US008712918B2
`
`(12) United States Patent
`Luzzatto
`
`(10) Patent No.:
`(45) Date of Patent:
`
`US 8,712,918 B2
`Apr. 29, 2014
`
`ELECTRONIC CURRENCY, ELECTRONIC
`VVALLET TIIEREFOR AND ELECTRONIC
`PAYMENT SYSTEMS ENIPLOYING TIIEM
`
`(5 6)
`
`References Cited
`U.S. PATFNT DOCIIMPNTS
`
`Inventor: Kfir Luzzatto, O1ner (IL)
`
`Assignee: Moneycat Ltd., O111er (IL)
`
`Notice:
`
`Subject to any disclaimer, the tern1 of this
`patent is extended or adjusted under 35
`USC. 154(b) by 0 days.
`
`Appl. No.: 13/464,451
`
`Filed:
`
`May 4, 2012
`Prior Publication Data
`
`US 2012/0284181A1
`
`Nov. 8. 2012
`
`Related U.S. Application Data
`
`Continuation of application No. 12/539,141, filed on
`Aug. 11, 2009, now Pat. No. 8,195,578, which is a
`continuation 01' application No. 09/644,104, [lled on
`Aug. 23, 2000, now Pat. No. 7,590,602.
`
`(30)
`
`Foreign Application Priority Data
`
`Aug.26, 1999
`Aug.31,1999
`Nov. 14, 1999
`
`(1.5) ........................................ .. 131612
`(15)..
`(1.5) .......................................
`
`132919
`
`(51)
`
`Iut.Cl.
`G06Q 20/00
`(52) U.S.Cl.
`USPC .......... .. 705/69; 902/1; 902/2; 902/7; 902/24;
`902/41
`
`(2()1 2.01)
`
`(58) Field of Classification Search
`USPC ........................... .. 705/69; 902/1, 2, 7, 24, 41
`See application file for complete search history.
`
`4,625,276
`5,305,383
`5,461,217
`5,644,727
`5,671,279
`5,745,886
`5,748,737
`5,768,385
`5,799,087
`
`)>>D>3>>i>D>>D>
`
`11/1986 Benton et a1.
`4/ 1994 Guillou et al.
`10/ 1995 Claus
`7/ 1997 Atkins
`9/1997 Elgamal
`4/ 1998 Rosen
`5/ 1998 Daggar
`6/1998 Simon
`8/1998 Rosen
`
`(Continued)
`FOREIGN PA1.:N1 DOCUM.
`
`2221399 C
`0788066
`
`5/1998
`8/1997
`
`(Continued)
`()'1'Hl:'R PUBLICATIONS
`
`O’Mah0ny et al., “Electronic Payment Systems”, Artcch House,
`Copyright 1997; pp. 158-185.
`
`(Continued)
`
`Primary Examiner — Tsan—Yu J Huang
`(74) Attorney, Agent. or Firm — Roach Brown McCarthy &
`Gnlber, P.C.; Kevin D. McCarthy
`
`ABSTRACT
`(57)
`Electronic curre11cy consists of data in a form suitable to be
`stored in a user’s data storage medium. comprising inforrna-
`tion on the data Value. identification of each specific set of
`data or data point. and authentication information suitable to
`Verify that said data has been generated by a specific Currency
`Issuing Authority (CIA). A method a11d a system for effecting
`currency transactions between two users over the Internet or
`other conmiunication network are also described.
`
`23 Claims, 10 Drawing Sheets
`
`PayPal Ex.1001, p.1
`
`

`
`US 8,712,918 B2
`Page 2
`
`References Cited
`
`U.S. PATEN '1' DOCUMENTS
`
`>i>D>>D>3>>i>D>>D>3>3>D>D>>D>3>
`
`5,809,144
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`5,878,138
`5,889,862
`5,892,900
`5,903,880
`5,903,881
`5,905,976
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`5,915,023
`5,953,423
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`6,003,764
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`6,308,277
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`7,010,512
`
`8,195,578
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`2002/0004779
`2002/0130175
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`2004/0083182
`2004/0206814
`2007/0244812
`
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`8/2001 Himmel et a1.
`1/2002 Turk et al.
`..................... .. 705/39
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`
`FOREIGN PATENT DOCUMENTS
`
`0865010
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`2321751
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`
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`12/1996
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`OTHER PUBLICATIONS
`
`“Untraceable Electronic Cash”, Chaurn, David et al. Published 1990
`in “Proceedings on Advances in Cryptology” from CRYPTO’88.
`“Untraceable Digital Cash, Information Markets, and BlackNet”,
`paper by Tim May, 1997.
`“Blind signatures for untraceable payments”, Chaum David. Pub-
`lished 1983 in “Proceedings on Advances in Cryptology" from
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`Internet Archive VVayback Machine archive ofwww.r11arktwain.corI1,
`archived Oct. 1997. Multiple webpages included.
`“Discover the secrets of the Java Serialization API”, obtained from
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`technicalArticles/Programming/serialization-/. Originally published
`Jun. 2000 in JavaWorld magazine.
`Electronic Payment Systems, O’Mahony et al 1997. ISBN 0-89006-
`925-5. Table of Contents and Chapter 6 included. entire book cited.
`
`Digital Cash, Commerce on the Net, 2nd Edition. Wayner, Peter.
`1997. ISBN 0-12-788772-5. Table of Contents and Chapters 15 and
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`Gennady Medvinsky and B. Clifford Neuman; “Electronic Currency
`for the Internet", Electronic Markets, vol. 3, No 9/10, Oct. 1993, pp.
`23-24.
`Gennady Medvinsky and B. Clillord Neuman; “NetCash: A design
`for practical electronic currency 011 the Internet”, in Proceedings of
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`rity, Nov. 1993.
`Michael Peirce and Donal O’Mahony; “Scaleable, Secure Cash Pay-
`ment for WWW Resources with the PayMe Protocol Set”, 4.sup.th
`Int. VVorld Wide Web Conference, Dec. 11-14, 1995, Boston, Mass,
`USA.
`Donald O’Mahony et a1.; “Electronic Payment Systems", Artech
`House, Boston, London, XP002128662, 236620, pp. 228-236.
`Lei Tang; “A Set of Protocols for Micropayments in Distributed
`Systems”, Proceedings of the Usenix VVorkshop of Electronic Com-
`merce, XX,XX. Jul. 11, 1995, pp. 107-115, XP000579444.
`Electronic Payment Systems. O‘Mahony, Donal et a1. Artech House,
`Boston. MA, 1997. ISBN 0-89006-925-5. Front matter. back matter,
`contents, chapters 1 and 5, and index included.
`Awithdrawn complaint regarding US patent No. 7,590,602; filed 011
`Aug. 30, 2010 at United Stated District Court for the District of
`Delaware. 4 pages.
`M. Bellare et al., “VarietyCa sh: a Multi-purpose Electronic Payment
`System”, Proceedings of the 3rd Usenix Workshop on Electronic
`Commerce, 17 pages; Aug. 31-Sep. 3, 1998.
`Gennady Medvinsky et al., “.\IetCash: A design for practical elec-
`tronic currency on the Interne ”, Association for Computing Machin-
`ery, 5 pages, Nov. 1993.
`Ex Parte Reexamination Request of U.S. patent No. 7,590,602,
`mailed to the USPTO on Oct. 31, 2011, 45 pages.
`Claim chart of EX Parte Reexamination Request of U.S. patent No.
`7,590,602 in view of Bellare reference
`identified as CC—A, mailed
`to the USPTO or1 Oct. 31, 2011, 11 pages.
`Claim chart of Ex Parte Reexamination Request ofU.S. patent No.
`7,590,602 in view of Bellare and Ito refer'ences—identified as CC-B,
`mailed to the USPTO on Oct. 31, 2011, 3 pages.
`Claim chart of EX Parte Reexamination Request of U .S. patent No.
`7,590,602 in view of Medninsky and Bellare references—identified
`as CC-C, mailed to the USPTO on Oct. 31. 2011. 7 pages.
`Claim chart of Ex Parte Reexamination Request of U S. patent No.
`7,590,602 in view ol‘Bellare, Medninsky and Ito references—iden-
`tified as CC-D, mailed to the USPTO on Oct. 31, 2011, 3 pages.
`Claim chart of Ex Parte Reexamination Request of U.S. patent No.
`7,590,602 in view of Bellare and Ito references—identified as CC-E,
`mailed to the USPTO on Oct. 31, 2011,26 pages.
`Rec uest for Ex Parte Reexamination ofU.S. patent No. 8,051,011, 76
`pages, submitted to the USPTO on Sep. 14, 2012; received on Sep.
`19, 2012.
`Rec uest for 7.x Parte Reexamination ofI I.S. patent No. 8,051 ,01 1—
`Mjolnes claim chaat, 18 pages. submitted to the USPTO on Sep. 14,
`2012; received on Sep. 19, 2012.
`Rec uest for Ex Parte Reexamination ofU.S. patent No. 8,051,011—
`Mjolnes-Medvinsky claim chart, 2 pages, submitted to the USPTO
`on Sep. 14, 2012; received on Sep. 19, 2012.
`Rec uest for Ex Parte Reexamination ofU.S. patent No. 8,051,011—
`Mj olnes-O‘Mahony claim chart, 2 pages, submitted to the USPTO on
`Sep. 14, 2012; received on Sep. 19, 2012.
`Rec uest for Ex Parte Reexamination ofU.S. patent No. 8,051,011
`Mjolnes-O’Mahony-Medvinsky claim chart, 5 pages, submitted to
`the USPTO on Sep. 14, 2012; received on Sep. 19, 2012.
`Rec uest for Ex Parte Reexamination ofU.S. patent No. 8,051,01 1—
`Mjolnes-O‘Mahony-Vledvinsky claim chart, 20 pages, submitted to
`the USPTO on Sep. 14, 2012; received on Sep. 19, 2012.
`Re uest for Ex Parte Reexamination ofU.S. patent No. 8,051,011—
`I—lauser'-()’Mahony-Medvinsky claim chat, 4 pages, submitted to the
`USPTO on Sep. 14, 2012; received on Sep. 19, 2012.
`Rec uest for Ex Parte Reexamination ofU.S. patent No. 8,051,011—
`Hauser claim chart, 7 pages, submitted to the USPTO on Sep. 14,
`2012; received on Sep. 19, 2012.
`
`PayPal Ex.1001, p.2
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`

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`US 8,712,918 B2
`Page 3
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`(56)
`
`References Cited
`O'1'HJ:'R PUBL1CA'1'1()NS
`
`Rec uest for Ex Parte Reexamination ofU.S. patent No. 8,051,011—
`Mjolnes-Medvinsky claim chart (second one), 2 pages, submitted to
`the USPTO on Sep. 14, 2012; received on Sep. 19, 2012.
`Rec uest for Ex Parte Reexamination ofU.S. patent No. 8,051,011—
`Hauser—O’Mahony claim chart, 4 pages, submitted to the USPTO on
`Sep. 14, 2012; received on Sep. 19, 2012.
`Rec uest for Ex Parte Reexamination ofU.S. patent No. 7,590,602, 55
`pages, submitted to the USPTO on Sep. 14, 2012; received on Sep.
`19, 2012.
`Rec uest for Ex Paite Reexamination of U .S. patent N o. 7. 590.602—
`Mjolnes claim chart, 15 pages. submitted to the USPTO on Sep. 14,
`2012; received on Sep. 19, 2012.
`Re uest for Ex Parte Reexamination ofU.S. patent No. 7,590,602—
`Mjolnes-O’Mahony claim chart, 5 pages, submitted to the USPTO on
`Sep. 14, 2012; received on Sep. 19, 2012.
`Rec uest for Ex Parte Reexamination ofU.S. patent No. 7,590,602—
`Mjolnes-Medvinsky-O’Mahony claim chart, 13 pages, submitted to
`the USPTO on Sep. 14, 2012; received on Sep. 19, 2012.
`Rec uest for Ex Parte Reexamination ofU.S. patent No. 7, 590,602—
`Hauser claim chart, 9 pages, submitted to the USPTO on Sep. 14,
`2012; received on Sep.
`9, 2012.
`Rec uest for Ex Parte Reexamination ofU.S. patent No. 7,590,602—
`Hauser-O’Mahony claim chart, 5 pages, submitted to the USPTO or1
`Sep. 14, 2012; received on Sep. 19, 2012.
`Gennady Medvinsky et a1.. “Net Cash: A design for practical elec-
`tronic currency on the In emet", Association for Computing Machin-
`ery, Nov. 1993 (5 pages).
`Donal O‘Mahony et al., “Electronic Payment Systems for E-C om-
`merce”, 1st ed. Norwoo . MA: Artech House, Inc., 1997 (264 pages).
`Ralph Hauser et al., “Micro-Payments based on iKP”. Information
`Technology Solutions Department, IBM research Division, Zurich
`Research Laboratory, C {-8803, Ruschlikon, Switzerland, Aug. 21,
`1996 (:9 pages).
`Request for Ex Parte Reexamination ofU.S. patent No. 8,195,578, 64
`pages, submitted to the JSPTO on Sep. 14, 2012; received on Sep.
`17, 2012.
`Request for Ex Parte Reexamination ofU.S. patent No. 8.195,578—
`Mjolnes claim chart. 15 pages. submitted to the USPTO on Sep. 14.
`2012; received on Sep.
`7, 2012.
`Request for Ex Paite Reexamination of U.S. patent No. 8. 195.578—
`Mjolnes-O’Mahony claim chart, 10 pages, submitted to the USPTO
`on Sep. 14, 2012; received on Sep. 17, 2012.
`Request for Ex Parte Reexamination ofU.S. patent No. 8.195,578—
`Mjolnes—Medvinsky—O’Mahony claim chart, 19 pages, submitted to
`the USPTO on Sep. 14, 2012; received on Sep. 17, 2012.
`
`creation date Feb. 24,
`
`Request for F.x Parte Reexamination ofl IS. patent No. 8.195,578—
`Hauser claim chart, 12 pages, submitted to the USPTO on Sep. 14,
`2012; received on Sep. 17. 2012.
`Request for Ex Parte Reexamination ofU.S. patent No. 8.195,578—
`Hauser-O'Mahony claim chart, 12 pages, submitted to the USPTO on
`Sep. 14, 2012; received on Sep. 17, 2012.
`Answer for Patent In1‘ringernent—r\/IoneycatLtd. v. Pa/tpal. Inc., liled
`Sep. 30, 2013—1l pages.
`An Overview of electronic commerce, L. Me & R. Chaillat—publi-
`cation date unknown.
`Cybercash Document of unknown origin
`1997—publication date unknown.
`Shaping the Future of Casl1: Cybercash, Inc.—Cl1ri stine Springer—
`with a copyright date of 1996 but publication date unknown.
`TRF.C°98—“F.1ectronic payment and banking”. Jun. 3, 1998.
`Eine Software-Plattllorm lluer Elektronische Zahlungssysteme im
`lnternet—apparently a university dissertation. Dated May l998—
`publication date unknown.
`NetBill: An Internet Commerce System Optimized for Network-
`Delivered Services. M. Sirbu and J.D. Tygar
`IEEE Personal Com-
`munications, Aug. 1995.
`NetBil1 Security and Transaction Protocol. B. Cox, J.D. Tygar & M.
`Sirbu, Proceedings ofthe 1st USENIX Workshop on Electronic Com-
`merce, Jul. 1995, pp. 77-88.
`CyberCash Credit Card Protocol Version 80, dated Feb. 1996.
`A Theoretical Approach to Electronic Money, Nadia Piffarelli, Work-
`ing Paper, University of Friburg, dated Feb. 1998—publication date
`unknown.
`Document identified as PPMC00000357 (first page)
`publication dates unknown.
`Document identified as PPMCO0000360 (first page)—cr'eation and
`publication dates unknown.
`Complaint for Patent 1nfringement—M0ney(7aI‘ Ltd. v. Paypal, Inc.,
`filed Jul. 30, 2013
`104 pages.
`Order Denying Request for Ex Parte Reexamination of US. patent
`No.8051011, mailed Nov. 23, 2012—1 8 pages.
`Decision that Denied Petition for Reconsideration of examiner’s
`decision to deny Ex Parte Reexamination of U.S. patent No.
`8051011—confirmed the order denying the request for Ex Parte
`Reexamination—mai1ed Aug. 14, 2013—9 pages.
`Decision that Denied-in-part and Dismissed-in-part Petition for
`Reconsideration of examiner’ s determination that Mjolsnes does not
`raise a substantial question of patentability affecting any claim of
`U.S. patent No. 7590602—eonfirmed the order denying the request
`for Ex Parte Reexamination mailed Apr. 29, 2013
`8 pages.
`
`creation and
`
`* cited by examiner
`
`PayPal Ex.1001, p.3
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`U.S. Patent
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`Apr. 29, 2014
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`
`US 8,712,918 B2
`
`1
`ELECTRONIC CURRENCY, ELECTRONIC
`VVALLET TIIEREFOR AND ELECTRONIC
`PAY1\IENT SYSTEMS EMPLOYING THEM
`
`R 4F A R *NC A TO CO-PENDING APPLICATIONS
`
`This application claims priority as a continuation applica-
`tion o US. patent application Ser. No. 12/539,141 (allowed)
`filed onAug. 1 1. 2009; which is a continuation of U.S. patent
`application Ser. No. 09/644,104, filed on Aug. 23, 2000 (U.S.
`Pat. No. 7,590,602 as ofSep. 15, 2009); which claims priority
`to (a) sraeli patent application number 13291 9, filed on Nov.
`14, 1999; (b) Israeli patent application number 131672, filed
`on Aug. 31, 1999; and
`Israeli pa ent application number
`131612, filed on Aug. 26, 1999.
`
`FIEI D OF THA INV*N1ION
`
`The invention relates to electronic currency. More particu-
`larly, the invention relates to electronic cash money “to the
`bearer”, to electronic wallets carrying such cash money, and
`to electronic payment systems employing them.
`
`BACKGROUND OF THE INVENTION
`
`Flectronic payment transactions have become increasingly
`important, and tremendous efforts are constantly placed into
`the development of suitable systems for carrying out such
`transactions. One such system is the so-called “electronic
`wallet” or “electronic purse”, which holds sums of money
`withdrawn fiom a bank. which can be used to pay for goods
`and services. The electronic wallet present several problems
`which, so far, have limited its use:
`it has a considerable
`security problem, inasmuch as the loss of the wallet entails
`the loss of the money it carries, it requires sophisticated
`storage means, coupled with a “smart card”, as well as com-
`plicated and expensive encryption procedures. It further pre-
`sents a disadvantage that renders it unattractive for many
`persons, namely, it causes a loss of feeling of control over the
`money it contains. Since all procedures are automated,
`encrypted and electroinc, With only minimal intervention of
`the owner, many owners feel that they have no real control
`over the movement of their money.
`I-‘Electronic cash has many applications, ranging from the
`use of electronic wallets carried on the owner, in lieu ofcredit
`cards, in daily transactions and including payments for goods
`and services purchased over the Internet. While purchases
`made over the Internet are by no means the sole use for the
`electronic cash, they probably are the most problematic,
`mainly because of security problems.
`The problem of payments over the Internet is well known,
`and many solutions to it have been suggested. The problem is
`a complicated one, because the use of credit cards over the
`Internet is unsafe, and because i11 many transactions the buyer
`does not wish to provide details of himself, or of his bank
`account.
`Among the systems suggested to overcome this problem,
`there can be mentioned a few. For instance, a concept called
`“First Virtual” first asks a potential customer to fill out an
`application form providing standard personal information.
`First Virtual would then send a personal identification number
`(PIN) with an 800 number over the Intemet to the customer’ s
`email. Then the customer is supposed to use the 800 number
`to give the customer’ s credit card information over the phone
`to First Virtual to establish or open no more than just an
`electronic charge account.
`
`,
`
`2
`Another concept called “Cybercash” requires customers or
`buyers on the Internet to first open a special Cybercash bank
`account that contains money designated for spending on the
`Internet. A consumer issues instructions to purchase goods or
`services on the Internet a11d money for these items are trans-
`ferred from the consumer’ s Cybercash bank account to that of
`the merchant’s. Transactions are anonymous unless the seller
`specifically asks for the identity of the buyer.
`Yet another concept called the “Netbill” requires a buyer on
`the Internet to first put money iii a Netbill account and sub-
`sequent transactions made by the buyer are to be draw11 off
`from the account sum orbalance. Accounts ofbot11 buyers and
`sellers are maintained on a Netbill server, to keep transactions
`off the I11ternet and to maintain lower transaction costs. After
`a purchase is made, the transfer of funds will automatically
`take place at the server. Digital goods, e.g. programs, docu-
`ments etc. are transferred to the buyer in encrypted form.
`When the Netbill account has cleared the transaction, a
`receipt containing the key to the encrypted goods is sent to the
`merchant, then forwarded to the consumer.
`A two—step process called “Millicent” had also been intro-
`duced, using fake money. A merchant creates its own elec-
`tronic currency, or “scrip“, that is sold to brokers. Brokers
`then sell the scrip to buyers. Sellers deal withjust a handful of
`accounts, spreading transaction costs over a large volume of
`purchases. Millicent customers need to buy currency from
`only a few trusted brokers.
`Another system is the so-called “Digicash” or “ecash”. In
`theory this system turns a user’ s or buyer’ s hard drive on a PC
`i11to a purse. To use this system, one first establishes an
`account with a bank. To obtain digicash or ecash, the user
`creates a series of numbers that will represent a mixture of
`coins or money bills in various denominations according to
`the user’ s own wishes. This request for digicash is then sent to
`the bank, which deducts the total amount requested from the
`user’ s existing valid account. The bank then sends the user an
`equivalent amount of ecash as a11 encrypted email message
`containing a series of numbers. Each number corresponds to
`a specified amount ofmoney. Before the user can actually use
`these encrypted series of numbers from the bank to purchase
`goods or services on the Net, the user must first obtain a user
`name and a password from Digicash. Then the user 11as to
`download l_)igicash’s ecash software to the user’s PC. The
`linal step is to create the user’s own encryption key (in
`essence another password) and together with the user’s pass-
`word obtained earlier from Digicash, the user can then spend
`ecash on the Net. The operation ofthis system is illustrated in
`FIG. 1.
`Another prior art system is NetCash, which is described in
`“Gennady Medvinsky and B. Clifford Neuman, Electronic.
`Currencyfor the Internet, Electronic Markets Vol 3. No. 9/ 1 0,
`October 1993, pages 23-24”, a11d in “Gennady Medvinsky
`and B. Clifford Neuman, NetCash: A design for practical
`electronic currency on the Internet, In Proceedings of the
`First ACM Conference 011 Computer and Communications
`Security, November 1993. It is a framework for electronic
`cash developed at the Information Sciences Institute of the
`University of Southern California. It uses identified on-line
`electronic cash. Although the cash is identified there are
`mechanisms whereby coins can be exchanged to allow some
`anonymity. The system is based on distributed currency serv-
`ers w11ere electro11ic c11ecks can be exchanged for electromc
`cash. The NetCash system consists ofbuyers, merchants, and
`currency servers. An organization wishing to set up and man-
`age a currency server obtains insurance for the new currency
`from a central certification authority. The currency server
`generates a public/private key pair. The public key is then
`
`PayPal Ex.1001, p.14
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`

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`US 8,712,918 B2
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`3
`certified by being signed by the central authority. This certifi-
`cate contains a certificate ID, name of the currency server,
`currency server’s public key, issue date and an expiry date, all
`signed by the central authority:
`The currency server mints electronic coins, which consist
`
`of:
`l . Currency Server Name: Identifies a currency server.
`2. Currency Server Network Address: Where the currency
`server can be found. If this address is no longer in use, a
`name server can be queried to llnd the current address.
`. Expiry Date: Limits the state that must be maintained by
`each currency server.
`. Serial Number: Uniquely identifies the coin.
`. Coin Value: Amount coin is worth.
`The coin is signed with the currency server’s private key.
`The currency server keeps track of the serial numbers of all
`outstanding coins. In this way double spending can be pre-
`vented by checking a coin’s serial number with the currency
`server at the time of purchase (or exchange). If the coin’s
`serial number is in the database it has not been spent already
`and is valid. When the coin is checked the serial number is
`then removed from the database. The coin is then replaced
`with a new coin (coin exchange). An electronic cheque canbe
`exchanged with a currency server for electronic coins. The
`currency server is trusted not to record to whon1 the coins are
`issued. To further aid anonymity a holder of coins ca11 go to
`any currency server and exchange valid coins for new ones.
`The currency server does not know who is exchanging coins,
`only the network address of where they are coming from. By
`performing the exchange and by choosing any currency
`server to do this with, it becomes diflicult to track the path of
`the coins. If a currency server receives coins that were not
`minted by it, it will contact the minting currency server to
`validate those coins.
`FIG. 2 shows how a buyer uses NetCash coins to purchase
`an item from a merchant. In this transaction the buyer remains
`anonymous since the merchant will only know the network
`address ofwhere the buyer is coming from. NetCasl1 assumes
`that the buyer l1as or can obtain the public key ofthe merchant,
`and that the merchant has the public key of the currency
`server.
`
`Another system that has been suggested is the PayMe
`system (Michael Peirce and Donal ()’Mahony, “Scaleable,
`Secure Cash Payment for WWW Resources with the PayMe
`Protocol Set”, presented at the Fourth International World
`Wide Web Conference, Dec.
`ll—l 4, 1995, Boston, Mass.,
`USA—http ://www.w3 .org/Conferences/WWW4/Papersz’
`228/). PayMe is an on—line electronic cash system. The enti-
`ties involved are banks and users. Users can be either buyers ,
`or merchants but each has the same functionality. They can
`make payments, accept payments, or deal with the bank. Each
`bank mints its ow11 identified electronic cash with serial num-
`bers. Double spending of coins is prevented by the bank
`maintaining a database ofcoins in circulation. Any user in the
`PayMe system can accept payments and make payments.
`Merchants can receive payments for selling Web goods but
`they can also make payments to the buyers. This can be used
`for making refunds or in pay-out services. A simple model
`showing the basic functionality ofthe PayMe system is shown
`in FIG. 3.
`Both symmetric and public-key cryptography are used.
`Each entity has its own public/private key pair. It is a stand-
`alone system which has been tailored for use with the Web.
`The PayMe system uses its own secure cormrrunicatiorrs pro-
`tocol, the PayMe Transfer Protocol (PMTP), to communicate
`between entities.
`
`4
`Coins are the pieces of data that represent monetary value
`within the system. The coins are digitally signed by the bank
`using public key cryptography to make them valid currency.
`Each coin has a serial number which is entered into the bank’ s
`database when the coin is minted. Coins have fields for the
`coin value, serial number, bank id, bank host name and port
`number, and expiry date. VVhen these five fields are put
`together and signed with the bank’ s private key, a valid coin is
`created.
`PayMe can be used with any Web client or server. To
`purchase a11 item a user starts up both their PayMe Wallet and
`any Web client. They browse the Web until they find a mer-
`chant shop, which will be presented by a HTML document. A
`combination ofPMTP messages are used in a purchase trans-
`action, as shown in FIG. 4.
`All the aforementioned systems require a direct interaction
`between the seller and the buyer during the transfer of the
`payment and/or involve complicated and time—consuming
`key agreement processes.
`In a recently issued patent, US. Pat. No. 5,913,203, a
`system is suggested, which is stated to provide totally anony-
`mous or effectively anonymous cash—like transactions, which
`are accomplished by using a pseudo cash data package con-
`verter for inserting a user key into a pseudo cash preliminary
`data packet through the use of a user insertion key to generate
`a pseudo cash unit with a fixed monetary value that can be
`used to purchase goods or services via the Internet. A pseudo
`cash repository facilitates the cash-like transactions and
`maintains a record of the pseudo cash units and their fixed
`monetary value. Depending upon the level of anonymity
`selected by a purchaser, the pseudo cash repository can either
`transmit pseudo cash preliminary data packets orpseudo cash
`units to a first entity. If the first entity loses an effectively
`anonymous pseudo cash preliminary data packet, it can be
`replaced by the pseudo cash repository without risk of loss.
`This patent is said to solve one of the prior art problems
`existing, e.g., in the Digicash system, in which a user’s ecash
`is stored as a series ofnumbers on the hard disk ofl1is PC. This
`leads to the danger that, if one has a disk crash, which is quite
`common nowadays in view ofthe complexities ofmodern day
`software, or if one’s computer is stolen, one has lost his
`money.
`Another severe drawback of certain systems is that they
`require that the cash dispenser be involved in the transaction,
`to identify the users (either the buyer, the seller, or both),
`rendering the transaction cumbersome, and detracting from
`its privacy.
`Because, of these facts, there is currently no electronic
`“currency” that can be used in a simple manner by the general
`public as well as by Internet surfers, just as one uses bills,
`coins or checks. For this reason, e-commerce is still relatively
`limited both in physical transactions, such as in shops and in
`service-providing establishments, and over the Internet. It is
`therefore clear that there is a great need for an electronic
`currency that overcomes the disadvantages of the prior art.
`All the prior art methods and systems suffer from severe
`drawbacks arising from a misconception that could be termed
`“excessive protectivity”. The prior art does not take into
`account that most transactions made over the Internet or other
`LANs or WANs involve small sums. While it is important to
`ascertain that theft of such sums is made difficult, just as one
`keeps his pocket money, the danger of theft does not justify
`the complexity of the systems devised by the prior art.
`Additionally, and largely because of said misconception,
`most of the prior art systems require the user to open an
`account with either a bank, or a pseudo-bank, or with a sup-
`plier, and either to provide prepaid funds to these accounts,
`
`PayPal Ex.1001, p.15
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`US 8,712,918 B2
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`5
`from wl1ich it possible to draw, or to perform relatively com-
`plicated operations when the user wishes to spe11d, withdraw
`or generate funds.
`Another severe drawback of certain systems is that they
`require that the cash dispenser be involved in the transaction,
`to identify the users (either the buyer, the seller, or both),
`rendering the transaction cumbersome, and detracting from
`its privacy.
`Because, of these facts, there is currently no electronic
`“currency” that can be used in a simple manner by the general
`public in physical transactions or wl1en surfing the Intemet,
`just as one uses bills, coins or checks. For this reason, e-con1-
`merce is still relatively limited in physical shops and over the
`Internet.
`It is therefore clear that it would be highly desirable to
`provide a11 electronic currency system which is free fron1 all
`the aforementioned drawbacks, and which permits e—con1—
`mcrce to proceed freely, in a manner as similar as possible to
`live commerce.
`It is therefore an object of this invention to provide elec-
`tronic currency and a system for its implementation, that
`overcome all the aforementioned drawbacks of the prior art.
`It is another purpose of this invention to provide electronic
`currency that can be converted to and from regular currency,
`and wl1ich can be transferred in real time from one Internet
`user to another.
`It is a further purpose of the invention to provide an elec-
`tronic curre11cy and system which are user-independent, and
`which do not require a user key or identification such cur-
`rency being essentially “to the bearer”.
`It is yet another object ofthe invention to provide electronic
`currency in electronic form that can be lawfully copied onto
`magnetic, optical or other media, so as to ensure against loss
`or crashes of the media where the currency is saved.
`It is a further object of the invention to provide electronic
`money and systems employing it, which can be used for
`carrying out transactions over the Internet.
`It is still another object oftl1e ii1vei1tion to provide a method
`and system which permit to carry out delayed-payment trans-
`actions, n1ucl1 as wl1ei1 paying for goods or services with a
`post—dated check.
`It is a further object of the invention to provide a method
`and currency which can be used for the simultaneous service
`receipt/payment, and which can further be used for payments
`which are linked to the quantity of goods or services elec-
`tronically furnished.
`Many preferred embodiments ofth