Apple’s Homeland Security Deal Yields Checkpoint, KYC, Voter ID Patents, Documents Suggest
Contract Shows Apple Drove Key Decisions in TSA’s Mobile Driver's License Rollout
Hey all, Jason here.
I arrived in Guadalajara early Friday morning, and I’m looking forward to spending the next week or so here. The city, the second largest in the country, is sometimes referred to as the “Silicon Valley of México” (though in my head I think of it more as the “Chicago”). If you happen to be based here, drop me a line, and let’s get a coffee!
🚨Happy hour alert: for folks who are starting to gear up for Money20/20 next month, mark your calendars for Tuesday evening. I’ll be co-hosting a happy hour with my friends at Perfomline — you can request your invite here🚨
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Apple’s Homeland Security Deal Yields Checkpoint, KYC, Voter ID Patents, Documents Suggest
If you have an ID from Arizona or Maryland, you are now able to use it via a mobile driver’s license in your Apple Wallet to pass through TSA screening at select airports.
What has been less clear, until now, is how Apple partnered with — and may substantially benefit from its collaboration with — the Department of Homeland Security’s Transportation Security Administration.
Documents obtained exclusively by Fintech Business Weekly show that Apple entered into a Cooperative Research and Development Agreement, known as a CRADA, with the TSA, beginning in March, 2019.
The research agreement facilitated Apple and the TSA’s collaboration to develop the technology that would “read” a mobile driver’s license at airport checkpoints when shared from an Apple device.
The government agreement appears to give Apple control over key intellectual property and patents resulting from the research collaboration. While this is a common feature of CRADAs, and the government itself retains rights to the IP, it could put Apple competitors at a disadvantage in the race to develop a digitally-native, mobile-first identity credential.
Additional patent filings suggest the collaboration between Apple and TSA produced intellectual property related to using mobile identity credentials (MICs) as part of “Know Your Customer” checks, in merchant or peer-to-peer transactions, to secure medical records, and even for use in voter identification — all of which could end up controlled by Apple.
Apple’s History of Collaborating With — And Profiting From — Government
This isn’t the first time Apple and the US government have crossed paths.
In fact, as far back as 1984 — the same year as Apple’s iconic “Think Different” Super Bowl commercial — the American military was using off-the-shelf Apple computers in West Germany to target tactical nuclear weapons.
Apple also has a history of collaborating directly with the government. In the 1990s, Apple had multiple research agreements — under the same CRADA framework as with TSA — with the Naval Air Warfare Center Weapons Division. Under those agreements, Apple worked with the Navy on training tools for F/A-18 pilots. An Apple SVP at the time stated it was the company's goal “to get more Apple computers and specific military computer applications into the military and government marketplace.”
The Department of Defense also made extensive use of Apple products during the war in Iraq, with Apple laptops used to target bombing runs and iPods specially equipped with language software used to facilitate local communication. By 2004, the company had over 20 contracts with the Department of Defense.
Apple’s efforts with TSA build on this history of collaborating with — and profiting from — the US government.
Apple’s Push to Digitize Your Wallet
Apple has shown it is willing to play the long game in digitizing your wallet.
The company began its efforts with the launch of Passbook (eventually renamed Wallet) a decade ago. At launch, example use cases included movie tickets, airline boarding passes, but also a Starbucks loyalty-and-payment card — a sign of the company’s early ambitions to push into payments.
Apple Pay launched two years later, in 2014, but saw a very slow rate of adoption, particularly in the United States. Apple’s patience seems to have, gradually, paid off — the Wall Street Journal recently reported that about 75% of US iPhones had “activated” Apple Pay — though other survey research suggests the actual usage rate for in-person transactions remains as low as 6%.
The “killer” use case for Apple Pay is ecommerce transactions taking place on iPhone; instead of laboriously filling in card number, expiration date, CVV, and address, it’s possible to complete a transaction with a quick confirmation via FaceID or TouchID. Now imagine being able to prove your identity just as seamlessly.
There’s broad awareness in fintech that big tech companies have a major advantage in building identity platforms. Tommy Nicholas, CEO of identity decisioning platform Alloy, commented in response to emailed questions, “Who is best positioned to distribute a credential? Probably Apple and Google, as they manufacture the devices we all have in our pockets that are already enabled to share tokenized credentials (Apple / Samsung / Google Pay).”
Apple’s patience should make banking and fintech execs nervous.
Apple has gradually pushed further into financial services through its partnership with Goldman Sachs on the Apple Card. And with Apple’s “Project Breakout,” the company is reportedly looking to replace banking and fintech partners by developing its own tech — including for payment processing, credit risk, and fraud prevention.
Apple’s development of its mobile driver’s license (mDL) could end up being looked back on as an inflection point in its Wallet and financial services strategy. Its contracts with state DMVs — as first reported on by Fintech Business Weekly — give it something other identity verification vendors lack: digitally-native access to a state-issued and real-time government-verified identity credential.
Companies like “Google or Apple want to carry the digital identity in their wallets, but don’t want the responsibility or liability for issuing the identity,” industry expert David Birch said in an interview. By partnering with state DMVs, Apple has control over the user experience through its OS and Wallet app, without bearing responsibility for ensuring the accuracy of information it is relaying.
Surveys have shown a top use case respondents report wanting an mDL for is passing through airport security — giving Apple ample reason to prioritize working with TSA to enable this functionality — and to control patents related to it.
Apple’s Contract with the DHS’ Transportation Security Administration
Apple’s collaboration with the Transportation Security Administration dates to at least March, 2019, when the two first signed a Cooperative Research and Development Agreement (CRADA).
CRADAs are not vendor/supplier agreements, but rather facilitate the commercialization of government research.
The government is prohibited from directly paying research collaborators it works with through these agreements. Collaborators may make payments to government agencies, though, based on Apple’s agreement with TSA, it doesn’t appear to have done so.
The real benefit for companies working with the government through CRADAs is the resulting intellectual property.
According to a publication by law firm Schoonover & Moriarty (emphasis added):
“A CRADA provides a lot of flexibility in assigning intellectual property rights, such as patents. The parties can negotiate licenses for background patents (existing patents useful to the CRADA effort). They can also specify patent rights for inventions arising out of the CRADA effort…
Intellectual property, however, is also where the non-federal partner can cash in. It too can obtain ownership or license rights in the CRADA invention (or other background patents) that it can then exploit commercially. That’s the real benefit of a CRADA from the non-federal partner’s perspective: capitalizing on patent rights in the private sector.”
For example, Moderna has long engaged with government research labs under the guise of CRADAs — research which formed the foundation for its COVID-19 vaccine. Such research agreements yielded a valuable commercial invention that Moderna is profiting from — and patents that Moderna is now suing Pfizer for allegedly infringing.
Apple’s research agreement with TSA does include a section defining how rights to software developed from their collaboration will be handled, though that section was redacted as a “trade secret” in the documents produced in response to a FOIA request.
Apple Drove Key Project Decisions
According to its contract, the purpose of Apple’s agreement with TSA “is for TSA to gain industry perspective about the transmission and acceptance of Digital Identity Credentials (as defined in the CRADA), by evaluating the potential use of Apple mDLs at TSA checkpoints,” with the intention that the development of a successful solution would be widely deployed across TSA checkpoints.
The agreement anticipates Apple and TSA “developing technical considerations” that will inform TSA partners, like the American Association of Motor Vehicle Administrators, and standards setting bodies, like American National Standards Institute, of “acceptance capabilities and policies.”
The collaboration has four defined phases: a technical assessment and planning phase, the development of a TSA reader prototype, internal testing of the prototype, and live field testing — the phase Apple and TSA appear to currently be in.
The agreement shows Apple had the leading role in assessing and developing a technical solution to enable TSA credential readers to interoperate with mobile driver’s licenses on Apple devices:
An expected result of the overall agreement is “to identify mDL related technologies, standards and protocols suitable for use in a TSA checkpoint environment.”
According to the agreement, “TSA may use the insights obtained under this CRADA to inform which mDLs that are acceptable for TSA acceptance and which mDLs are not.”
Leading development of these “technologies, standards and protocols” seems highly likely to give Apple a substantial advantage vs. competitors who wish to offer a mobile identity credential compatible with TSA, and, possibly, industry-wide hardware.
Apple’s agreement with TSA also allows for “ongoing partnership after Phase 4” — the currently live field test.
Apple Named as Applicant on Key Patent
Beyond the creation of the first real use case of its mobile driver’s license feature, Apple seems set to benefit from substantial intellectual property stemming from its collaboration with TSA.
The key patent stemming from the collaboration, “Checkpoint Identity Verification on Validation Using Mobile Identification Credential,” was first filed in April, 2020. In initial versions of the filing, the applicant was listed as the US Government, and all listed inventors were employees of TSA:
However, in August, 2021, the government assigned its rights in the application to Apple.
When the patent was granted in December, 2021, the applicant was listed as Apple Inc., rather than the US Government, and five additional inventors — Apple employees — were added to the patent. One lawyer described such late addition of named inventors on a patent filing as “definitely an anomaly.”
Applications for Know Your Customer, Medical Records, and Voter ID Patents Appear Related
While Apple’s patent for the technology developed for use in TSA’s checkpoints is notable, perhaps more important are a slew of seemingly linked patent applications.
While these additional applications and granted patents all currently list the US Government as the applicant and assignee, it is possible they may be transferred to Apple in the future — as the “checkpoint” patent was — or that Apple has rights or license to them under the CRADA or other agreements that wouldn’t be reflected in the patent filings (the portion of the agreement that would speak to this was redacted as a “trade secret.”)
Based on the filing dates, listed inventors, key terminology, and identical diagrams used in the filings, it seems highly likely these patents are related to Apple’s research agreement with TSA.
Seemingly related patent applications include those describing the use of a mobile identity credential for KYC, for verifying identity in merchant or peer-to-peer transactions, for transporting medical records, and even for use as voter identification.
The patent for using a mobile identity credential for KYC describes a potential use case of a financial institution leveraging a mobile identity credential (MIC) for account opening (emphasis added):
“In another embodiment, the MIC is used for Know Your Customer (KYC) assessment of an individual seeking services from a financial institution such as opening an account for holding and/or trading cryptocurrencies. The KYC assessment helps financial institutions mitigate the risk of being intentionally or unintentionally exploited by bad actors in order to conduct illicit financial behavior, e.g., to launder money or fund terrorism.”
One can easily imagine using an Apple-powered mobile identity credential to streamline opening a new financial account. This could take place fully digitally, of course, but also in bricks and mortar settings, via the credential reader tech resulting from Apple’s collaboration with TSA.
First-Mover Advantage and IP Give Apple Significant Head Start on Digital IDs
Not only does Apple have a first-mover advantage in getting a mobile driver’s license onto its devices, thanks to its agreements with state DMVs, but now it controls at least one key patent in how that credential can be used — and, potentially, has key rights to a stunningly wide array of applications for such credentials.
The potential features and applications enabled by a mobile identity credential are likely part of Apple’s strategy to offer differentiated capabilities compared to competitors and make users even more loyal (and valuable) to the Apple ecosystem.
“Ultimately, I think the idea behind such moves is to sell more Apple Watches and iPhones. The watch is already a payment device (wallet), a health monitoring device (movement, heart rate, sleep), a communications device, a social media bridge, and it’s supposed to tell time. So as a verified ID device, it simply becomes more ubiquitous and valuable,” Phillip Phan, a professor at Johns Hopkins University Carey Business School, said in an email interview.
Nicholas, the Alloy CEO, raised concerns about the inclusivity of privately distributed digital identity credentials, saying, “Private companies also have a directive to make profits, not provide universal support, so there are some natural questions about how a private company would prioritize a solution that worked for all people and not just its target user base.”
The implications of Apple’s control of key intellectual property around the development and use of mobile identity credentials are also potentially significant.
Apple has nominally committed to “fair, reasonable, and non-discriminatory” licensing principles, but, having been involved in numerous multi-billion dollar patent lawsuits, the company no doubt understands the benefit of controlling IP that may come to define industry standards.
With the company seemingly set to control key patents governing how mobile identity credentials are used, Apple is well-positioned to shape who can use the tech and how they can use it — and, presumably, to profit handsomely as well.
Apple didn’t respond to questions about its collaboration with TSA prior to publication. A spokesperson for TSA shared the following statement via email:
“The CRADA contains proprietary information, and TSA will not disclose or comment on the terms of agreement. TSA has no information about the patents, so I suggest contacting the US Patent Office for additional information. You may also contact Apple for additional information on their patents.”
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