PTAB: Encrypting Financial Account No. Is Patent-Eligible

After a patent examiner in a business methods art unit rejects claims as patent-ineligible under 35 USC § 101 and the Alice test, what does it take for the PTAB to reverse? Here is an example of an ex parte appeal in which the PTAB deemed claims directed to encrypting a financial account number to present a technical solution that survived the Alice test.  Ex Parte Faith, Appeal 2016-008020, Application 12/778,638, Technology Center 3600 (PTAB March 30, 2018).

The claims at issue recite encrypting a portion of a financial account number to generate a new account number and a “verification value” for the purpose of inhibiting fraud. The examiner had rejected the claims under 35 USC § 101 as allegedly directed to the unpatentable “abstract idea of determining account information based on mathematical analysis and ‘participating in a transaction.’” The examiner made the familiar allegation that the claims were simply directed to “mathematical relationships, organizing information through mathematical correlations, collecting and comparing known information, and organizing human activity or performing processes using pen and paper.”

The exemplary independent claim is reproduced below.

A method comprising:

encrypting, using a processor, a first portion of a first account number, the first portion having less digits than the whole first account number, to form an encrypted account number portion, while leaving a remaining portion of the first account number unencrypted, the first account number being associated with a first expiration date and a first verification value;

determining a second account number based at least in part on a first segment of the encrypted account number portion and the remaining portion of the first account number;

determining a second expiration date based at least in part on a second segment of the encrypted account number portion;

determining a second verification value based at least in part on a third segment of the encrypted account number portion; and

participating in a transaction with respect to an account corresponding to the first account number utilizing the determined second account number, the determined second expiration date and the determined second verification value in place of the first account number, the first expiration date and

the first verification value,

wherein (i) each segment of the encrypted account number portion contains less information than the whole encrypted account number portion and (ii) the first segment, the second segment and the third segment of the encrypted account number portion collectively contain all the information in the whole encrypted account number portion.

The PTAB agreed with the applicant that the claims were directed to “novel and nonobvious data structures and technical operations,” and were analogous to the claims deemed patent-eligible in Enfish, LLC v. Microsoft Corp., 822 F.3d 1327 (Fed. Cir. 2016) and McRO, Inc. v. Bandai Namco Games America Inc., 837 F.3d 1299 (Fed. Cir. 2016).  Why?  Because the PTAB concluded that “the character of the claims as a whole is directed to an improved encryption device, such as a smartcard, and an improved encryption method for secure transaction handling.” The Specification supported this conclusion by discussing “improved data security systems.”

Simply collecting information would have been an unpatentable abstract idea. But here, analogous to Enfish, the claims were directed to substituting portions of account number information for real account number information, improving account security.

The PTAB also affirmed a 35 USC § 112 rejection that will be easy to address, and reversed a separate Section 101 rejection of “computer readable medium” claims as directed to a “signal per se,” as well as rejections under 35 USC § 102.

Lessons for Practice

Despite what many patent examiners would have you believe, claims are not necessarily patent-ineligible simply because they recite storing or manipulating data, and no more. Of course, many claims directed to manipulating data, business methods, and the like, will fail the Alice patent-eligibility test. Nonetheless, some of these claims can survive if the applicant can show an improved technological system.

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