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Federal Circuit Jumps to Step Two To Rescue Authentication Patent

Bruce D. Sunstein

Bruce D. Sunstein | Founder, Partner View more articles

Bruce is a member of our Litigation Practice Group, Patent Practice Group, Trademark Practice Group and Business Practice Group

In Cosmokey Solutions Gmbh & Co. KG v. Duo Security LLC, on October 4, 2021, the Federal Circuit jumped straight to Step Two of the Supreme Court’s two-step method for determining patent eligibility and upheld a user authentication patent.

The Supreme Court’s often criticized 2014 decision in Alice Corp. v. CLS Bank, discussed here, prescribes a two-step test for patent eligibility: first, are the patent claims directed to a patent-ineligible abstract idea?—and, second, if so, do the patent claims fail to define subject matter that amounts to “significantly more” than the abstract idea? If the answers to both questions are “yes,” then the claimed subject matter is not eligible to be patented.

In Cosmokey, in reversing a federal trial court’s invalidation of a patent for a method of authenticating a user performing a transaction at a terminal, the Federal Circuit dispensed with a discussion of Alice step 1, and went straight to Alice step 2. The Federal Circuit did not decide whether under Alice step 1 the patent claims are directed to a patent-ineligible abstract idea. Instead, the Federal Circuit said that, regardless, under Alice step 2, the patent claims do define subject matter that amounts to “significantly more” than any abstract idea.

In an opinion by Judge Stoll, joined by Judge O’Malley, the Federal Circuit said that it did not need to decide whether the claims are directed to an abstract idea under Alice step 1, because under Alice step 2, the “patent claims and specification recite a specific improvement to authentication that increases security, prevents unauthorized access by a third party, is easily implemented, and can advantageously be carried out with mobile devices of low complexity.” The Court found that the claimed method was not known in the prior art. Judge Reyna concurred in the result, but faulted the majority for jumping straight to Alice step 2. He found the claims to be patent eligible under Alice step 1.

The patented method requires the user simply to activate the user’s mobile telephone, or a specific application on the mobile telephone, at a time when the user is seeking to engage in the transaction at the terminal with a “transaction partner,” such as a bank. A separate authentication device checks over the mobile telephone network to determine, when the user is seeking to engage in the transaction, if the mobile telephone or its specific application happens to be active. Under the principle of operation of the patented method, the mobile telephone or the specific application is normally inactive. Therefore if it is determined that the mobile telephone or its specific application is active, then it likely that the user is indeed the one seeking to engage in the transaction, so the authentication device sends an authentication message to the transaction partner to enable the user to perform the transaction.

In jumping straight to Alice step 2, the Federal Circuit has paved the way to what may sometimes be a more efficient way of getting to a patent eligibility determination. In view of the hurdles the Supreme Court’s Alice decision has placed between patent claims and their enforcement, a potentially shorter path to patent eligibility is a welcome development.

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