Patent Directed to Countering Credit Card Fraud is an Invalid Abstract Idea Under Section 101

In the case of In Re: SARADA MOHAPATRA, Appellant, No. 2020-1935, 2021 WL 408755 (Fed. Cir. Feb. 5, 2021), Sarada Mohapatra sought to overturn a decision of the Patent Trial and Appeal Board (PTAB), holding that his patent application was directed to unpatentable subject matter.

Mohapatra's patent application was directed to a method for countering credit card fraud by enabling a cardholder to change the card's security code at any time. The method provided that the new credit card security code would be different from the code printed on the card. The PTAB, however, decided that his patent application was directed to unpatentable subject matter under Section 101, specifically "the abstract idea of a method of organizing human activity in the form of fundamental economic practices."

Mohapatra appealed to the U.S. Court of Appeals for the Federal Circuit. He first argued that the U.S. Patent and Trademark Office (USPTO) has issued many patents directed to similar subject matter over the past two decades. This did not persuade the judges, who said, "Each application is examined on its own merits for compliance with pertinent statutory requirements." He then argued that his patent application was not abstract within the meaning of Section 101 because the claims are "integrated into a practical application for real-world benefits." But a claim does not cease to be abstract for Section 101 purposes "simply because the claim confines the abstract idea to a particular technological environment in order to effectuate a real-world benefit."

The Federal Circuit also agreed with the PTAB that the idea underlying Mohapatra's claims is for an individual to alter the identification code associated with a financial instrument, such as a credit card, to protect against fraud. The judges commented, "The benefits that flow from performing an abstract idea do not render the abstract idea patentable subject matter if the benefits flow from performing an abstract idea in conjunction with a well-known database structure." The idea of a changeable personal identification number (PIN) may be beneficial but it is also abstract and, therefore, not patentable without claiming more.

Mohapatra's final argument was that his claims embodied inventive concepts, such as "making security code numbers changeable, providing for card account management on web or mobile devices to update the changes and using those features to prevent fraud." The claims, however, were "just the benefits or goals that Mohapatra contends will flow from the claimed abstract idea." The court found that the claims failed to disclose an inventive way by which those goals are achieved and, instead, "merely announce the goals themselves."

While the claims recited using the new security code to validate transactions without altering the card or any of the supporting equipment, "it does not specify how that is to be done." The claimed functions of recording, storing and verifying both the security code and changes to the code "amount to no more than the implementation of an abstract idea on a computer operating in a conventional manner."

The Federal Circuit, therefore, upheld the PTAB's decision that the claims of the application were directed to patent-ineligible subject matter.

The representative claim follows:

18. A method for countering credit card fraud arising from compromised credit card information by utilizing cardholder changeable card security code (CSC; also known as card verification value CVV2 or card verification data CVD or card identification code CID or card verification code CVC2) comprising:

a) A card issuer enabling change of card security code printed on the card, by allowing cardholder to choose a new security code value as often as cardholder wishes, facilitating recordation of chosen card security code by the cardholder by providing an internet connected card account management facility, using most recently recorded card security code to verify subsequent transaction authorization requests without requiring any change in existing credit cards, terminals, equipment, computer software and communication protocols used in transaction authorization, and denying transactions when card security code provided during authorization does not match card security code on record;

b) Cardholder changing card security code any time s/he deems it necessary to mitigate risk from possible card security code compromise, by selecting a new security code value to be used as personal secret separate from the card without requiring assistance from any software program running on any device, ensuring that selected new security code value is different from the printed code on first change and is different from last recorded code on subsequent changes, recording the new card security code value using issuer provided internet connected card account management facility, and remembering and providing the new card security code when prompted during subsequent credit card authorizations.

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