Appeals Court Upholds Novelty of Patented Internet Credit Card Processing System

In a case that is important to the online shopping industry, the Court of Appeals for the Federal Circuit upheld the novelty of a patented Internet credit card processing system. In doing so, it also clarified, in a precedential opinion, what a prior art reference must disclose to establish that an invention claimed in a patent was published more than one year prior to the application for the patent, and thereby invalidate the claim as “anticipated.”

The case, Net MoneyIN, Inc. v. VeriSign, Inc. et al., 2007-1565, involves a patent owned by our client NetMoneyIN, Inc. on an Internet payment system that is arguably the dominant system in use today. The Federal Circuit's reversal of a federal district court's invalidation of claim 23 of the patent based on lack of novelty paves the way for NetMoneyIN, Inc. to pursue its infringement claims against VeriSign, Inc. and others in the industry who use this system.

Generally, the invention of patent claim 23 covers an Internet payment system having a combination of five “links”:

• Link 1: Between a vending computer and a customer computer for communicating promotional information to the customer computer
• Link 2: Between the customer computer and a “payment processing computer” for communicating credit card information and an amount from the customer computer to the credit card processing computer
• Link 3: Between the payment processing computer and a credit card server computer for communicating the credit card information and the amount to the credit card server computer, and communicating an authorization indicia back to the payment processing computer
• Link 4: Communicating a transactional indicia to the customer computer
• Link 5: Communicating the transactional indicia to the vending computer

Thus, the customer's credit card information and the authorization request are handled by a third party, who notifies both the customer and vendor regarding authorization of the transaction.

The federal district court found the claim invalid on the ground that the invention described by claim 23 was anticipated by a prior art reference entitled “Internet Keyed Payments Protocol” (“the iKP reference”), published by the Internet Engineering Task Force and IBM. The Federal Circuit reversed the lower court's holding, concluding that the iKP reference “cannot anticipate the system of claim 23.”

The Federal Circuit took the opportunity presented by this case to clarify its prior statements that to anticipate an invention, a prior art reference must “describe every element of the claimed invention.” The Court made the following clarification: “Because the hallmark of anticipation is prior invention, the prior art reference—in order to anticipate under 35 U.S.C. § 102—must not only disclose all elements of the claim within the four corners of the document, but must also disclose those elements arranged as in the claim.”

Taking material from two separate disclosed examples in iKP, the district court stated: “All of the limitations of claim 23 can be found within in the iKP reference. A simple combination [of those limitations] would produce the system described in claim 23 of the . . . patent. That no specific example within iKP contains all five links does not preclude a finding of anticipation.”

The Federal Circuit disagreed. It held that “unless a reference discloses within the four corners of the document not only all of the limitations claimed but also all of the limitations arranged or combined in the same way as recited in the claim, it cannot be said to prove prior invention of the thing claimed and, thus, cannot anticipate under 35 U.S.C. § 102.” It went on to say:

“Here, the iKP reference discloses two separate protocols for processing an Internet credit card transaction. Neither of these protocols contains all five links arranged or combined in the same way as claimed in the . . . patent. Thus . . . the iKP reference cannot anticipate the system of claim 23. The district court was wrong to conclude otherwise.”