CyberSource Corporation v. Retail Decisions, Inc.: Federal Circuit Invalidates Software Patent As Mere Mental Process

CyberSource Corporation v. Retail Decisions, Inc., No. 2009-1358 (Fed. Cir. August 16, 2011)

Slip Opinion

The Federal Circuit affirmed the United States District Court for the Northern District of California’s grant of summary judgment, agreeing that plaintiff CyberSource’s patents were invalid for ineligible subject matter under 35 U.S.C. § 101.

Writing for a unanimous panel, Judge Dyk held that CyberSource’s method of verifying credit card transactions by matching up Internet addresses represented an abstract process, doable entirely within the human mind and thus not amenable to patent. The court also invalidated CyberSource’s patent for the actual program in its computer readable medium, characterizing the patent claim as a mere enshrining of an unpatentable method in object code.

Patently-O provides an overview of the case. TechDirt characterizes the decision as part of a broader trend, derived from Bilski, against “bogus” software patents. Ars Technica also takes a favorable view of the result, but characterizes the Federal Circuit’s human-capability test as an artificial distinction.

The patent claims at issue cover CyberSource’s means of checking the Internet address of a customer against other Internet addresses used with the same credit card, and the computer readable medium containing the program instructions for executing that method. Slip op. at 3, n. 1. CyberSource sued Retail Decisions for infringement of these patents, and following the Federal Circuit’s holding in In re Bilski, 545 F.3d 943 (Fed. Cir. 2008) (en banc), Retail Decisions moved for a summary judgment of invalidity.

The district court granted summary judgment, finding CyberSource’s method claim failed to satisfy the Bilski machine-or-transformation test. The district court held, and the Federal Circuit agreed, that the method CyberSource outlined was merely “an unpatentable mental process” of gathering and comparing data, that was neither transformative nor necessarily involving a machine. Slip op. at 9. By virtue of the ineligibility of the first patent claim, the district court found, the computer readable medium claim was also invalid.

In rendering its decision, the Federal Circuit drew on Supreme Court precedent in Gottschalk v. Benson, 409 U.S. 63, 67 (1972), which found that “methods which can be performed mentally, or which are the equivalent of human mental work, are unpatentable abstract ideas.” CyberSource’s claim was drawn broadly enough to run afoul of Gottschalk and its progeny. That is, a human could carry out every step of CyberSource’s method as delineated in the patent. A human could manually list prior Internet credit card transactions, and compare Internet addresses against prior records. Slip op. at 13. Thus, CyberSource’s claim was directed to a fundamental thought process not amenable to patent.

Having found the method claim ineligible, the circuit court went on to invalidate CyberSource’s computer readable medium claim, also known as a Beauregard claim after In re Beauregard, 53 F.3d 1583 (Fed. Cir. 1995). CyberSource argued that even if its process was unpatentable, coupling the process with a manufacture or machine brought it back within the realm of patent. The Federal Circuit disagreed, rejecting CyberSource’s distinction and finding that the Beauregard claim was actually directed to the method itself. As the method could be carried out within the human mind, the computer’s role in the process was “incidental” and did not bring the claim within the machine-and-transformation rubric. Slip op. at 19.

This opinion serves to clarify the Bilski test and circumscribe the availability of software patents. In addition, to the extent CyberSource expands the abstract-mental-process exception for patent eligibility, it could also affect the status of other types of method patents.