Blockchain patent applications may be divided into two types:
underlying technologies of blockchain, such as consensus methods,
security, etc., and applications of blockchain in, e.g., fintech,
legal, and other industries. In patent examination, the first type,
because it recites underlying technology improvement, rarely
elicits subject matter rejections. The second type, applications of
blockchain, are often found to be directed to an abstract idea.
This article analyzes a recent Patent Trial and Appeal Board (PTAB)
decision in a blockchain patent application and explores drafting
and prosecution strategies to anticipate subject matter
scrutiny.
Patent Eligibility Under the U.S. Patent System
An invention, to be patent-eligible, must first fall within one
of the four enumerated categories of patentable subject matter
recited in 35 U.S.C. § 101 (i.e., process, machine,
manufacture, or composition of matter). See MPEP §
2106.04. Though almost all blockchain patent applications pass this
first step, some face scrutiny under the second step of the §
101 abstract idea exception analysis.
The USPTO essentially splits the second step into 2A (is the
claim directed to an abstract idea (a judicial exception)?) and 2B
(does the claim recite additional elements that amount to
significantly more than the judicial exception?). Step 2A also has
two prongs. For blockchain application, the first prong essentially
is to determine whether the claims recite an abstract idea, i.e.,
(1) mathematical concepts; (2) certain methods of organizing human
activity; and (3) mental processes. If a blockchain patent
application is not directed to any of these categories, it will
most likely be patent-eligible. Otherwise, the subject matter
analysis proceeds to the second prong, where the Examiners are to
determine if the exception is integrated into a practical
application. To this end, the Examiners should (1) identify whether
there are any additional elements beyond the abstract idea, and (2)
evaluate those elements to determine whether they integrate the
exception into a practical application. Two examples of practical
application provided by the USPTO are most relevant to blockchain
patent applications: (i) an improvement in computer
functionalities, and (ii) limiting the judicial exception in some
other meaningful way beyond generally linking to a technological
environment. See MPEP § 2106.04(d)(I).
Lastly, even if the claims do not pass Step 2A, they are
analyzed under Step 2B, where the Examiner must determine if there
is an inventive concept such that the additional elements recited
in the claims provide significantly more than the judicial
exception.
Appeal 2019-004127 (Decided August 19, 2020)
Decision: 35 U.S.C. § 101 rejection of claims 1-16
reversed
This case involves the PTAB’s reversal of the § 101
rejection of claims 1-16 in the 14/719,030 patent application. This
patent application relates to “the linking of blockchain
transactions to privately verified identities, specifically the
association of a blockchain transaction to a consumer or merchant
associated with a transaction account based on transaction data and
stored account profiles.” The application recognizes
disadvantages of blockchain transactions such as long processing
time, payee’s inability to identify payor, and sole reliance on
electronic credentials to establish ownership to digital
currencies. The invention addresses such issues by combining the
blockchain network and the traditional payment network.
Claim 1 of the application reviewed by the PTAB recites:
1. A method for linking blockchain
transactions to privately verified identities, comprising:
[A] storing, in an account database of a computer
system, 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;
[B] receiving, by a receiver of the computer system, a
transaction message via a payment network, 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 and where the third data element or a fourth
data element is configured to store a digital signature;
[C] identifying, by a processor of the computer system, 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, and wherein the first account profile includes
a public key;
[D] identifying, by the processor of the computer system, 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;
[E] receiving, by the receiver of the computer system, 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 where the address
identifier is generated using the public key;
[F] verifying, by the processor of the computer system, the
digital signature using the public key included in the first
account profile; and
[G] storing, by the processor of the computer system upon
verification of the digital signature, 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.
(Emphases and labels of claim
limitations added)
Under Step 2A Prong 1, the PTAB agreed with the Examiner on
finding the claims directed to an abstract idea of storing data,
receiving data, identifying data, and verification. The PTAB
further agreed with the finding of the claims directed to certain
methods of organizing human activities, namely “commercial
transaction processing such as blockchain payment transaction,
using both standard payment and blockchain payment elements to
verify the identity of the payor.” Accordingly, the PTAB
determined the claims to recite fundamental economic practice,
which is an abstract idea.
Under the same prong, however, the PTAB rejected the Examiner
finding that the claims were also or alternatively directed to
mental processes. The PTAB sided with the Appellant who argued that
“the claims recite the explicit use of a number of
technologies that cannot be performed by human work or mentally,
even given a significant amount of time,” because
“digital signatures are of sufficient data size and complexity
to not be understood by human mental work, let alone verified
through the use of a public key and overly complex (by design)
signature algorithms” and that “transaction messages are
processed in speeds that have to be measured in nanoseconds for
network reliability and due to the overwhelming number of
transaction processed each day, necessitating the use of
specialized computer systems, which is impossible to replicate
through human mental work.” In another word, performing the
claimed invention with the human mind is impractical.
Moving on to Step 2A Prong 2, the PTAB identified additional
elements integrating the abstract idea into a practical application
that combines advantages of both blockchain processing system
(e.g., anonymity) and standard payment processing system (e.g.,
speed, security, fraud prevention).
When identifying additional elements beyond the abstract idea,
the Examiner only found “a database,” “a computer
system,” and “a processor” are positively recited in
the claims. Although not directly addressing the positive
recitation issue, the PTAB agreed with the Appellant and recognized
the ordered combination of “an account database,” “a
receiver of the computer system,” “a payment
network,” “a processor,” and “a blockchain
network” to constitute the additional elements. The PTAB
agreed that the claims require using both networks (i.e., the
standard payment network and the blockchain network) with the
computer system to ensure that the party in the submitted
transaction message was a party to the blockchain transaction.
Accordingly, the PTAB included “a payment network” and
“a blockchain network” in the following evaluation of the
additional elements.
When determining whether the additional elements integrate the
abstract idea into a practical application, the Examiner concluded
that the database, the computer system, and the processor merely
served as tools for implementing the abstract idea and do not
improve the functions of the computer system or otherwise. The
PTAB, on the other hand, focused on improvements to the
technological field of blockchain transactions performed using
computers, such that the blockchain system can acquire the
advantages of speed, security, and fraud prevention of the standard
payment processing system. To accomplish these improvements, the
Appellant contended that the ordered combination of the additional
elements links blockchain transactions to privately verified
identities. Specifically, the PTAB agreed with the Appellant that
the claims “provid[e] the security of standard payment
processing systems (e.g., by identifying first and second account
profiles in limitations C and D of claim 1), and the privacy of
blockchain payment transactions (e.g., by using a blockchain
network to generate an address identifier using a public key in
limitation E of claim 1), to verify a digital signature (e.g.,
limitation F of claim 1) stored in data elements of a receiver of
the computer system (e.g., limitation B of claim 1) that is part of
the account database (e.g., limitation A of claim 1).”
Overall, the identification of the two networks as additional
elements and clear support for the improvements to the blockchain
system appear to be the key for the PTAB to find for the
Appellant.
Conclusions
As shown by the reasonings above, blockchain applications by
nature can hardly be directed to mental processes. Reciting
features such as digital signature and consensus verification in
claims may make it appear even less accomplishable with pen and
paper in practice.
Improvement to computer functionality such as the security and
speed of processing blockchain transactions is likely to be
recognized as a practical application. In particular, improving the
blockchain network with a standard type of computer network will
likely be found as a practical application. It is important for
blockchain patent drafters to think about how the integration of
different computer networks improves the functionality of each
network and explain clearly in the specification.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.