Case 1:21-cv-05463-LJL Document 35 Filed 05/03/22 Page 1 of 24
`
`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
`---------------------------------------------------------------------- X
`
`
` :
`AUTHWALLET, LLC,
` :
`
` :
`
` :
`
` :
`
` :
`
` :
`BLOCK, INC.,
` :
`
` :
`
` :
`
` :
`
`---------------------------------------------------------------------- X
`LEWIS J. LIMAN, United States District Judge:
`
`
`
`
`
`
`
`
`
`-v-
`
`
`
`
`
`
`
`Plaintiff,
`
`Defendant.
`
`5/3/2022
`
`21-cv-5463 (LJL)
`
`OPINION AND ORDER
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`Defendant Block, Inc. (“Block” or “Defendant”) moves, pursuant to Federal Rule of Civil
`
`Procedure 12(b)(6), to dismiss the complaint of Plaintiff AuthWallet, LLC (“AuthWallet”)
`
`against it for failure to state a claim.1
`
`For the following reasons, the motion to dismiss is granted.
`
`BACKGROUND
`
`AuthWallet is a Texas-based limited liability corporation. Dkt. No. 1 (the “Complaint”)
`
`¶ 1. Block is a corporation headquartered and incorporated in the state of New York. Id. ¶ 2.
`
`For the purposes of this motion, the Court accepts the well-pleaded allegations of the Complaint
`
`as true.
`
`
`1 AuthWallet’s action was originally brought against “Square, Inc.” See Dkt. No. 1. On
`December 21, 2021, Defendant Square, Inc. informed the Court that it changed its name to
`Block, Inc. and moved to substitute Block, Inc. for Square, Inc. and to change the case caption
`accordingly. Dkt. No. 27. Defendant agreed that the allegations asserted in the Complaint
`against Square, Inc. shall be deemed asserted against Block, Inc., and Block, Inc. will be bound
`by the service of summons on Square, Inc. and by the filings previously made by Square, Inc. in
`the case. Id. The Court granted that motion on December 22, 2021. Dkt. No. 28.
`
`
`
`
`

`

`Case 1:21-cv-05463-LJL Document 35 Filed 05/03/22 Page 2 of 24
`
`I.
`
`The ’852 Patent
`
`Plaintiff AuthWallet is the sole owner of all rights, title, and interest in U.S. Patent
`
`Number 9,292,852 (the “’852 Patent” or “Patent”) entitled “System And Method For Applying
`
`Stored Value To A Financial Transaction.” Id. ¶ 6. The ’852 Patent was duly and legally issued
`
`by the U.S. Patent and Trademark Office on March 22, 2016 and is owned by AuthWallet by
`
`assignment. Id. The patent relates to novel and improved methods and systems for processing
`
`financial transaction data. Id. ¶ 7. It contains forty claims, which state as follows:
`
`Claim 1:
`
`A computer-implemented method for processing financial transaction data in a
`computing system including a processor and a storage area, the method comprising:
`receiving an authorization request generated as a result of a transaction by a
`purchaser at a point of purchase via an acquirer configured to receive authorization
`requests from a plurality of points of purchase, wherein the authorization request
`includes a purchaser identifier and transaction information, the transaction
`information including a transaction amount, and wherein the purchaser identifier
`identifies the purchaser that initiated the transaction;
`based on the authorization request, determining one or more stored value items to
`apply to the transaction, wherein each stored value item includes an associated
`value, wherein the one or more stored value items are selected from a plurality of
`stored value items stored in the storage area, and wherein the plurality of stored
`value items includes stored value items provided by a plurality of different third
`parties;
`transmitting a transaction indication message to a mobile device associated with the
`purchaser
`identifier, wherein
`the
`transaction
`indication message
`includes
`information about the determined one or more stored value items;
`receiving an indication from a user of the mobile device that at least one stored
`value item should be applied against the transaction;
`applying the indicated at least one stored value item to pay a first portion of the
`transaction amount; and
`initiating a payment process to pay a remaining portion of the transaction amount
`by providing a modified transaction amount to the acquirer for submission to a
`payment association.
`
`Dkt. No. 1, Ex. A at ECF pp. 36–37.
`
`Claim 2: “The method of claim 1, wherein a stored value item is a coupon for use in
`
`transactions with a specified merchant or for a specified product.” Id. at 37.
`
`2
`
`

`

`Case 1:21-cv-05463-LJL Document 35 Filed 05/03/22 Page 3 of 24
`
`Claim 3: “The method of claim 1, wherein the associated value is expressed as a currency
`
`amount.” Id.
`
`Claim 4: “The method of claim 1, wherein the associated value is expressed as a
`
`percentage of a portion of the transaction amount.” Id.
`
`Claim 5: “The method of claim 1, wherein the associated value is expressed in non-
`
`currency units and further comprising converting the non-currency units to a currency amount
`
`using a conversion rate before applying the indicated at least one stored value item to the first
`
`portion of the transaction amount.” Id.
`
`Claim 6: “The method of claim 5, wherein the conversion rate is determined based on
`
`characteristics of the transaction.” Id.
`
`Claim 7: “The method of claim 1, wherein the transaction information identifies a
`
`product purchased during the transaction, and wherein a stored value item is determined based
`
`on the identified product.” Id.
`
`Claim 8: “The method of claim 1, wherein a stored value item is
`
`associated with an applicable time or time period and the stored value item is determined based
`
`on a time associated with the transaction.” Id.
`
`Claim 9: “The method of claim 1, wherein a stored value item is determined based on a
`
`transaction history of the purchaser.” Id.
`
`Claim 10: “The method of claim 1, wherein initiating a payment process comprises:
`
`generating a modified authorization request based on the received authorization request, wherein
`
`the modified authorization request includes a modified transaction amount based on the
`
`remaining portion of the transaction amount; and transmitting the modified authorization request
`
`to an issuing institution for authorization of payment.” Id.
`
`3
`
`

`

`Case 1:21-cv-05463-LJL Document 35 Filed 05/03/22 Page 4 of 24
`
`
`Claim 11: “The method of claim 1, wherein the one or more stored value items are
`
`uniquely associated with the purchaser identifier in the authorization request.” Id.
`
`Claim 12:
`
`The method of claim 1, wherein a plurality of stored value items are contained in
`the storage area and each stored value item has associated transaction conditions
`under which a stored value item is to be applied, and wherein determining the one
`or more stored value items to apply to the transaction comprises selecting a stored
`value item from the plurality of stored value items in response to determining that
`the associated transaction conditions under which the stored value item is to be
`applied are satisfied by the authorization request.
`
`Id.
`
`Claim 13: “The method of claim 12, wherein the associated transaction conditions
`
`include an identity of a product being purchased.” Id.
`
`Claim 14: “The method of claim 12, wherein the associated transaction conditions
`
`include a time period during which the stored value item is valid.” Id.
`
`Claim 15:
`
`A system for processing financial transaction data, the system comprising: a
`processor; a storage component configured to store a plurality of stored value items,
`wherein the plurality of stored value items includes stored value items provided by
`a plurality of different third parties; a communication module configured to receive
`an authorization request generated as a result of a transaction by a purchaser at a
`point of purchase via an acquirer configured to receive authorization requests from
`a plurality of points of purchase, wherein the authorization request includes a
`purchaser identifier and transaction information, the transaction information
`including a transaction amount, and wherein the purchaser identifier identifies the
`purchaser that initiated the transaction; and a stored value module configured to:
`based on the authorization request, determine one or more stored value item to
`apply to the transaction, wherein each stored value item includes an associated
`value, wherein the one or more stored value items are selected from the plurality of
`stored value items stored in the storage area, and; transmit a transaction indication
`message to a mobile device associated with the purchaser identifier, wherein the
`transaction indication message includes information about the determined one or
`more stored value items; receive an indication from a user of the mobile device that
`at least one stored value item should be applied against the transaction; apply the
`indicated at least one stored value item to pay a first portion of the transaction
`
`4
`
`

`

`Case 1:21-cv-05463-LJL Document 35 Filed 05/03/22 Page 5 of 24
`
`amount; and initiate a payment process to pay a remaining portion of the transaction
`amount by providing a modified transaction amount to the acquirer for submission
`to a payment association.
`
`Id.
`
`Claim 16: “The system of claim 15, wherein a stored value item is a coupon for use in
`
`
`
`
`
`transactions with a specified merchant or for a specified product.” Id.
`
`Claim 17: “The system of claim 15, wherein the associated value is expressed as a
`
`currency amount.” Id.
`
`Claim 18: “The system of claim 15, wherein the associated value is expressed in non-
`
`currency units and wherein the stored value module is further configured to convert the non-
`
`currency units to a currency amount using a conversion rate before applying the indicated at least
`
`one stored value item to the first portion of the transaction amount.” Id.
`
`
`Claim 19: “The system of claim 18, wherein the conversion rate is determined based on
`
`characteristics of the transaction.” Id.
`
`Claim 20: “The system of claim 15, wherein the transaction information identifies a
`
`product purchased during the transaction, and wherein the stored value item is determined based
`
`on the identified product.” Id.
`
`Claim 21: “The system of claim 15, wherein a stored value item is associated with an
`
`applicable time or time period and the stored value item is determined based on a time associated
`
`with the transaction.” Id.
`
`Claim 22: “The system of claim 15, wherein a stored value item is determined based on a
`
`transaction history of the purchaser.” Id.
`
`Claim 23:
`
`5
`
`

`

`Case 1:21-cv-05463-LJL Document 35 Filed 05/03/22 Page 6 of 24
`
`The system of claim 15, wherein initiating a payment process comprises: process
`comprises: generating a modified authorization request based on the received
`authorization request, wherein the modified authorization request includes a
`modified transaction amount based on the remaining portion of the transaction
`amount; and transmitting the modified authorization request to an issuing
`institution for authorization of payment.
`
`Id. at 37–38.
`
`Claim 24: “The system of claim 15, wherein the one or more stored value items are
`
`uniquely associated with the purchaser identifier in the authorization request.” Id. at 38.
`
`Claim 25:
`
`The system of claim 15, wherein a plurality of stored value items are contained in
`the storage area and each stored value item has associated transaction conditions
`under which a stored value item is to be applied, and wherein determining the one
`or more stored value items to apply to the transaction comprises selecting a stored
`value item from the plurality of stored value items in response to determining that
`the associated transaction conditions under which the stored value item is to be
`applied are satisfied by the authorization request.
`
`Id.
`
`Claim 26: “The system of claim 25, wherein the associated transaction conditions include
`
`an identity of a product being purchased.” Id.
`
`Claim 27: “The system of claim 25, wherein the associated transaction conditions include
`
`a time period during which the stored value item is valid.” Id.
`
`Claim 28:
`
`
`
`A computer-readable medium containing instructions for processing financial
`transaction data in a computing system including a processor and an associated
`storage area, by a method comprising: receiving an authorization request generated
`as a result of a transaction by a purchaser at a point of purchase via an acquirer
`configured to receive authorization requests from a plurality of points of purchase,
`wherein the authorization request includes a purchaser identifier and transaction
`information, the transaction information including a transaction amount, and
`wherein the purchaser identifier identifies the purchaser that initiated the
`transaction; based on the authorization request, determining one or more stored
`value items to apply to the transaction wherein the stored value item includes an
`associated value, wherein the plurality of stored value items includes stored value
`
`6
`
`

`

`Case 1:21-cv-05463-LJL Document 35 Filed 05/03/22 Page 7 of 24
`
`items provided by a plurality of different third parties; transmitting a transaction
`indication message to a mobile device associated with the purchaser identifier,
`wherein the transaction indication message includes information about the
`determined one or more stored value items receiving an indication from a user of
`the mobile device that at least one stored value item should be applied against the
`transaction; applying the stored value item to pay a first portion of the transaction
`amount; and initiating a payment process to pay a remaining portion of the
`transaction amount by providing a modified transaction amount to the acquirer for
`submission to a payment association.
`
`Id.
`
`Claim 29: “The computer-readable medium of claim 28, wherein a stored value item is a
`
`coupon for use in transactions with a specified merchant or for a specified product.” Id.
`
`Claim 30: “The computer-readable medium of claim 28, wherein the associated value is
`
`expressed as a currency amount.” Id.
`
`Claim 31: “The computer-readable medium of claim 28, wherein the associated value is
`
`expressed in non-currency units and further comprising converting the non-currency units to a
`
`currency amount using a conversion rate before applying the indicated at least one stored value
`
`item to the first portion of the transaction amount.” Id.
`
`Claim 32: “The computer-readable medium of claim 31, wherein the conversion rate is
`
`determined based on characteristics of the transaction.” Id.
`
`Claim 33: “The computer-readable medium of claim 28, wherein the transaction
`
`information identifies a product purchased during the transaction, and wherein a stored value
`
`item is determined based on a product purchased during the transaction.” Id.
`
`Claim 34: “The computer-readable medium of claim 28, wherein a stored value item is
`
`associated with an applicable time or time period and the stored value item is determined based
`
`on a time associated with the transaction.” Id.
`
`7
`
`

`

`Case 1:21-cv-05463-LJL Document 35 Filed 05/03/22 Page 8 of 24
`
`Claim 35: “The computer-readable medium of claim 28, wherein a stored value item is
`
`determined based on a transaction history of the purchaser.” Id.
`
`Claim 36:
`
`The computer-readable medium of claim 28 wherein initiating a payment process
`comprises: generating a modified authorization request based on the received
`authorization request, wherein the modified authorization request includes a
`modified transaction amount based on the remaining portion of the transaction
`amount; and transmitting the modified authorization request to an issuing
`institution for authorization of payment.
`
`Id.
`
`Claim 37: “The computer-readable medium of claim 28 wherein
`
`
`
`the one or more stored value items are uniquely associated with the purchaser identifier in the
`
`authorization request.” Id.
`
`Claim 38:
`
`The computer-readable medium of claim 28, wherein a plurality of stored value
`items are contained in the storage area and each stored value item has associated
`transaction conditions under which a stored value item is to be applied, and wherein
`determining the one or more stored value items to apply to the transaction
`comprises selecting a stored value item from the plurality of stored value items in
`response to determining that the associated transaction conditions under which the
`stored value item is to be applied are satisfied by the authorization request.
`
`Id.
`
`Claim 39: “The computer-readable medium of claim 38 wherein the associated
`
`transaction conditions include an identity of a product being purchased.” Id.
`
`Claim 40: “The computer-readable medium of claim 38 wherein the associated
`
`transaction conditions include a time period during which the stored value item is valid.” Id.
`
`II.
`
`Defendant’s Products and Methods
`
`Defendant Block “maintains, operates, and administers online platforms, products and
`
`services that facilitate financial transaction data processing.” Dkt. No. 1 ¶ 8. Block offers
`
`8
`
`

`

`Case 1:21-cv-05463-LJL Document 35 Filed 05/03/22 Page 9 of 24
`
`mobile payment options that provide a means for customers to earn and redeem rewards for
`
`multiple vendors. Id. ¶ 9. Block also receives pre-authorizations from debit and credit cards
`
`used on its platforms; the pre-authorization requests include purchaser identification and
`
`transaction amounts. Id. Block can add dollar amounts, points, discounts, and other awards on
`
`transactions and can send notifications of these awards to a customer’s cell phone. Id. When
`
`customers use these benefits toward future eligible purchases, Block pays the transaction amount
`
`and deducts any redemption values after the purchase has completed. Id.
`
`III. The Alleged Infringement and Current Dispute
`
`AuthWallet alleges that Block’s payment platforms infringe on one or more of claims 1–
`
`40 of the ’852 Patent, either literally or under the doctrine of equivalents.2 Id. ¶ 8.
`
`AuthWallet alleges that “Defendant put the inventions claimed by the ’852 Patent into
`
`service (i.e., used them); but for Defendant’s actions, the claimed-inventions embodiments
`
`involving Defendant’s products and services would never have been put into service.” Id.
`
`Defendants’ actions thus “caused those claimed invention embodiments as a whole to perform”
`
`and benefitted Defendant financially and commercially. Id.
`
`With respect to claims 1–18, AuthWallet alleges that Defendant has induced infringement
`
`and has contributorily infringed, and continues to do so by:
`
`actively encourag[ing] or instruct[ing] others (e.g., its customers and/or the
`customers of its related companies), and continues to do so, on how to use its
`products and services (e.g., payment products and services that facilitate purchases
`from a vendor using a bridge computer) such as to cause infringement of one or
`more of claims 1–18 of the ’852 patent, literally or under the doctrine of
`equivalents.
`
`
`2 The doctrine of equivalents states that “a product or process that does not literally infringe upon
`the express terms of a patent claim may nonetheless be found to infringe if there is ‘equivalence’
`between the elements of the accused product or process and the claimed elements of the patented
`invention.” Depuy Spine, Inc. v. Medtronic Sofamor Danek, Inc., 469 F.3d 1005, 1016 (Fed. Cir.
`2006) (citing Warner–Jenkinson Co. v. Hilton Davis Chem. Co., 520 U.S. 17, 21 (1997)).
`
`9
`
`

`

`Case 1:21-cv-05463-LJL Document 35 Filed 05/03/22 Page 10 of 24
`
`Id. ¶¶ 10–11. AuthWallet also alleges that Defendant has known or should have known about
`
`the ’852 Patent and underlying technology since at least the date the patent was issued. Id.
`
`AuthWallet filed its complaint in this case on June 7, 2021, bringing a claim under 35
`
`U.S.C. § 271, et seq. Dkt. No. 1. It seeks compensatory damages; injunctive relief against future
`
`infringement; associated attorneys’ fees, expenses and costs incurred in this action; and any other
`
`relief this Court deems proper. Dkt. No. 1 at 8–9. The case was reassigned to the undersigned
`
`on June 22, 2021. Block filed its motion to dismiss on October 15, 2021. Dkt. No. 19.
`
`AuthWallet filed its response in opposition on November 22, 2021, Dkt. No. 23, and Block
`
`replied on December 17, 2021. Dkt. No. 26.
`
`LEGAL STANDARD
`
`To survive a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), a
`
`complaint must include “sufficient factual matter, accepted as true, to ‘state a claim to relief that
`
`is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v.
`
`Twombly, 550 U.S. 544, 570 (2007)).
`
`“A claim has facial plausibility when the plaintiff pleads factual content that allows the
`
`court to draw the reasonable inference that the defendant is liable for the misconduct
`
`alleged.” Id. “Put another way, the plausibility requirement ‘calls for enough fact to raise a
`
`reasonable expectation that discovery will reveal evidence [supporting the claim].’” RDPA, LLC
`
`v. Geopath, Inc., 543 F. Supp. 3d 4, 16 (S.D.N.Y. 2021) (quoting Twombly, 550 U.S. at
`
`556); accord Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27, 46 (2011). “Determining
`
`whether a complaint states a plausible claim for relief will . . . be a context-specific task that
`
`requires the reviewing court to draw on its judicial experience and common sense.” Iqbal, 556
`
`U.S. at 679.
`
`10
`
`

`

`Case 1:21-cv-05463-LJL Document 35 Filed 05/03/22 Page 11 of 24
`
`Although the Court must accept all the factual allegations of a complaint as true, it is “not
`
`bound to accept as true a legal conclusion couched as a factual allegation.” Id. at 678
`
`(quoting Twombly, 550 U.S. at 555). The ultimate issue “is not whether a plaintiff will
`
`ultimately prevail but whether the claimant is entitled to offer evidence to support the
`
`claims.” Walker v. Schult, 717 F.3d 119, 124 (2d Cir. 2013) (quoting Scheuer v. Rhodes, 416
`
`U.S. 232, 235–36 (1974)); see also DiFolco v. MSNBC Cable L.L.C., 622 F.3d 104, 113 (2d Cir.
`
`2010) (“In ruling on a motion pursuant to Fed. R. Civ. P. 12(b)(6), the duty of a court is merely
`
`to assess the legal feasibility of the complaint, not to assay the weight of the evidence which
`
`might be offered in support thereof.” (internal quotation marks and citation omitted)).
`
`The Federal Circuit has affirmed that subject matter eligibility under Section 101 of the
`
`Patent Act, 35 U.S.C. §§ 100, et seq., is a question of law suitable for resolution at the pleading
`
`stage of a patent case. SAP Am., Inc. v. InvestPic, LLC, 898 F.3d 1161, 1166 (Fed. Cir. 2018)
`
`(“Like other legal questions based on underlying facts, this question may be, and frequently has
`
`been, resolved on a Rule 12(b)(6) or (c) motion where the undisputed facts, considered under the
`
`standards required by that Rule, require a holding of ineligibility under the substantive standards
`
`of law.”). The focus of a Section 101 inquiry is on the asserted claims. See Dealertrack, Inc. v.
`
`Huber, 674 F.3d 1315, 1334 (Fed. Cir. 2012).
`
`DISCUSSION
`
`Block argues in support of its motion to dismiss that claims 1–40 of the ’852 Patent are
`
`not patentable under 35 U.S.C. § 101. Block contends that claim 1 is directed to the abstract idea
`
`and conventional business practice of processing a discounted payment in a sales transaction and
`
`simply implements that abstract idea using computer technology. It also contends that the
`
`remaining claims are ineligible for patenting for the same reasons that claim 1 is ineligible and
`
`that claim 1 is thus representative. Specifically, it argues that claims 15 and 28 cover systems
`
`11
`
`

`

`Case 1:21-cv-05463-LJL Document 35 Filed 05/03/22 Page 12 of 24
`
`and media, respectively, that are configured to perform the same method described in claim 1
`
`and that claims 2–14, 16–27, and 29–40 are dependent on claims 1, 15, or 28, and merely recite
`
`additional layers of abstraction. Block separately argues that claims 28–40 are patent-ineligible
`
`because they encompass transitory computer-readable media.
`
`AuthWallet also treats claim 1 as representative. Accordingly, the Court will start its
`
`analysis with claim 1; its analysis and conclusion with respect to claim 1 applies to claims 2–40.
`
`I.
`
`Patentability of the Subject Matter
`
`Block argues that the claims of the ’852 Patent are ineligible for protection under Section
`
`101 of the Patent Act because they are directed to the abstract concept of processing discounted
`
`payments during sales transactions. Section 101 of the Patent Act provides for four categories of
`
`patentable subject matter: “any new and useful process, machine, manufacture, or composition of
`
`matter.” 35 U.S.C. § 101. The capacious language of the Patent Act is not without limit,
`
`however. Courts “have long held that this provision contains an important implicit exception:
`
`Laws of nature, natural phenomena, and abstract ideas are not patentable.” Ass’n for Molecular
`
`Pathology v. Myriad Genetics, Inc., 569 U.S. 576, 589 (2013) (emphasis added). Such concepts
`
`are “the basic tools of scientific and technological work,” Gottschalk v. Benson, 409 U.S. 63, 67
`
`(1972), and “monopolization of those tools through the grant of a patent might tend to impede
`
`innovation more than it would tend to promote it,” Mayo Collaborative Servs. v. Prometheus
`
`Lab’ys, Inc., 566 U.S. 66, 72 (2012). Thus, the Supreme Court has affirmed that patent claims
`
`that monopolize the “building blocks of human ingenuity” are not extended protection. Alice
`
`Corp. Pty. Ltd. v. CLS Bank Int'l, 573 U.S. 208, 216 (2014).
`
`The prohibition on patenting “abstract ideas” reflects “the longstanding rule that ‘[a]n
`
`idea of itself is not patentable.’” Gottschalk, 409 U.S. at 67 (1972) (quoting Rubber-Tip Pencil
`
`Co. v. Howard, 87 U.S. 498, 507 (1874)). The exception prevents patenting a result where “it
`
`12
`
`

`

`Case 1:21-cv-05463-LJL Document 35 Filed 05/03/22 Page 13 of 24
`
`matters not by what process or machinery the result is accomplished.” O'Reilly v. Morse, 56
`
`U.S. 62, 113 (1853).
`
`The Supreme Court has emphasized that courts must “tread carefully in construing [the]
`
`exclusionary provision lest it swallow all of patent law.” Alice, 573 U.S. at 217. Because “[a]t
`
`some level, ‘all inventions . . . embody, use, reflect, rest upon, or apply laws of nature, natural
`
`phenomena, or abstract ideas’ . . . an invention is not rendered ineligible for patent simply
`
`because it involves an abstract concept.” Id. (quoting Prometheus Lab’ys, 566 U.S. at 71).
`
`“‘Applications’ of such concepts ‘to a new and useful end’ . . . remain eligible for patent
`
`protection.” Id. (quoting Gottschalk, 409 U.S. at 67).
`
`The Supreme Court has laid a path for courts to navigate the careful terrain that lies
`
`between claims of patent eligibility and claims of abstractness. In Alice, the Supreme Court
`
`established a two-part test for determining whether an idea is unpatentable as a law of nature,
`
`natural phenomenon, or abstract idea (the “Alice test”). First, the court determines whether the
`
`claims at issue are directed to a patent-ineligible concept, such as an abstract idea. Id. at 216.
`
`The court must consider the claims “in their entirety to ascertain whether their character as
`
`a whole is directed to excluded subject matter.” Internet Patents Corp. v. Active Network, Inc.,
`
`790 F.3d 1343, 1346 (Fed. Cir. 2015). Courts should not “simply ask whether the claims involve
`
`a patent-ineligible concept, because essentially every routinely patent-eligible claim involving
`
`physical products and actions involves a law of nature and/or natural phenomenon,” Enfish, LLC
`
`v. Microsoft Corp., 822 F.3d 1327, 1335 (Fed. Cir. 2016), and they “‘must be careful to avoid
`
`oversimplifying the claims’ by looking at them generally and failing to account for the specific
`
`requirements of the claims,” McRO, Inc. v. Bandai Namco Games Am. Inc., 837 F.3d 1299,
`
`1313 (Fed. Cir. 2016) (quoting In re TLI Commc'ns LLC Patent Litig., 823 F.3d 607, 611 (Fed.
`
`13
`
`

`

`Case 1:21-cv-05463-LJL Document 35 Filed 05/03/22 Page 14 of 24
`
`Cir. 2016)). At this first step of the Alice test, the focus of the inquiry is “the claimed advance
`
`over the prior art.” Trading Techs. Int'l, Inc. v. IBG LLC, 921 F.3d 1378, 1384 (Fed. Cir. 2019).
`
`The Federal Circuit has provided specific guidance for assessing patents involving
`
`computer technology at this first step. When “the patent involves computer software, Alice step
`
`one 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 versus being
`
`directed to an abstract idea.’” Gabara v. Facebook, Inc., 484 F. Supp. 3d 118, 124 (S.D.N.Y.
`
`2020) (quoting Visual Memory LLC v. NVIDIA Corp., 867 F.3d 1253, 1258 (Fed. Cir. 2017)).
`
`The “‘mere automation of manual processes using generic computers . . . does not constitute a
`
`patentable improvement in computer technology.’” Trading Techs., 921 F.3d at 1384 (quoting
`
`Credit Acceptance Corp. v. Westlake Servs., 859 F.3d 1044, 1055 (Fed. Cir. 2017)). An 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.” Ancora Techs., Inc. v.
`
`HTC Am., Inc., 908 F.3d 1343, 1349 (Fed. Cir. 2018).
`
`The inquiry does not end with the court’s determination that the claims at issue are
`
`directed to a patent-ineligible concept. The second step of the Alice test requires a court to ask
`
`“[w]hat else is there in the claims before [it]?” Prometheus Lab’ys, 566 U.S. at 78. To answer
`
`that question, a court “consider[s] the elements of each claim both individually and ‘as an
`
`ordered combination’ to determine whether the additional elements ‘transform the nature of the
`
`claim’ into a patent-eligible application.’” Alice, 573 U.S. at 217 (quoting Prometheus Lab’ys,
`
`566 U.S. at 78). Step two of the analysis asks whether there is an “inventive concept—i.e., an
`
`element or combination of elements that is ‘sufficient to ensure that the patent in practice
`
`amounts to significantly more than a patent upon the ineligible concept itself.’” Id. at 217–18
`
`14
`
`

`

`Case 1:21-cv-05463-LJL Document 35 Filed 05/03/22 Page 15 of 24
`
`(quoting Prometheus Lab’ys, 566 U.S. at 72–73). “In looking for an inventive concept, a court
`
`must consider the elements of the claims ‘both individually and as an ordered combination’ to
`
`determine whether the additional elements have transformed the claim into a patent eligible
`
`application.” Gabara, 484 F. Supp. 3d at 124 (quoting BASCOM Glob. Internet Servs., Inc. v.
`
`AT&T Mobility LLC, 827 F.3d 1341, 1347 (Fed. Cir. 2016)). “A claim contains an inventive
`
`concept if it include[s] additional features that are more than well-understood, routine,
`
`conventional activities.” Smart Sys. Innovations, LLC v. Chi. Transit Auth., 873 F.3d 1364, 1374
`
`(Fed. Cir. 2017). “If a claim’s only ‘inventive concept’ is the application of an abstract idea
`
`using conventional and well-understood techniques, the claim has not been transformed into a
`
`patent-eligible application of an abstract idea.” BSG Tech LLC v. Buyseasons, Inc., 899 F.3d
`
`1281, 1290–91 (Fed. Cir. 2018). Thus, “[a] claim that recites an abstract idea must include
`
`‘additional features’ to ensure ‘that the [claim] is more than a drafting effort designed to
`
`monopolize the [abstract idea].’” Alice, 573 U.S. at 221 (quoting Prometheus Lab’ys, 566 U.S.
`
`at 77). The “transformation [of an idea] into a patent-eligible application requires ‘more than
`
`simply stat[ing] the [abstract idea] while adding the words “apply it.”’” Id. (quoting Prometheus
`
`Lab’ys, 566 U.S. at 72).
`
`A court need not address “each asserted claim in a § 101 analysis . . . when the claims are
`
`‘substantially similar and linked to the same abstract idea.’” Pers. Beasties Grp. LLC v. Nike,
`
`Inc., 341 F. Supp. 3d 382, 386 (S.D.N.Y. 2018) (quoting Content Extraction & Trans. LLC v.
`
`Wells Fargo Bank, N.A., 776 F.3d 1343, 1348 (Fed. Cir. 2012)). All forty claims of the ’852
`
`Patent are substantially similar because they are linked to the method of payment processing in
`
`sales transactions outlined in claim 1.3 Therefore, the Court’s application of the Alice test to
`
`
`3 Block argues this point in it