The Court of Appeals for the Federal Circuit has held that patent method claims, reciting steps that can be carried out by a human (mental steps), and corresponding computer readable medium claims (arguably an article of manufacture) are not valid and not within the statutory subject matter for patents under 35 U.S.C. §101. See Cybersource Corp. v. Retail Decisions Inc., Fed. Cir. No. 2009-1358 (Fed. Cir. August 16, 2011) (available here).
CyberSource sued Retail Decisions, Inc. (“Retail Decisions”) alleging infringement of the ‘154 patent. Retail Decisions sought reexamination of the ‘154 patent before the U.S. Patent and Trademark Office (“PTO”). After the reexam, the district court resumed proceedings with amended claims. Two claims were at issue. Claim 3 recites a process for verifying the validity of credit card transactions over the Internet. Claim 2 recites a computer readable medium containing program instructions for executing the same process.
The ‘154 patent solves the problem of “who is using the credit card” ( a validation issue) by using Internet address information (IP addresses, MAC addresses, e-mail addresses, etc.) to determine whether an Internet address relating to a particular transaction “is consistent with other Internet addresses [that have been] used in transactions utilizing [the same] credit card.” See ‘154 Patent, col. 3 ll. 15-16 (available here).
Claim 3, as amended during reexamination, reads as follows. 3. “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.”
Claim 2 reads: “A computer readable medium containing program instructions for detecting fraud in a credit card transaction between a consumer and a merchant over the Internet, wherein execution of the program instructions by one or more processors of a computer system causes the one or more processors to carry out the steps of:  obtaining credit card information relating to the transactions from the consumer; and  verifying the credit card information based upon values of plurality of parameters, in combination with information that identifies the consumer, and that may provide an indication whether the credit card transaction is fraudulent,  wherein each value among the plurality of parameters is weighted in the verifying step according to an importance, as determined by the merchant, of that value to the credit card transaction, so as to provide the merchant with a quantifiable indication of whether the credit card transaction is fraudulent,  wherein execution of the program instructions by one or more processors of a computer system causes that one or more processors to carry out the further 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.”
The Patent Statute identifies patent-eligible subject matter categories in §101. “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.” 35 U.S.C. §101. The Patent Statute defines the “process” category tautologically and provides little guidance as to the scope of a protectable method. “The term ‘process’ means process, art or method, and includes a new use of a known process, machine, manufacture, composition of matter, or material.” Id.The Federal Circuit has adopted a “machine-or-transformation” test to determine the patentability of process claims. In re Bilski, 545 F.3d 943 (Fed. Cir. 2008) (en banc). A claimed process is “patent-eligible under § 101 if: (1) it is tied to a particular machine or apparatus; or (2) it transform a particular article into a different state or thing.” Id. at 954. Also, to satisfy the machine prong of the test, the use of a machine “must impose meaningful limits on the claim’s scope.” Id. at 961. See Cybersource at slip opn. 6. The Supreme Court in Bilski v. Kappos, 130 S. Ct. 3218 (2010) stated that the “machine-or-transformation test is a useful an important clue,” but it “is not the sole test for deciding whether an invention is a patent-eligible ‘process.”‘ Id. at 3227. “The Court declined to ‘define further what constitutes a patentable ‘process,’ beyond pointing to the definition of that term provided in § 100(b) and looking to the guideposts in [the Court’s precedents].’” Cybersource p. 7, quoting Bilski v. Kappos, 130 S.Ct. at 3232.
Precedents set forth three specific exceptions to § 101’s broad patent-eligibility principles: ‘laws of nature, physical phenomena, and abstract ideas.”‘ Id. at 3225 (quoting Diamond 447 U.S. at 309).
By reading claim 3, one notes that the only “machine” item in the claim is the “Internet.” It does not identify any computer or computer memory storage facility or database processing facility. Per the Court, “[t]he method of claim 3 simply requires one to ‘obtain and compare intangible data pertinent to business risks.’ The mere collection and organization of data regarding credit card numbers and Internet addresses is insufficient to meet the transformation [of data] prong of the test… Regardless of whether ‘the Internet’ can be viewed as a machine, it is clear that the Internet cannot perform the fraud detection steps of the claimed method.” Cybersource, pg. 8-9.
The Court held that claim 3 failed to recite patent-eligible subject mater because it was “drawn to an unpatentable mental process – a subcategory of unpatentable abstract ideas.” Id, see also In re Grams, 888 F.2d 835, 840 (Fed. Cir. 1989)(data-gathering steps cannot make an
otherwise nonstatutory claim statutory); In re Meyer, 688 F.2d 789, 794 (CCPA 1982); Gottschalk v. Benson, 409 U.S. 63, 67 (1972)(method of programming a general-purpose computer to convert
binary-coded decimal (“BCD”) numbers into pure binary through the use of a mathematical algorithm not patentable subject matter); Parker v. Flook, 437 U.S. 584 (1978)(method for calculating alarm limits for catalytic chemical conversion not patentable); In re Schrader, 22 F.3d 290, 291 (Fed. Cir. 1994)(holding unpatentable a method of conducting auctions to maximize total
sales revenue); In re Warmerdam, 33 F.3d 1354, 1355, 1360 (Fed. Cir. 1994) (holding unpatentable a process for controlling objects to avoid collisions); In re Comiskey, 554 F.3d 967, 980 (Fed. Cir. 2009)(method of arbitration).
As for the computer readable medium claim (see claim 2 above), the Court looks to the underlying invention for patent-eligibility purposes. Since the steps in the computer program recited in claim 2 could be a mental process conducted by a person, the computer readable medium claim does not fall within one of another of the statutory categories of “process, machine, manufacture, or composition of matter.” 35 U.S.C. § 101.
This case shows the importance of asserting data processing events, such as storing, processing, and interactively converting data, in claims to obtain a transformation of data useful as an output. Further, patent claims that were considered to pass muster in the past may no longer be deemed patentable subject matter. The simple nature of the Cybersource claims can be used as a teaching tool for patent litigators and district courts.