Is A Blockchain Innovation Patent-Eligible?

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On May 21, 2015, Mastercard filed patent application 14/719,030 (hereinafter ‘030) entitled “Method and System for Fraud Control of Blockchain-Based Transactions.”[1] The application was directed at methods for linking blockchain transactions to privately verified identities.[2]

Upon examination at the United States Patent and Trademark Office (USPTO) the patent was assigned to art unit 3685 “Data Processing” which boasts a 33% allowance rate. The first independent claim of the ‘030 patent application recites the following:

A method for linking blockchain transactions to privately verified identities, comprising:

storing, in an account database, a plurality of account profiles, wherein each account profile includes data related to a transaction account including at least an account identifier and account data;

receiving, by a receiving device, a transaction message, wherein the transaction message is formatted based on one or more standards and includes a plurality of data elements including at least a first data element configured to store a personal account number, a second data element configured to store a merchant identifier, and a third data element configured to store at least a blockchain network identifier;

identifying, by a processing device, a first account profile stored in the account database where the included account identifier corresponds to the personal account number stored in the first data element included in the received transaction message;

identifying, by the processing device, a second account profile stored in the account database where the included account identifier corresponds to the merchant identifier stored in the second data element included in the received transaction message;

receiving, by the receiving device, a transaction notification, wherein the transaction notification indicates a transaction processed using a blockchain network associated with the blockchain network identifier stored in the third data element included in the received transaction message and includes at least a transaction identifier and an address identifier associated with one of the first account profile and the second account profile; and

storing, by the processing device, a linkage between the transaction identifier included in the received transaction notification and at least one of: the address identifier, the personal account number, and the merchant identifier.[3]

In both the non-final and final rejection, the ‘030 application was rejected under 35 U.S.C. § 101 for being directed to a judicial exception to patentability.[4] Specifically, the USPTO argued in the rejection that the claims were directed to “the abstract idea of storing data (e.g., account profiles and a linkage between the data), receiving data (e.g., a transaction message and a transaction notification), and identifying data and verification.”[5] The USPTO asserted that the claims as a whole did not amount to something “significantly more” than the claimed judicial exception.[6]

Upon receiving the final § 101 rejection, Mastercard then appealed the decision to the Patent Trial and Appeal Board (PTAB).[7] The PTAB analyzed the § 101 rejection using the two-step framework set forth in Mayo and Alice.[8] The first step in the two-step framework includes a determination as to what the claims are “directed to.”[9] Patent ineligible abstract ideas include methods of organizing human activity, mathematical formulas, and mental processes.[10] Patent eligible ideas as set forth by Congress include a process, a machine, a manufacture, and a composition of matter.[11]

In the original rejection, the Examiner had concluded that the claims were directed to an abstract idea because they pertained in part to storage of data and commercial transactions.[12] The focus of the claims in the ‘030 patent was towards commercial transaction processing including both standard payment methods and blockchain payments.[13] On appeal, the PTAB agreed with the Examiner’s analysis, stating that the claims recited a patent exception, specifically methods of organizing human activity.[14]

Having determined that the claims recited an abstract idea, the PTAB then had to determine if the claims were directed to the abstract idea or if the claims contained additional elements that integrated the abstract idea into a “practical application” of the abstract idea.[15] The PTAB found that the claims did incorporate a practical application of an abstract idea.[16] Specifically, the PTAB found that the claims provided standard payment processing systems combined with blockchain payment transactions, which were impossible to perform in the human mind.[17] In further support for this conclusion, the claims also recited additional computer components including a “payment network,” a “processor,” and a “blockchain network.”[18] The PTAB stated that these components worked together to achieve a technological improvement, namely blockchain transactions using computers.[19]

For these reasons, the PTAB chose not to sustain the rejection of claims 1-16 under § 101 as being directed to patent ineligible subject matter, ensuing a subsequent notice of allowance to be issued for the ‘030 patent from the USPTO.[20] This case is significant, in that it provides future guidance surrounding blockchain patent eligibility at the USPTO. As patenting activity in the blockchain space has continued to increase over the past few years, we can expect to continue to see exponential growth of blockchain technologies. Strategically drafting robust patent applications that emphasize and incorporate blockchain specific features and technological improvements can help to minimize future §101 rejections.

To learn more on the use of blockchain read here: The Interplay of NFTs and Intellectual Property Law

[1] https://appft.uspto.gov/netacgi/nph-Parser?Sect1=PTO2&Sect2=HITOFF&p=1&u=%2Fnetahtml%2FPTO%2Fsearch-bool.html&r=1&f=G&l=50&co1=AND&d=PG01&s1=14%2F719030&OS=14/719030&RS=14/719030

[2] Id.

[3] Id.

[4] MasterCard International Incorporated, 14719030 – (D) (P.T.A.B. Aug. 19, 2020)

[5] Id.

[6] Id.

[7] Id.

[8] Id.

[9] Id.

[10] See MPEP §2106.

[11] Id.

[12] MasterCard International Incorporated, 14719030 – (D) (P.T.A.B. Aug. 19, 2020)

[13] Id.

[14] Id.

[15] Id.

[16] Id.

[17] Id.

[18] Id.

[19] Id.

[20] Id.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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