MasterCard International Incorporated

Patent Trials and Appeals Board

Feb 20, 2020

14090854 - (D) (P.T.A.B. Feb. 20, 2020)

UNITED STATES PATENT AND TRADEMARK OFFICE
UNITED STATES DEPARTMENT OF COMMERCE
United States Patent and Trademark Office
Address: COMMISSIONER FOR PATENTS
P.O. Box 1450
Alexandria, Virginia 22313-1450
www.uspto.gov
APPLICATION NO. FILING DATE FIRST NAMED INVENTOR ATTORNEY DOCKET NO. CONFIRMATION NO.
14/090,854 11/26/2013 Mary E. Lesbirel 21652-00315 6270
75564 7590 02/20/2020
DANIEL M. FITZGERALD (21652)
ARMSTRONG TEASDALE LLP
7700 Forsyth Boulevard
Suite 1800
St. Louis, MO 63105
EXAMINER
SHEIKH, ASFAND M
ART UNIT PAPER NUMBER
3627
NOTIFICATION DATE DELIVERY MODE
02/20/2020 ELECTRONIC
Please find below and/or attached an Office communication concerning this application or proceeding.
The time period for reply, if any, is set in the attached communication.
Notice of the Office communication was sent electronically on above-indicated "Notification Date" to the
following e-mail address(es):
USpatents@armstrongteasdale.com
PTOL-90A (Rev. 04/07)

UNITED STATES PATENT AND TRADEMARK OFFICE
____________

BEFORE THE PATENT TRIAL AND APPEAL BOARD
____________

Ex parte MARY E. LESBIREL and DEBASHIS GHOSH
____________

Appeal 2019-002699
Application 14/090,854
Technology Center 3600
____________

Before DONALD E. ADAMS, JEFFREY N. FREDMAN, and
MICHAEL A. VALEK, Administrative Patent Judges.

FREDMAN, Administrative Patent Judge.

DECISION ON APPEAL

This is an appeal1,2 under 35 U.S.C. § 134(a) involving claims to a
computer-implemented method for electronically detecting cardholder return
activity by monitoring cardholder transactions over a payment card
interchange network. The Examiner rejected the claims as obvious and as
reciting non-statutory subject matter. We have jurisdiction under 35 U.S.C.
§ 6(b). We affirm.

1 We use the word “Appellant” to refer to “applicant” as defined in 37
C.F.R. § 1.42. Appellant identifies the Real Party in Interest as Mastercard
International Incorporated (see Appeal Br. 1).
2 We have considered and herein refer to the Specification of Nov. 26, 2013
(“Spec.”); Final Office Action of Mar. 7, 2018 (“Final Act.”); Appeal Brief
of Aug. 10, 2018 (“Appeal Br.”); Examiner’s Answer of Dec. 19, 2018
(“Ans.”); and Reply Brief of Feb. 19, 2019 (“Reply Br.”).
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Statement of the Case
Background
In “some cardholder-initiated financial transactions, the cardholder
(e.g., an entity using a payment card such as a credit card, a debit card, or a
prepaid card) may seek to return goods or services to a merchant” (Spec.
¶ 2). “When a return occurs, the merchant may experience financial,
logistic, or opportunity costs related to the return of the goods or services”
(id.). “[M]erchants may find it valuable to have information regarding the
return of products including information on cardholders who are more likely
to return purchased products” (id. ¶ 3).
The Claims
Claims 1, 2, 6, 7, 9–11, 15, 16, and 18–23 are on appeal. Independent
claim 1 is representative. Claim 1 is reproduced below, reformatted for
clarity, and with bracketed letters added to identify certain language:
1. A computer-implemented method for electronically
detecting cardholder return activity by monitoring cardholder
transactions over a payment card interchange network, the
method implemented by a monitoring computer system in
communication with a centralized memory and associated with
the payment card interchange network, the monitoring
computer system including a determining component
configured to electronically detect cardholder return activity,
the method comprising:
[a] retrieving, from the payment card interchange
network, a return record of one of the cardholder transactions in
which a credit has been generated;
[b] storing the return record within the centralized
memory, the return record configured to hold a historical record
of cardholder return activity within the payment card
interchange network indexed at least using a stored
cardholder identifier, thereby enabling retrieval of the return
record based upon the stored cardholder identifier;
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[c] receiving, from a merchant computing device
associated with a first merchant of a plurality of merchants, a
set of first transaction data being processed over the payment
card interchange network and associated with a first transaction
initiated by the cardholder at the first merchant;
[d] detecting, by the determining component, that the
set of first transaction data includes a return indicator;
[e] determining, by the determining component, while
processing the first transaction and based on the detection, that
the first transaction is a first return transaction that includes a
set of first return transaction data;
[f] identifying a cardholder identifier included within
the set of first transaction data;
[g] identifying that the return record is associated with
the cardholder by determining a match between the cardholder
identifier and the stored cardholder identifier;
[h] updating the return record with the set of first
return transaction data;
[i] determining that the return record includes at least
one set of second return transaction data associated with at least
one second return transaction initiated by the cardholder with
one of the plurality of merchants;
[j] generating a cardholder risk assessment based at
least upon a comparison of the set of first return transaction
data to the at least one set of second return transaction data, the
cardholder risk assessment configured to enable the merchant to
determine whether to accept the first return transaction; and
[k] transmitting the cardholder risk assessment to the
merchant computing device as a viewable indicator during the
first transaction.

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The Rejections
A. The Examiner rejected claims 1, 2, 6, 7, 10, 11, 15, 16, and 19–23
under 35 U.S.C. § 103 as obvious over Hammond3 and Kamal4 (Final Act.
15–22).
B. The Examiner rejected claims 9 and 18 under 35 U.S.C. § 103 as
obvious over Hammond, Kamal, Chaves,5 and Official Notice (Final Act.
22–23).
C. The Examiner rejected claims 1, 2, 6, 7, 9–11, 15, 16, and 18–23
under 35 U.S.C. § 101 as directed to an abstract idea (Final Act. 8–14).

A. & B. 35 U.S.C. § 103(a)
The Examiner finds “Hammond discloses a computer-implemented
method for electronically detecting cardholder return activity by monitoring
cardholder transactions” (Final Act. 15). The Examiner finds Hammond
teaches all of the elements of claim 1 other than step [a] of retrieving from
“the payment card interchange network, a return record of one of the
cardholder transactions in which a credit has been generated” (id. 17).
The Examiner finds Kamal teaches “an interchange network . . . for
exchange of financial transaction data” and teaches “a return record of one
of the cardholder transactions in which a credit has been generated” (Final
Act. 18). The Examiner finds it obvious to combine the teachings of
Hammond and Kamal to provide users with a “means for exemplary multi-
party payment card industry system for enabling payment-by-card

3 Hammond et al., US 2011/0087606 A1, published Apr. 14, 2011.
4 Kamal, US 2011/0125642 A1, published May 26, 2011.
5 Chaves et al., US 7,822,771 B1, issued Oct. 26, 2010.
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transactions in which the merchants and issuer do not need to have a one-to-
one special relationship” (Final Act. 18).
We note that Appellant does not argue the claims separately (see
Appeal Br. 18), so claims 2, 6, 7, 9–11, 15, 16, and 18–23 stand or fall with
claim 1 because separate reasons for their patentability were not provided in
the Appeal Brief. 37 C.F.R. § 41.37(c)(1)(iv).
The issue with respect to this rejection is: Does the evidence of record
support the Examiner’s conclusion that Hammond and Kamal render claim 1
obvious?
Findings of Fact
1. Hammond teaches “automated processing of merchandise
returns, and more particularly . . . automated identifying of a consumer
associated with a merchandise sale or return to determine an appropriate
response to a merchandise request” (Hammond ¶ 3).
2. Hammond teaches, regarding step [a], that:
decision engine 135 may make determinations based, at least in
part, on information from one or more other repositories of data
collected and maintained by the return authorization service
100, or from one or more external merchant or non-merchant
data sources 160. For example, the decision engine 135 may
identify the customer 110 requesting the merchandise return,
identify customer data associated with the customer 110 (e.g.,
prior returns and/or prior purchases made by the customer
110), and make a risk assessment, or other determinations,
based at least in part on the identified customer data.
(Hammond ¶ 67; underlining and italics added). Hammond therefore
teaches that the computer may use data retrieved from an external non-
merchant data source including data on prior returns by a customer (see id.).
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3. Hammond teaches, regarding step [b], “a repository of customer
return data 140, which includes a wide variety of information about past
merchandise return activity associated with the customers” (Hammond
¶ 71). Hammond teaches “it is much more common for the return
authorization service 100 to serve a plurality of merchants 120” and
maintain “sales data 165 for each of the merchants 120” and “the return
authorization service 100 may combine some or all of the various data stores
described above” (Hammond ¶ 76).
4. Hammond teaches, regarding step [b], that “customer
identification data 137 can include stored associations or links between
various customer identifiers” that are used “to locate and evaluate not only
prior purchases and returns made using the first credit card, but also those
made using the second credit card or using the customer loyalty card”
(Hammond ¶ 70).
5. Hammond teaches, regarding steps [c] and [d], that:
a receipt identifier 505 can be used to identify data associated
with the original purchase of the merchandise being returned
from the sales data 525, and one or more customer identifiers
can be extracted from the original purchase data. The customer
identifiers can be used to retrieve stored data 520 associated
with the customer who purchased the merchandise (who is
presumably also the same customer requesting the return).
(Hammond ¶ 112).
6. Hammond also teaches, regarding step [d], that during the
return process, the “return transaction can be assigned an identification
number” (Hammond ¶ 105).
7. Hammond teaches, regarding step [e], “to obtain information
about the requested return at the point of return” as well as
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to allow for the collection of some or all of the following
additional information: retailer identification, consumer name
and address, customer zip code, current price of the returned
items, product condition, customer’s stated reason for making
the return, purchase date, time, tender type, and original
salesperson, ID expiration date, requested return type ( e.g.,
cash exchange, credit to account, even exchange for
merchandise, or merchandise exchange with balance due either
to the merchant or to the customer).
(Hammond ¶ 108).
8. Hammond teaches, regarding step [f], collecting “sales data
associated with prior purchases associated with the customer identifier”
where the “customer identifier can be a customer loyalty number, a hashed
credit card number, a hashed debit card number, a hashed checking account
number, or a merchant-specific customer ID number” (Hammond ¶¶ 9, 11).
9. Hammond teaches, regarding step [g], that “the system
identifies prior merchandise return data associated with the extracted
customer identifier” (Hammond ¶ 167).
10. Hammond teaches, regarding steps [h] and [i], that the record
may be updated with current and past return data specifically teaching “the
types of stored data 520 that may be used may include, but are not limited
to: current and past return-related transaction data from this customer 110 at
this and other branches of the merchant’s establishment 120 (or from
additional other merchants)” (Hammond ¶ 113).
11. Hammond teaches, regarding step [j], that a “fraud detection
model 540 uses the variables 530 to determine a fraud score 550 that
indicates the determined likelihood that fraud is occurring on the return
transaction or that the customer 110 is abusing the merchant's return policy.
(Hammond ¶ 115).
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12. Hammond teaches, regarding step [k], that the “return
authorization service 100 may, in some embodiments, calculate a numerical
score that indicates the strength of the warning and transmit that score to the
POR [point of return] device 126 for display to the customer 110”
(Hammond ¶ 137).
13. Hammond teaches “a multi-functional checkout terminal or
other computerized device may be configured to provide some or all of the
functionality associated with the POR device 126” (Hammond ¶ 53).
Hammond also explains “the point of return 125 may be a normal checkout
terminal or cashier’s station that may be additionally used for processing
purchases and other types of business transactions” (Hammond ¶ 51).
14. Kamal teaches
an exemplary multi-party payment card industry system for
enabling payment-by-card transactions in which the merchants
and issuer do not need to have a one-to-one special relationship.
The present invention relates to a payment card system, such as
a credit card payment system and/or a debit card payment
system using an interchange network.
(Kamal ¶ 20).
15. Kamal teaches “[u]sing interchange network 28, the computers
of the acquirer 26 or the merchant processor will communicate with the
computers of issuer 30” (Kamal ¶ 22).
16. Kamal teaches “[i]f a consumer returns goods after the
transaction has been captured, a ‘credit’ is generated. Issuer 30 stores the
credit card transaction information, such as the type of merchant, amount of
purchase, date of purchase, in a data warehouse” (Kamal ¶ 23).
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17. Kamal teaches that if two systems are
unable to communicate with one another, the results may
include massive data duplication, potentially inaccurate data, a
greater potential for fraud, increased computer hardware
requirements, additional software, and greater overall expense.
Accordingly, a computer device is needed to allow the different
transaction processing systems to communicate with one
another, including the ability of one system to retrieve data
stored on the other system.
(Kamal ¶ 5).
Principles of Law
“The combination of familiar elements according to known methods
is likely to be obvious when it does no more than yield predictable results.”
KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398, 416 (2007).
Analysis
We adopt the Examiner’s findings of fact and reasoning regarding the
scope and content of the prior art (Final Act. 15–23; FF 1–17) and agree that
the claims are obvious over Hammond and Kamal. We address Appellant’s
arguments below.
Appellant contends “the cited references, whether taken alone or in
combination, fail to teach or suggest the claimed monitoring computer
system in communication with a centralized memory and payment card
interchange network” (Appeal Br. 15).
We are not persuaded this argument as “the test for obviousness is not
whether the features of a secondary reference may be bodily incorporated
into the structure of the primary reference . . . . Rather, the test is what the
combined teachings of the references would have suggested to those of
ordinary skill in the art.” In re Keller, 642 F.2d 413, 425 (C.C.P.A. 1981).
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In particular, this argument fails to address the teachings of Hammond
and Kamal in combination. Hammond teaches the use of centralized
repositories for return data, specifically teaching “repositories of data
collected and maintained by the return authorization service 100, or from
one or more external merchant or non-merchant data sources 160” (FF 2).
Hammond teaches that the data may include credit card information (FF 4,
7, 8). And while, as the Examiner acknowledges, Hammond does not teach
that the return data depository can be integrated into a payment card
interchange network (Final Act. 17), Kamal teaches an interchange network
that is configured to address returned goods and store information regarding
those returned goods (FF 15–16).
An ordinary practitioner would have had reason to create a computer
system that integrated the return repository of Hammond with the control of
payments as it relates to returns in Kamal, because Kamal explains that
when two processing systems cannot communicate, a number of problems
including fraud, expense and inaccurate data may result (FF 17). DyStar
teaches the reason to combine may be implicit “when the ‘improvement’ is
technology-independent and the combination of references results in a . . .
process that is more desirable, for example because it is . . . cheaper, cleaner,
faster . . . or more efficient.” DyStar Textilfarben GmbH & Co. Deutschland
KG v. C.H. Patrick Co., 464 F.3d 1356, 1368 (Fed. Cir. 2006).
Appellant contends that
Hammond also fails to teach or suggest the transmittal and
display of a cardholder risk assessment to the merchant
computing device during the newly pending (“first”) return
transaction. Hammond only discloses that a numerical score is
transmitted to a “device for display to the customer” (emphasis
added), and not to the merchant.
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(id. 12).
We find this argument unpersuasive because Hammond specifically
teaches to “transmit that [fraud] score to the POR [point of return] device
126” (FF 12). Hammond explains that “a multi-functional checkout terminal
or other computerized device may be configured to provide some or all of
the functionality associated with the POR device 126” (FF 13). Thus,
Hammond specifically teaches that a merchant computing device, the
checkout terminal, may be selected to receive the numerical fraud score (FF
12).
Appellant contends the Examiner failed to identify “any teaching or
suggestion within Kamal that would motivate the person of ordinary skill in
the art to modify the reference to add the claimed functionality of the recited
monitoring system to the payment card interchange network of Kamal” (id.).
We find this argument unpersuasive because the Examiner provided
reasons to combine including combining prior art elements according to
known methods to yield predictable results (see Final Act. 18). In this
instance, Hammond teaches the use of a computerized system to monitor
return transactions to avoid fraud (FF 1, 11) while Kamal teaches a
computerized interchange system that monitors returns to assign appropriate
credit (FF 15–16). Kamal further teaches general reasons to combine
computerized systems in order to avoid fraud, expense, and inaccurate data
(FF 17). Thus, we agree with the Examiner that the ordinary artisan, aware
of the issues identified by Kamal regarding the benefits of combining two
computer systems, would have had reason to combine the known prior art
computerized systems of Hammond and Kamal to yield the predictable
result of a single system that would both monitor returns for fraud and
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ensure proper crediting for those returns on customer accounts. In
particular, concern with fraud is shared by both Hammond and Kamal (FF
11, 17).
Appellant contends “the rejection erroneously equates a ‘credit’ as
being equivalent to a ‘return record’” and therefore contends that Kamal’s
use of credit is insufficient to satisfy this limitation because “Kamal is silent
regarding ‘return records’” (Appeal Br. 17).
We find this argument unpersuasive because the argument fails to
properly combine the teachings of Hammond and Kamal and because the
Specification never defines the term “return record” to exclude a “credit” as
being a type of return record. Specifically, Hammond teaches recording
detailed information regarding a return including merchant type, amount and
date of purchase and further including “credit to account” as a type of return
information (FF 7). Kamal teaches storing such “credit” information along
with the type of merchant and amount and date of purchase (FF 16). Thus,
both Hammond and Kamal teach the storage of “return record” information.
In addition, the Specification never defines “return record”
information nor excludes “credit to account” as a type of “return record”
information. Actually, the Specification teaches “[i]f cardholder 22 returns
products after the transaction has been captured, a ‘credit’ is generated.
Interchange network 28 and/or issuer bank 30 stores the transaction card
information” (Spec. 43). Therefore, consistent with the Specification, the
storage of a “credit to account” does represent a type of “return record.” To
the extent that Appellants rely on some more limiting interpretation of
“return record”, we note “limitations are not to be read into the claims from
the specification.” In re Van Geuns, 988 F.2d 1181, 1184 (Fed. Cir. 1993).
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Appellant contends that:
Even if the person of ordinary skill in the art were to combine
these references as proposed, all return record monitoring of the
combination Hammond/Kamal system would still be performed
at the distributed location of merchant 24, and not the
centralized location of network 28. . . . [and] would be unable to
utilize, even indirectly, any confidential information stored by
interchange network 28, or by issuer bank 30.
(Appeal Br. 17–18).
We find this argument unpersuasive because Hammond specifically
teaches the use of “repositories of data collected and maintained by the
return authorization service 100, or from one or more external . . . non-
merchant data sources” (FF 2). Thus, Hammond does not limit the data
analysis or method performance to a merchant computer, but recognizes that
external data sources may be used. This teaching, in combination with
Kamal’s teaching of an interchange network that addresses return
information, reasonably renders the use of a payment card interchange
network for monitoring returns obvious for the reasons already given.
We are also unpersuaded by Appellant’s argument that confidential
information would not be capable of being used in the combined system
because Hammond teaches that a plurality of merchants may share a return
authorization service, that this service may have confidential data such as
sales data for each of the merchants, and that the service may combine all of
the data stores to provide returns (see FF 3). Appellant provides no evidence
of any inability to utilize confidential information. “Attorney’s argument in
a brief cannot take the place of evidence.” In re Pearson, 494 F.2d 1399,
1405 (CCPA 1974).
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Appellant contends that “the rejection is further deficient as a matter
of law for failing to satisfy Administrative Procedures Act requirements for
providing written evidence on the record to support all legal conclusions”
(Appeal Br. 19).
Arguments that the Examiner’s actions during prosecution violate the
Administrative Procedures Act are not matters appealable to the Board.6
The Board reviews only “adverse decisions of examiners upon application
for patent,” that is claim rejections. See 35 U.S.C. § 6(b). The Board does
not exercise supervisory authority over patent examiners.
Appellant can, among other things, request the Examiner's
Supervisory Patent Examiner to exercise supervisory oversight, or Appellant
can petition the Director to invoke supervisory authority under 37 C.F.R.
§ 1.181(a)(3).
Conclusion of Law
The evidence of record supports the Examiner’s conclusion that
Hammond and Kamal render claim 1 obvious.

C. 35 U.S.C. § 101
The Examiner finds the claims “are directed to monitoring cardholder
return activity [in order to] provide a risk assessment which is considered an
abstract idea” (Final Act. 8). The Examiner finds this abstract idea includes

6 We note that on the merits of the arguments related to motivation, we find
that the Examiner has provided sufficient reason to combine to render the
claimed combination obvious for the reasons discussed in the body of the
Decision. Also, we note KSR rejected a rigid application of the teaching,
suggestion, or motivation (“TSM”) test in an obviousness inquiry. KSR, 550
U.S. at 419.
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“at least the judicial descriptor(s) of: fundamental economic practice, certain
methods of organizing human activity, and/or an idea of ‘itself’” (id. at 12).
Appellant contends:
Claim 1 recites a specific non-conventional and non-generic
way of achieving the desired goal of generating a cardholder
return risk assessment in real-time, during a return transaction.
In addition or alternatively, the rejection must be reversed at
step two of the Alice analysis because the Final Office Action
cites no evidence that the claimed invention recites only “well-
understood, routine, and conventional activities” and thus lacks
an inventive concept.
(Appeal Br. 7).
Principles of Law
An invention is patent-eligible if it claims a “new and useful process,
machine, manufacture, or composition of matter.” 35 U.S.C. § 101.
However, the Supreme Court has long interpreted 35 U.S.C. § 101 to include
implicit exceptions: “[l]aws of nature, natural phenomena, and abstract
ideas” are not patentable. See, e.g., Alice Corp. v. CLS Bank Int’l, 573 U.S.
208, 216 (2014).
In determining whether a claim falls within an excluded category, we
are guided by the Supreme Court’s two-step framework, described in Mayo
and Alice. Id. at 217–18 (citing Mayo Collaborative Servs. v. Prometheus
Labs., Inc., 566 U.S. 66, 75–77 (2012)). In accordance with that framework,
we first determine what concept the claim is “directed to.” See Alice, 573
U.S. at 219 (“On their face, the claims before us are drawn to the concept of
intermediated settlement, i.e., the use of a third party to mitigate settlement
risk.”).
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Concepts determined to be abstract ideas, and therefore patent
ineligible, include certain methods of organizing human activity, such as
fundamental economic practices (Alice, 573 U.S. at 219–20; Bilski, 561 U.S.
at 611) and mental processes (Gottschalk v. Benson, 409 U.S. 63, 69
(1972)). Concepts determined to be patent eligible include physical and
chemical processes, such as “molding rubber products” (Diamond v. Diehr,
450 U.S. 175, 191 (1981)) or software “purporting to improve the
functioning of the computer itself” (Enfish, LLC v. Microsoft Corp., 822
F.3d 1327, 1335 (Fed. Cir. 2016)).
If the claim is “directed to” an abstract idea, we turn to the second
step of the Alice and Mayo framework, where “we must examine the
elements of the claim to determine whether it contains an ‘inventive
concept’ sufficient to ‘transform’ the claimed abstract idea into a patent-
eligible application.” Alice, 573 U.S. at 221 (quotation marks omitted). “A
claim that recites an abstract idea must include ‘additional features’ to
ensure ‘that the [claim] is more than a drafting effort designed to
monopolize the [abstract idea].’” Id. (quoting Mayo, 566 U.S. at 77).
“[M]erely requir[ing] generic computer implementation[] fail[s] to transform
that abstract idea into a patent-eligible invention.” Id.
The United States Patent and Trademark Office published guidance
on the application of 35 U.S.C. § 101. USPTO’s 2019 Revised Patent
Subject Matter Eligibility Guidance (“Guidance”).7 Under the Guidance, in

7 2019 Revised Patent Subject Matter Eligibility Guidance, 84 Fed. Reg.
50–57 (January 7, 2019).
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determining what concept the claim is “directed to,” we first look to whether
the claim recites:
(1) any judicial exceptions, including certain groupings
of abstract ideas (i.e., mathematical concepts, certain methods
of organizing human activity such as a fundamental economic
practice, or mental processes) (Guidance Step 2A, Prong 1);
and
(2) additional elements that integrate the judicial
exception into a practical application (see MPEP § 2106.05(a)–
(c), (e)–(h)) (Guidance Step 2A, Prong 2).
Only if a claim (1) recites a judicial exception and (2) does not
integrate that exception into a practical application, do we then look to
whether the claim contains an “‘inventive concept’ sufficient to ‘transform’”
the claimed judicial exception into a patent-eligible application of the
judicial exception. Alice, 573 U.S. at 221 (quoting Mayo, 566 U.S. at 82).
In so doing, we thus consider whether the claim:
(3) adds a specific limitation beyond the judicial
exception that are not “well-understood, routine and
conventional in the field” (see MPEP § 2106.05(d)); or
(4) simply appends well-understood, routine,
conventional activities previously known to the industry,
specified at a high level of generality, to the judicial exception.
(Guidance Step 2B). See Guidance, 84 Fed. Reg. at 54–56.
Analysis
Applying the Revised Guidance to the facts on this record, we find
that Appellant’s claims 1, 2, 6, 7, 9–11, 15, 16, and 18–23 are directed to
patent-ineligible subject matter. Because the same issues are present in each
of the claims, we focus our consideration on representative claim 1. The
same analysis applied below to claim 1 also applies to the other rejected
claims.
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A. Guidance Step 1
We consider whether the claimed subject matter falls within the four
statutory categories set forth in § 101, namely “[p]rocess, machine,
manufacture, or composition of matter.” Guidance 53–54; see 35 U.S.C. §
101. Claim 1 recites a “method,” claim 10 recites a “system” and claim 19
recites “media” and, thus, fall within the “process,” “machine,” and
“composition of matter” categories respectively. Consequently, we proceed
to the next step of the analysis.
B. Guidance Step 2A, Prong 1
The Revised Guidance instructs us first to determine whether any
judicial exception to patent eligibility is recited in the claim. The Revised
Guidance identifies three judicially-excepted groupings identified by the
courts as abstract ideas: (1) mathematical concepts, (2) certain methods of
organizing human behavior such as fundamental economic practices, and (3)
mental processes.
Claim 1 reasonably falls within two of the three of the judicially-
excepted groupings listed in the Revised Guidance: fundamental economic
practices involving authenticating customer returns and mental processes.
It is well established that mental processes are abstract ideas.
CyberSource instructs that “a method that can be performed by human
thought alone is merely an abstract idea and is not patent-eligible under
§ 101.” CyberSource Corp. v. Retail Decisions, Inc., 654 F.3d 1366, 1373,
1375 (Fed. Cir. 2011) (“That purely mental processes can be unpatentable,
even when performed by a computer, was precisely the holding of the
Supreme Court in Gottschalk v. Benson.”). Alice found an abstract idea in
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claims to “a method of exchanging financial obligations between two parties
using a third-party intermediary to mitigate settlement risk.” Alice, 573 U.S.
at 219.
Claim 1 is drawn to a method of monitoring customer return of goods
activity over a computer network. This is reasonably understood as a
fundamental economic practice, just as a merchant decides whether to permit
a customer to return a purchased item in part based on their records/memory
regarding the integrity of the customer. Indeed, Hammond teaches that
“[d]etermining when to allow retail customers to return purchased
merchandise is a delicate and complex business decision that many
merchants face” (Hammond ¶ 5). Hammond identifies concerns including
“labor and bookkeeping expenditures associated with handling the return”
(id.). Hammond therefore supports Examiner’s determination that managing
customer returns is a fundamental economic practice and is a mental process
faced by merchants (see id.). Accordingly, we conclude that the steps of
claim 1 recites the judicial exceptions of organizing human activities and
mental processes.
We find the instant claims similar to those in Smart Systems, where
the Federal Circuit held that claims directed to a method for “validating
entry into a first transit system using a bankcard terminal” did not satisfy
Alice step one. See Smart Sys. Innovations, LLC v. Chicago Transit Auth.,
873 F.3d 1364, 1370 (Fed. Cir. 2017). Smart Systems found the claims were
“not directed to a combined order of specific rules that improve any
technological process, but rather invoke computers in the collection and
arrangement of data. Claims with such character do not escape the abstract
idea exception under Alice step one.” Id. at 1372–3. The instant claim 1 is
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similar because claim 1 uses computers to store customer return data and use
that accumulated data to decide what risk is involved in allowing the
particular customer to make a return.
Appellant contends that “the claims are analogous to those at issue in
McRO, in that it is the specific ordered combination of rules recited in the
claims, rather than implementation of the recited method on a computer, that
produces the improvement realized by the claimed invention” (Appeal Br.
7). Appellant contends its
disclosure identifies a specific problem in the prior art, namely,
that merchants faced with a cardholder seeking to return
previously purchased products had no way to assess, prior to
approving the return, whether the return might be part of a
pattern of returns of goods or services by the same cardholder at
other merchants, and thus likely to be improper.”
(id. 8). Appellant contends the “application discloses and claims not the
automation of steps previously known in the art, but rather a new ordered
combination of rules that solves a specifically identified problem” (id. 9).
Appellant contends that “McRO illustrates the usefulness of considering, at
step one of the Section 101 inquiry, whether the claims preempt the use of
any abstract idea” and that “the absence of any risk of preemption further
supports the conclusion that the asserted claims are not directed to an
abstract idea”(Appeal Br. 11–12).
We find these arguments unpersuasive for several reasons. First,
while claim 1 permits return data from “a plurality of merchants” in step [c],
claim 1 does not have any requirement that data from more than a single
merchant is used, and therefore the assertion that the claim allows detection
of a pattern of fraud based on other retailers is not a limitation of the claim.
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Second, Hammond explains that “agreements may be implemented
allowing merchants to share their collected data for risk assessment or return
authorization purposes” and the authorization determination “can be based
on data collected from various merchants” (Hammond ¶ 77). Thus,
Hammond teaches that prior to Appellant’s filing, it was known to share
information between multiple merchants prior to approving a return (see id.).
Third, McRO was a computer based process that improved operations
on the computer animation process itself, while claim 1 uses mental
processes and methods of organizing human activity of deciding whether the
previous return behavior of a customer warrants authorizing permission for a
return for the customer. See McRO, Inc. v. Bandai Namco Games Am. Inc.,
837 F.3d 1299 (Fed. Cir. 2016).
Unlike McRO, the computer in claim 1 is used as a tool to perform the
same method performed in the mind of a merchant deciding whether to
allow a customer return of a purchase. That is, a clerk may determine “when
to allow retail customers to return purchased merchandise” out of concern
for “abusive or fraudulent behaviors on the part of the customer” (see
Hammond ¶ 5). The claim does not improve the computer itself. Claim 1
does not integrate the return process steps into a practical improvement
because the steps simply computerize known mental processes and methods
of organizing human activity. Therefore, contrary to McRO, where the
ultimate product produced was a synchronized computer animation that was
itself the transformative use, the result of the presently claimed method is a
drawn to a method of reducing fraud in customer returns, which does not
improve the computer itself.
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Fourth, while preemption is a concern underlying the judicial
exceptions, it is not a stand-alone test for determining eligibility. Rapid
Litig. Mgmt. v. CellzDirect, Inc., 827 F.3d 1042, 1052, (Fed. Cir. 2016).
“[W]e have consistently held that claims that are otherwise directed to
patent-ineligible subject matter cannot be saved by arguing the absence of
complete preemption.” Return Mail, Inc. v. United States Postal Service,
868 F.3d 1350, 1370 (Fed. Cir. 2017). Moreover, we note that claim 1
would preempt the application of Hammond’s methods to interchange
networks as disclosed by Kamal, and therefore there is a significant risk of
preemption.
Guidance Step 2A, Prong 2
Having determined that the claims recite a judicial exception, the
Revised Guidance directs us to next consider whether the claims integrate
the judicial exception into a practical application. Guidance Step 2A, Prong
2. “[I]ntegration into a practical application” requires that the claim recite
an additional element or a combination of elements, that when considered
individually or in combination, “apply, rely on, or use the judicial exception
in a manner that imposes a meaningful limit on the judicial exception, such
that the claim is more than a drafting effort designed to monopolize the
judicial exception.” Guidance at 54.
A judicial exception is not integrated into a practical application when
the claims are drawn to the mere use of “a computer as a tool to perform an
abstract idea.” Guidance, 84 Fed. Reg. at 55; see Electric Power Grp., LLC
v. Alstom S.A., 830 F.3d 1350, 1354 (Fed. Cir. 2016) (finding that “the focus
of the claims is not on . . . an improvement in computers as tools, but on
certain independently abstract ideas that use computers as tools”); Enfish,
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LLC v. Microsoft Corp., 822 F.3d 1327, 1335–6 (Fed. Cir. 2016)
(determining whether the claims at issue were focused on a “specific
asserted improvement in computer capabilities” or “a process that qualifies
as an ‘abstract idea’ for which computers are invoked merely as a tool”).
Here, there is no practical integration of the abstract idea. Other than
the limitations reciting the abstract idea, discussed above, the invention is
claimed at a very high level of generality and relies upon standard
computing devices (see Spec. ¶¶ 31–33, 40, 48). We appreciate that simply
because standard devices are used is not solely dispositive of practical
integration.
However, in addition to using standard computer technology, the
instant claims do not recite anything unconventional regarding the process of
performing merchandise returns relative to the prior art as evidenced by
Hammond and Kamal (FF 1–17). We note that the Specification does not
recite any specific algorithms for calculating a “cardholder risk assessment”
but just provides the general concept of estimating risks associated with
returns. See Spec. ¶ 76 (“Cardholder risk assessment 630 may include . . .
any other indication that merchant 24 may review to assess risks related to
the return activity of the cardholder.”). Thus, the Specification reasonably
encompasses the mental process by which a shop owner assesses risk based
on their personal experience with a customer.
Therefore claim 1 does not recite elements that integrate the abstract
idea into a practical application that is more than the abstract idea itself.
Instead, the claims recite conventional computer components that are used to
apply the mental process and organization of human activity of managing
the risk of customer returns.
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The current claims simply use the computer and software as tools to
perform a mental process and process of organizing human activity as
routinely performed by a merchant or by the process disclosed by Hammond
(FF 1–13). See Elec. Power Grp., LLC v. Alstom S.A., 830 F.3d 1350, 1355
(Fed. Cir. 2016) (“[M]erely selecting information, by content or source, for
collection, analysis, and display does nothing significant to differentiate a
process from ordinary mental processes.”) Appellant does not identify any
teaching in the Specification that actually improves either the computer or
the physical components of the dispatch system.
We do not agree with Appellant’s argument that the Examiner over-
generalized the abstract idea (see Appeal Br. 10). Prior art evidences
limitations of claim 1 that were known and routine prior to the submission of
the instant application. As discussed above, Hammond anticipates every
element of claim 1 other than the use of an interchange network as the
computer system, and Kamal teaches that interchange networks may be used
for returns (FF 1–17).
We note that none of the detailed steps represent anything other than
taking the abstract idea of determining risk of a return based on prior
customer behavior and applying it using a conventional computer system.
Alice makes clear that “[s]tating an abstract idea while adding the words
‘apply it with a computer’ simply combines those two steps, with the same
deficient result.” Alice, 573 U.S. at 223.
C. Guidance Step 2B
Having determined that the judicial exception is not integrated into a
practical application, the Revised Guidance requires us to evaluate the
additional elements individually and in combination to determine whether
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they provide an inventive concept, such as a specific limitation beyond the
judicial exception that is not well-understood, routine, conventional in the
field, or simply appends well-understood, routine, conventional activities
previously known to the industry, specified at a high level of generality, to
the judicial exception. See 84 Fed. Reg. 51.
Appellant cites Berkheimer v. HP Inc., 881 F.3d 1360 (Fed. Cir. 2018)
for the “well-understood, routine, and conventional” test. Appellant
contends the “claims introduce a new structural component-the recited
monitoring computer system-into the traditional architecture of a payment
card interchange network, and the new structural component adds new and
innovative functionality that solves a specific problem discussed in the
specification” (Appeal Br. 12). Appellant contends the Examiner “cites no
evidence whatsoever that this novel architecture is well-understood, routine,
and conventional” (id. 12–13). Appellant contends the “claims require the
new structural component to retrieve two separate and distinct sets of return
transaction data from the payment card interchange network, namely, (i) at
least one historical return transaction and (ii) a newly pending return
transaction” (id. 13). Lastly, Appellant analogizes the facts to Bascom
Global Internet Serv., Inc. v. AT&T Mobility LLC, 827 F.3d 1341, 1351
(Fed. Cir. 2016), contending that “Claim 1 does not merely recite the idea of
assessing the risk that a product return is improper. Instead, Claim 1 recites a
technology-based solution” (id. 14).
We agree with Appellant that Berkheimer mandates evidence showing
the claim elements were well-understood, routine, and conventional in the
prior art is necessary to satisfy Alice step two.
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In this case, the Examiner has provided abundant evidence,
particularly in the obviousness analysis, demonstrating that both the process
steps and the structural components of the claim were well-understood,
routine, conventional in the field (see FF 1–17, Spec. ¶¶ 31–33, 48). Indeed,
the Specification itself states that interchange networks were well-known
(Spec. ¶ 40) as does Kamal (Kamal ¶ 20). In addition, Hammond even
acknowledges that “automated systems for implementing a merchant’s
return policy exist” in the prior art (Hammond ¶ 6). Because we affirmed
the Examiner’s obviousness rejection for the reasons given above, we also
rely on the evidence relied upon in that determination to show that the claim
elements were well-understood, routine, and conventional.
We are not persuaded by Appellant’s argument related to Bascom. In
Bascom, the Federal Circuit found the patent claimed “a technology-based
solution (not an abstract-idea-based solution implemented with generic
technical components in a conventional way) to filter content on the Internet
that overcomes existing problems with other Internet filtering systems.”
Bascom Global Internet Serv., Inc. v. AT&T Mobility LLC, 827 F.3d 1341,
1351 (Fed. Cir. 2016). Unlike Bascom, claim 1 recites an abstract-idea-
based solution, i.e., a mental process and method of organizing human
activity for managing returns using an interchange network but does not
indicate or identify any unconventional components in the analysis.
While Appellant states that the claims “adds new and innovative
functionality that solves a specific problem”, we are not persuaded that the
evidence of record supports this position because, as discussed above, the
process is identical to that performed by the ordinary merchant in the course
of processing returns (FF 1–17). That the computer used may include a
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network interchange does not substantively change the process because
claim 1 recites no limitations that uniquely depend on a payment card
interchange network. Rather, an ordinary merchant, who keeps track of
debits and credits of their customer and decide whether to allow returns
based upon their mental accounting, perform the same steps as those recited
in claim 1. Therefore, unlike Bascom, the invention at issue is not “a
‘software-based invention[] that improve[s] the performance of the computer
system itself.’” 827 F.3d at 1351.
Instead, we find the claimed invention more akin to the claims in
Ultramercial, Inc. v. Hulu, LLC, 772 F.3d 709, 714 (Fed. Cir. 2014). In
Ultramercial, like the instant case, the patentee argued that its claims were
“directed to a specific method of advertising and content distribution that
was previously unknown and never employed on the Internet before.”
Ultramercial, 772 F.3d at 714. However, Ultramercial found that the
majority of the steps were directed to the abstract idea of offering media
content in exchange for viewing an advertisement, and the “routine
additional steps[,] such as updating an activity log, requiring a request from
the consumer to view the ad, restrictions on public access, and use of the
Internet[,]” and, as such, were insufficient to transform the patent-ineligible
abstract idea into patent-eligible subject matter. Id. at 715–16.
Here, while the claims recite a specific abstract idea to use a particular
interchange network, that idea does not alter the computer itself in any
structural way, but rather falls into the category of methods “that can be
performed by human thought alone . . . and is not patent-eligible under
§ 101.” CyberSource Corp. v. Retail Decisions, Inc., 654 F.3d 1366, 1373,
1375 (Fed. Cir. 2011) (“That purely mental processes can be unpatentable,
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even when performed by a computer, was precisely the holding of the
Supreme Court in Gottschalk v. Benson.”).
The rejection of the claims under 35 U.S.C. § 101 is affirmed.

CONCLUSION
In summary:
Claims
Rejected
35 U.S.C. § Basis Affirmed Reversed
1, 2, 6, 7, 10, 11,
15, 16, 19–23
103 Hammond,
Kamal
1, 2, 6, 7, 10, 11,
15, 16, 19–23

9, 18 103 Hammond,
Kamal, Chaves
9, 18
1, 2, 6, 7, 9–11,
15, 16, 18–23
101 Eligibility 1, 2, 6, 7, 9–11,
15, 16, 18–23

Overall
Outcome
1, 2, 6, 7, 9–11,
15, 16, 18–23

No time period for taking any subsequent action in connection with
this appeal may be extended under 37 C.F.R. § 1.136(a).

AFFIRMED