Alice v. CLS Bank: no friend to FinTech patents based on abstract ideas
In a recent decision, the U.S. District Court for the Southern District of New York invalidated Western Express Bancshares, LLC’s (Western Express) U.S. Patent No. 8,498,932 relating to a method of transferring funds through a bankcard. The court’s decision nixed Western Express’ assertion of patent infringement claims against Green Dot Corporation (Green Dot) for the sale and offering of CashBack Visa® Debit Cards, Reloadable Prepaid Visa® Cards, Load Go Prepaid Visa® Cards, and Reloadable Prepaid Mastercard® Cards. Green Dot moved to dismiss the action on the ground that the ’932 Patent is invalid under the landmark 2014 U.S. Supreme Court decision in Alice Corp. v. CLS Bank. That case held that patent claims directed to an abstract idea without any inventive concept are ineligible for a patent under Section 101 of the U.S. Patent Code.
The court in Western Express found that the ‘932 Patent is “broadly directed to a ‘method of funds transfer […]’ [and that the] concept of transferring money through a bankcard is similar to other ‘fundamental economic practices’ that the Supreme Court and the Federal Circuit have held [to be unpatentable] abstract ideas.” Western Express Bancshares, LLC v. Green Dot Corporation, No. 19-cv-4465, 2019 WL 4857330, at *5 (S.D.N.Y. Oct. 2, 2019). The court also found that the patent lacked an inventive concept because it “relies on existing technologies and infrastructures that are inherent to the industries of banking and retail.” Id.
This decision comes on the heels of the Patent Trial and Appeal Board (PTAB) of the U.S. Patent and Trademark Office invalidating five Nasdaq patents relating to electronic securities exchanges under the Alice test. These recent PTAB and district court decisions demonstrate that FinTech patents may not be grounded within the contours of patentable subject matter under Alice and its progeny, and may provide defendants with some measure of protection against charges of infringement.
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