for the EPO.  Current EPO President Alison Brimelow will not seek reappointment as President of the European Patent Office when her current term expires at the end of June 2010.  Brimelow, a UK national, was elected President in December 2003 by the Administrative Council of the EPO.

Kaitlin also discusses last month’s European Patent Forum in Prague:

An oft-repeated statistic at the event was the fact that some 93 percent of business method patent applications to the EPO are rejected.

 

EPO’s Alexander Gardiner told Intellectual Property Watch that only one-fourteenth of the EPO patent-examining staff is devoted to information and communications technologies (ICTs), but that they account for 75 percent of refusals. And within ICT refusals, 40 to 50 percent are in business method patenting.

 

Several participants at the forum told Intellectual Property Watch they wished there had been a stronger American presence at the event. The United States Patent and Trademark Office (USPTO) has traditionally been more willing to approve business method patents than has the EPO, and participants told Intellectual Property Watch they felt it would have been valuable to hear an explanation of why. This is especially true as recent court cases might be changing legal precedent on business method patenting in the US (IPW, IP Law, 6 November 2008).

H.R. 2365 was introduced on May 21, 2009 and seeks to limit damages and other remedies with respect to patents for tax planning methods.   The bill was introduced by Virginia congressmen Rick Boucher and Bob Goodlatte and was co-sponsored by Rep. Steve Chabot (R-OH).  All three serve on the House Judiciary Committee, which has jurisdiction over patent legislation. Since 1998, the U.S. Patent and Trademark Office has granted over 60 tax planning method patents, which are a subcategory of business method patents, including patents on estate and gift tax, pension plans, tax-deferred exchanges and deferred compensation.

The bill’s backers believe the tax planning method patents:

• Limit the ability of taxpayers to freely interpret tax law, as intended by Congress;
• Require taxpayers and tax advisors to understand the most current patent law as well as tax law, which is already complicated; and
• Mislead taxpayers into believing that a patented tax planning method is valid under tax law, preferred by the government, and better as a whole.

H.R. 2365 prohibits civil lawsuits for infringement of a tax planning method patent, and the bill text is available at http://www.boucher.house.gov/images/stories/Boucher/tax%20planning%20method%20patents.pdf.  H.R. 2365 would amend Title 35 the include the following language:

With respect to the use by a taxpayer or a tax practitioner of a tax planning method that constitutes infringement under subsection (a) or (b) of section 271, the provisions of sections 281 [Remedy for infringement of patent], 283 [Injunction], 284 [Damages], and 285 [Attorney fees] shall not apply against the taxpayer, the tax practitioner, or any related professional organization with respect to such tax planning method.

Barry Melancon, President and Chief Executive Officer of the American Institute of Certified Public Accountants - the national professional organization of CPAs with 350,000 members - said in a statement that the bill is necessary “so that U.S. tax laws will be applied equally to all taxpayers. Tax strategies that are patented by the U.S. Patent and Trademark Office can only be used by some taxpayers. That’s not fair and not how Congress intended the tax laws to be administered.”

Internet database manager Matthew Walker obtained a patent for patent PassWindows, which synchronizes a part-pattern printed on a see-through card window with the rest of a unique pattern generated on the computer screen to display a numeric code.  Internet users will hold their card against the screen to reveal a randomly created six-digit number that securely authenticates their financial transactions.

Walker entered into an agreement with Australian-owned card maker CARDPro, based in China, to produce cards with PassWindows.

See “Cheap solution for bank security” at Australian IT.

“VASCO Integrates Strong Host Authentication into DIGIPASS 250, 260 and 270”

VASCO Data Security International, Inc. (Nasdaq: VDSI) (www.vasco.com), a leading software security company specializing in authentication products, announces that it will be integrating strong host authentication into DIGIPASS(R) 250, 260 and 270 and available in the 3rd quarter of this year. Strong host authentication is VASCO’s patent pending technology offering an enhanced One-Time Password (OTP) solution on the market today. Strong host authentication combined with e-signature offers an effective solution against identity theft and Man-in-the-Middle attacks.

 

 

The advantage of strong host authentication is that the end-user can ensure himself that the bank or organisation he is connecting to is actively involved in the communication process. For banks and other organisations it offers the possibility to know real-time whether their customers or users might have been the victim of online identity theft. Strong host authentication makes it even more difficult for hackers to intercept end-user credentials without first contacting the bank or other organisation real-time and attempting to obtain user credentials on a one-to-one basis.

 

 

Strong host authentication works as follows:

• When the user wants to access a secure website, he will provide his claimed identity using his username.
• The server from the bank or other organisation will provide the user with a time-based host One-Time Password (OTP). This host OTP is unique for the DIGIPASS authenticator the end-user is using and is only valid for a limited time.
• The user will enter the host OTP on his DIGIPASS authenticator.
• The DIGIPASS will verify the host OTP
• When it is correct, the DIGIPASS will generate a user OTP
• The user will use this user OTP to log on to the application.

Michael Geist is the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa, Faculty of Law.  In an article appearing today at TheStar.com, “Two clicks and you’re out, panel rules, Operating method patents face rough ride under Canadian statute”, he writes about patent subject matter in Canada and the CPAB:

In applying that analysis to the Amazon.com one-click patent, the panel concluded that “concepts or rules for the more efficient conduct of online ordering, are methods of doing business.

 

Even if these concepts or rules are novel, ingenious and useful, they are still unpatentable because they are business methods.”

 

The CPAB decision is not necessarily the end of the road for the one-click patent since Amazon.com has the option of appealing the decision to the Federal Court.

 

However, the decision provides a strong signal that the business method patents face a rough ride under current Canadian law.

In his article “Business methods need patents” appearing in The National Law Journal, Wayne Sobon from Accenture argues that the Supreme Court should acknowledge our tech-based economy by reversing Bilski:

Now companies and patent owners across wide swaths of our economy are waking up to how the PTO, deploying a “test” more relevant to the carriage makers or leather dyers of the 19th century than to the finance-, Internet- and services-based economy of the 21st century, is undermining the very nature of what our patent system was meant to encompass.

 

The United States needs every possible advantage to remain competitive in a linked global economy that is increasingly service- and information-driven. Bilski is a classic case of judicial overreach, with the potential to damage that competitiveness at a crucial time. We can only hope the Supreme Court sees it that way, as well.

On May 19, 2009, U.S. Patent 7,536,350 was issued to Intrasweep, a subsidiary of Double Rock Corporation, and was immediately asserted:

Intrasweep LLC (”Intrasweep”) is pleased to announce that on Tuesday, May 19, 2009, the U.S. Patent and Trademark Office issued to its sister company, Island Intellectual Property LLC (”Island IP”), U.S. Patent No. 7,536,350, entitled “Systems and Methods for Providing Enhanced Account Management Services for Multiple Banks” (the “‘350 Patent”). The ‘350 Patent is related to its sweep technology that enables banks to offer enhanced FDIC insurance coverage through multiple banks with reciprocal deposits, thereby keeping deposits on a bank’s balance sheet to fund loan demand.

 

Intrasweep, Island IP, and Double Rock Corporation, the parent to both companies, filed a federal lawsuit on May 19, 2009, in the U.S. District Court for the Southern District of New York, seeking to enforce the ‘350 Patent: ISLAND INTELLECTUAL PROPERTY LLC, INTRASWEEP LLC, and DOUBLE ROCK CORPORATION v. DEUTSCHE BANK AG, DEUTSCHE BANK TRUST COMPANY AMERICAS, and TOTAL BANK SOLUTIONS, LLC.

“Intrasweep Enjoys Patent on Reciprocal Deposits Technology.”  The patents and related litigation involve insured deposit products that allow financial service institutions to offer customers FDIC-insured, interest bearing demand accounts, with unlimited checking.

The 7,536,350 patent is a continuation-in-part of the 7,519,551, which was asserted in a April 14, 2009 Complaint, and will presumably be added to the action for patent infringement.  According to the 7,519,551 Complaint, “One improvement developed by the principals of Double Rock for the insured deposit product was the ability to provide financial service intuitions with the ability to maintain more assets in the program within their own financial services infrastructure.”