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Methods That Could Be Entirely Executed Mentally Found Unpatentable Under 35 U.S.C. § 101

August 16, 2011

Decision icon Decision

Last Month at the Federal Circuit - September 2011

Judges: Bryson, Dyk (author), Prost

[Appealed from: N.D. Cal., Judge Patel]

In CyberSource Corp. v. Retail Decisions, Inc., No. 09-1358 (Fed. Cir. Aug. 16, 2001), the Federal Circuit affirmed the district court’s grant of SJ of invalidity of claims 2 and 3 of U.S. Patent No. 6,029,154 (“the ’154 patent”) under 35 U.S.C. § 101 for failure to recite patent-eligible subject matter.

CyberSource Corporation (“CyberSource”) owns the ’154 patent, which recites a method and system for detecting fraud in a credit card transaction between a consumer and a merchant over the Internet. Claim 3 recites “[a] method for verifying the validity of a credit card transaction over the Internet comprising the steps of: a) obtaining information about other transactions that have utilized an Internet address that is identified with the . . . credit card transaction; b) constructing a map of credit card numbers based upon the other transactions and; c) utilizing the map of credit card numbers to determine if the credit card transaction is valid.” Slip op. at 3 n.1. Claim 2 recites “[a] computer readable medium containing program instructions for detecting fraud in a credit card transaction between a consumer and a merchant over the Internet . . . .” Id. at 3 n.2.

CyberSource brought suit against Retail Decisions, Inc. (“Retail Decisions”), alleging infringement. In response, Retail Decisions initiated an ex parte reexamination, which resulted in amended claims. After reexamination, Retail Decisions moved for SJ of invalidity under 35 U.S.C. § 101. The district court found that claim 3 recited an unpatentable mental process for collecting data and weighing values, which did “not become patentable by tossing in references to [I]nternet commerce,” and found with respect to claim 2 that “simply appending ‘A computer readable media including program instructions . . .’ to an otherwise non-statutory process claim is insufficient to make it statutory.” Id. at 5 (alterations in original) (citations omitted).

On appeal, CyberSource argued that the method of claim 3 is tied to a particular machine because it “would not be necessary or possible without the Internet.” Id. at 9 (citation omitted). In In re Bilski, 545 F.3d 943, 954 (Fed. Cir. 2008) (en banc), the Court held that a claimed process would only be “patent-eligible under § 101 if: (1) it is tied to a particular machine or apparatus; or (2) it transforms a particular article into a different state or thing.” Slip op. at 6 (quoting Bilski, 545 F.3d at 954). The Court noted that regardless of whether the Internet is a machine, nothing in claim 3 requires an infringer to use the Internet to obtain that data. The Court also noted that the mere collection and organization of data regarding credit card numbers and Internet addresses is insufficient to meet the transformation prong of the test. Further, the Court agreed with the district court that claim 3 also fails to meet the machine-or-transformation test. But, the Court did not end its analysis there, because in Bilski v. Kappos, 130 S. Ct. 3218, 3226 (2010), the Supreme Court rejected use of the machine-or-transformation test as the exclusive test for the patentability of a claimed process.

The Court further analyzed claim 3 in view of two Supreme Court cases, Gottschalk v. Benson, 409 U.S. 63 (1972), and Parker v. Flook, 437 U.S. 584 (1978), and found it drawn to an unpatentable mental process—a subcategory of unpatentable abstract ideas. The Court found that all three steps of claim 3 can be performed in the human mind or by a human using a pen and paper. For instance, step (a) can be performed by a human who simply reads records of Internet credit card transactions from a preexisting database; step (b) does not require the constructed “map” to consist of anything more than a list of a few credit card transactions; and step (c) is broadly written to encompass any method for detecting fraud based on the gathered transaction and Internet address data, including logical reasoning that can be performed entirely in the human mind. Finally, the Court noted that claim 2 is a “Beauregard claim” to a computer-readable medium (e.g., a disk, hard drive, or other data storage device) containing program instructions for a computer to perform a particular process. The Court, however, characterized the claim as nothing more than a computer-readable medium containing program instructions for executing the method of claim 3. The Court disagreed with CyberSource’s argument that claim 2 is patent eligible per se because it recites a “manufacture,” because the invention underlying the claims is a method for detecting credit card fraud, not a manufacture for storing computer-readable information. The Court compared this case to In re Abele, 684 F.2d 902 (CCPA 1982), where, although the claim invoked an “[a]pparatus,” the court treated it as a method claim for the purpose of its § 101 analysis. The Court also found that the claim failed the machine-or-transformation test. The Court noted that the machine did not play a significant part in permitting the claimed method to be performed, and, further, the mere manipulation or reorganization of data did not satisfy the transformation prong. The Court distinguished this case from two recent cases, SiRF Technology, Inc. v. International Trade Commission, 601 F.3d 1319, 1333 (Fed. Cir. 2010), and Research Corp. Technologies v. Microsoft Corp., 627 F.3d 859 (Fed. Cir. 2010), where the machine was required for the method. Thus, the Court affirmed the district court’s finding that claims 2 and 3 were invalid under § 101.

Summary authored by Sulay D. Jhaveri, Ph.D., Esq.