The Federal Circuit reversed the invalidation of two patents directed to providing security for credit card purchases in an opinion released earlier today.  The patents at issue, U.S. Patent Nos. 7,840,486 and 8,036,988, disclose methods for effecting secure credit-card purchases by minimizing merchant access to credit card numbers.  Both patents were the subject of inter partes reviews launched by a subsidiary of MasterCard Inc. after patent owner John D’Agostino sued for infringement of the claims of both patents in Delaware federal court in April of 2013.

The PTAB ruled that a prior art reference^[1] disclosing a system of disposable credit card numbers both anticipated and rendered obvious all the limitations of the claims at issue when combined with a second reference.  The Board’s decision came down to the interpretation of claim language “limit[ing] transactions to a single merchant,”^[2] illustrated in a limitation from a representative claim of the ‘988 patent:

1. b) receiving a request from said account holder for a transaction code to make a purchase within a payment category that at least limits transactions to a single merchant, said single merchant limitation being included in said payment category prior to any particular merchant being identified as said single merchant.

After construing this “single merchant limitation,” the Board ruled that the prior art reference anticipated this limitation through an embodiment that limits credit card transactions to a particular chain of stores.

The Federal Circuit disagreed with the Board’s construction of the claim.  After analyzing the specification and prosecution history, the court concluded that the single merchant limitation requires, “simply, that, when the transaction code is requested, the request limits the number of authorized merchants to one but does not identify the merchant, such identification occurring only later.”^[3]  The court went on to note that the PTAB departed from or misapplied the “clear meaning” of the limitation when it concluded that it covered a situation in which the customer first seeks a transaction code for an identified “chain of stores” and, later, picks a specific store in the chain.^[4]

The court particularly took issue with a hypothetical the Board used to support its reasoning.  In its opinion, the PTAB said a customer could designate the “Target” chain of stores when obtaining a transaction code and only later choose a specific Target store at which to use the code.^[5]   The Board thus read the prior art reference as teaching this scenario and thus the single merchant limitation in the claims at issue.  According to the Federal Circuit, however, the “decisive problem” with the Board’s analogy is that it “necessarily falls outside of the single-merchant limitation.”^[6]  As reasoned by the court, if “Target is more than one merchant, then telling the authorizing entity to limit transactions to Target is not limiting the number of merchants to one.”  However, if Target is one merchant, “then telling the authorizing entity to limit transactions to Target is not withholding the identity of the particular merchant – and the Target scenario is for that reason outside of the claim limitation.”^[7]

Since the Target “chain store” scenario relied on by the Board failed to meet the single merchant requirement of the claim, the CAFC held that the Board’s “chain store” claim construction must be set aside for both the novelty and obviousness determinations.  Consequently, the Board’s decision was reversed and remanded for further consideration.

_{[1] U.S. Patent No. 6,422,462 to Cohen.}

_{[2] ‘988 Patent, col. 11, lines 12-13.}

_{[3] D’Agostino v. Mastercard International, Inc., 2016-1592 at 7 (Fed. Cir. 2016).}

_{[4] Id. at 8.}

_{[5] Id.}

_{[6] Id.}

_{[7] Id. at 8-9.}