28 May 2011

CardinalCommerce Credited with Patent Win Over Visa

Visa Inc. v CardinalCommerce Corporation [2011] APO 34 (25 May 2011)

Opposition – whether claims suffer from ‘parametritis’ – whether claimed invention novel and inventive over systems in prior use – whether Internet Archive a ‘reliable source’ of prior art information – whether information relating to prior systems would have been ‘ascertained’ before the priority date – whether claims are for a ‘manner of manufacture’

International credit card giant, Visa Inc, has been wholly unsuccessful in an opposition to the grant of a patent in Australia relating to transaction authentication.  The patent application was filed in the name of CardinalCommerce Corporation, which bills itself as ‘the global leader in enabling authenticated payments, secure transactions and alternative payment brands for both eCommerce and mobile commerce.’

Visa contended that the CardinalCommerce claims lacked novelty and/or inventive step in view of two prior authentication systems – Active Access / Active Merchant and Secure Suite – and payment gateways that were well-known at the priority date of 12 June 2002.  Visa also contended that the claims did not define a ‘manner of manufacture’, i.e. were not for patentable subject matter.

Hearing Officer Matt Kraefft found that the evidence did not support a conclusion that the claimed invention lacked novelty, nor that it was obvious at the priority date.  He also found that ‘claims clearly relate to supporting authentication processing of on-line commercial transactions involving several physical steps in a networked environment’, and satisfied the requirements for a manner of manufacture.

He also considered the following additional issues:
  1. whether the claims suffered from ‘parametritis’ (they did not);
  2. whether the Internet Archive, or ‘WayBack Machine’, is a reliable source of prior art information (it may not be definitive, but a conclusion may be reached on the balance of probabilities); and
  3. whether documents that were not confidential, but may have had only a limited distribution, could be considered as the foundation for a lack of inventive step (they could not).

THE INVENTION – ‘UNIVERSAL AUTHENTICATION’

The invention claimed in patent application no. 2003243523 (application details here, specification here) addresses the problem of authentication of customers in an e-commerce system.  Authentication involves more than the normal ‘authorisation’ process, which generally comprises confirming with a card issuer (e.g. the cardholder’s bank) that credit of debit card details provided by the customer (e.g. card number, expiry date and name) are correct, and that there are sufficient funds available to complete the transaction.  Authentication is the process of verifying that the person making the transaction is the true cardholder.

As any online shopper will be aware, authentication remains a little-used feature even today, nine years after the CardinalCommerce priority date.  Part of the reason for this is that every platform(e.g. Visa, Mastercard, American Express) uses a different system, with different protocols.  One example is Visa’s own online authentication product, branded ‘Verified by Visa’.  Supporting the different authentication protocols, with new systems coming online and existing systems being upgraded, is extremely burdensome for merchants.

The CardinalCommerce solution, as disclosed in claimed in the patent application, is to provide a ‘universal platform server’, remote from the merchant, which assumes responsibility for determining which authentication system is required, and the appropriate protocols to use.  The merchant server can then collect payment details from a customer, and send a request to the universal platform server to perform authentication.  The result of the authentication (success or failure) is then returned to the merchant server.

‘PARAMETRITIS’

The opponent referred to a UK decision, Raychem Corp.’s Patents[1997] EWHC 372, in which Laddie J discussed the phenomenon of ‘parametritis’ which is, apparently:

the practice of seeking to repatent the prior art by limiting claims by reference to a series of parameters which were not mentioned in the prior art. … The attraction of this to a patentee is that it may be impossible to prove now that the prior art inevitably exhibited the parameters and therefore it is impossible for an opponent to prove anticipation.

The opponent also quoted the following related statement from Raychem:

There is another practice which can be used to obscure the patentee’s contribution, if any, to the art. This takes the form of drafting claims in an unnecessarily complicated way so that they are difficult to work through.

The Hearing Officer was unimpressed by these submissions, finding the claims to be perfectly clear, and not flawed in the manner suggested (at [20]).

NOVELTY

The prior art cited by Visa was essentially prior use, in the form of two specific pre-existing systems, and known payment gateways in general.

The first of the two prior systems comprised two separate components, Active Access and Active Merchant.  CardinalCommerce submitted that Active Access was primarily a card issuer solution, which could not be readily adapted for merchant use, because card issuers actually perform authentication, whereas a merchant can only provide support for authentication (at [34]).  Active Merchant comprised a ‘plug-in’ for use on merchant sites, which could perform multi-platform authentication processing.  There was some evidence to support Visa’s contention that the two systems could communicate so as essentially to form a single integrated system.

Even so, the Hearing Officer found that there was no evidence to suggest that the architecture of the Active Access / Active Merchant system was as claimed in the CardinalCommerce application.  On the contrary, it appeared that any multi-platform processing was performed by the plug-in, at the merchant site, and not at a remote ‘universal platform server’ (at [40]).

Secure Suite was described in Visa’s evidence as ‘a modular on-line payment security platform designed to support, in a single implementation, a wide range of authentication and card security products’ (at [46] – this reads like marketing material more than technical information).  CardinalCommerce argued that Secure Suite was ‘an issuer specific solution for authentication rather than a merchant solution’ and did ‘not exchange any communications with a merchant or a merchant service provider, such as a payment gateway’ (at [47]).  Visa also attempted to argue that it was implicit that Secure Suite implemented the same transactions and authentication architecture claimed by CardinalCommerce.

On the evidence, the Hearing Officer agreed (at [48]) that ‘Secure Suite is clearly geared at card issuer and cardholder support.’  He also considered it ‘quite a stretch’ to conclude that any specific architecture was implicit in Visa’s evidence, much less that it was the same as that defined in the patent claims (at [52]).

Payment gateways (i.e. third party services performing payment authorisation on behalf of online merchants) were well-established at the priority date.  However, the evidence did not establish that any payment gateway provider had implemented multi-platform authentication before the priority date (at [67]).

Accordingly, the claims were found to be novel.

RELIABILITY OF INTERNET ARCHIVE MATERIALS

An interesting aspect of the CardinalCommerce defence, in relation to the Secure Suite prior art, was a reference to a ‘European Patent Office (“EPO”) Boards of Appeal decision, T1134/06, to highlight a finding that the Internet generally, including the Internet Archive WayBackMachine, was not a reliable source for determining the state of the art.  The content, particularly the formatting, of a site in the Internet Archive for any particular quoted date is not necessarily an accurate or instantaneous reflection of the look of the site on the day’ (at [43]).

The Hearing Officer pointed out that he was not bound by an EPO decision, but that ‘it may nonetheless be persuasive’.  However, he considered the nature and content of the archived materials, and the fact that the accuracy of the archive date was not critical (being at least four months earlier than the priority date), and accepted that, on the balance of probabilities, the materials were available on the Internet prior to the priority date (at [45]).

This is an interesting statement, which suggests that prior art information drawn from the WayBack Machine should be corroborated where possible, or at least consistent with other supporting evidence.  Pages that do not render properly out of the archive, e.g. having missing images, or broken formatting, may be less persuasive and require additional corroboration.

INVENTIVE STEP

Under Section 7 of the Patents Act 1990, a claimed invention lacks an inventive step if it would have been obvious to the relevant person skilled in the art (PSA) having regard to the common general knowledge (CGK) of such persons, whether considered alone or along with other prior art information.  However, additional prior art information can only be considered if the PSA could reasonably be expected to have ascertained, understood and regarded this prior art as relevant.

We have written before of the shortcomings of the law of inventive step in Australia (see Patent Reform Exposed, Part I – Raising the Inventive Step), but all of this is well-established.

The Hearing Officer accepted Visa’s submission (at [77]) that the following information was CGK:
  1. the use of payment instruments such as credit and debit cards for Internet or e-commerce transactions;
  2. the concerns arising in relation to authentication, including in relation to security, privacy and commercial viability;
  3. different on-line authentication protocols;
  4. the various problems of the prior art, including the burden imposed by the size of plug-ins used by merchants, and the need for separate plug-ins for different authentication initiatives; and
  5. the periodic changing of authentication protocols by credit card networks such that plug-ins need to be changed.
However, information relating to the Active Access / Active Merchant and Secure Suite systems was not established to be CGK (at [83]).

The evidence showed that Active Access / Active Merchant was known in Australia before the priority date through existence in the marketplace, and presentations to clients.  However, the evidence did not show that this information was widely disseminated, or readily accessible, and the Hearing Officer therefore concluded that the skilled person could not reasonably have been expected to have ascertained (i.e. found) the information.  Therefore, despite it having been established as prior art for novelty purposes, it was not available as a basis for assessment of inventive step.

In any event, the Hearing Officer was not persuaded that the claimed invention would have been obvious at the priority date.  Visa argued that the problems associated with merchants requiring multiple, regularly changing, plug-ins were well-known, and that there were no great technical difficulties to be overcome in implementing a multi-platform authentication server, it was therefore obvious to the skilled person to do so.  The Hearing Officer considered, however, that this was a misstatement of the problem, and warned against the impermissible application of hindsight (at [92]-[93]):

The evidence is absent of indications that persons in the industry had directed any significant attention to the stated problem of the burdens on merchants of managing authentication with merchant plug-ins before the priority date of the application.

It may seem obvious that, to relieve such burdens on merchants, a solution could have been to have an expert third party manage the whole authentication process remote from the merchant site, including the determination of the relevant authentication protocols to use as claimed in the application. … The evidence before me suggests that very little seems to have actually been done about the problem before the priority date of the application. Work on simplifying authentication, specifically providing single solutions for multiple protocols, appeared, in the main, to be directed to merchant systems.

Therefore, the invention as claimed was not obvious, and involved an inventive step.

MANNER OF MANUFACTURE

The opponent argued that the invention was not proper subject matter for a patent, i.e. not for a manner of manufacture, on the basis that ‘at least the method claims 5-13 merely defined a scheme which makes use of known components for which their known properties make them suitable’ (at [96]).

In a pleasing contrast to a number of recent decisions on this issue. also involving computer-implemented systems (Invention Pathways Pty Ltd [2010] APO 10; Iowa Lottery [2010] APO 25; Research Affiliates, LLC. [2010] APO 31), the Hearing Officer readily dismissed these arguments, stating (at [97]):

The method claims clearly relate to supporting authentication processing of on-line commercial transactions involving several physical steps in a networked environment. The claims are not directed merely to a scheme.

This is a welcome confirmation that where, unlike in the other recent cases noted above, there is useful information processing performed which involve physical steps conducted in a networked environment, then the subject matter is a manner of manufacture.

CONCLUSION

The outcomes on novelty and inventive step in this case are, on the evidence as characterised in the decision, unremarkable and consistent with prior authority.

The Hearing Officer’s comments on the reliability of the Internet Archive are interesting, and should be noted by those who may wish to rely on such material in proceedings before the Patent Office.  Best practice would seem to be to obtain corroboration, perhaps preferably in the form of evidence from someone who may have been involved in authoring or posting the content at the relevant time.  However, if the layout and content of the pages from the archive appear intact, and the dates are not too critical, then corroboration may not be essential.

Finally, having been provided with some recent decisions on what is not a manner of manufacture when it comes to computer-implemented systems, a decision confirming that systems performing technical processing steps and physical operations and transmissions are patentable, even when (as in this case) they are intended for use in e-commerce systems, is welcome guidance to inventors in this field, and their professional advisers.

As is usual, costs were awarded against the unsuccessful opponent.  We presume that they will be paying by credit card.

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