See CYBERSOURCE v. RETAIL DECISIONS
Issue(s): Was the district court correct in granting summary judgment of invalidity of claims 2 and 3 of U.S. Patent No. 6,029,154 (“’154 patent”) under 35 U.S.C. § 101 for failure to recite patent-eligible subject matter for a computer method?
CYBERSOURCE CORPORATION, Plaintiff-Appellant, v. RETAIL DECISIONS, INC., Defendant-Appellee. (2009-1358) Appeal from the United States District Court for the Northern District of California in case no. 04-CV-03268, Judge Marilyn H. Patel. (Decided: August 16, 2011); Before BRYSON, DYK (Author), and PROST,
Facts: CyberSource is the owner by assignment of 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.” ’154 patent, at [57]. The ’154 patent’s specification explains that prior art credit card fraud detection systems—which generally rely on billing addresses and personal identification information—work well for “face-to-face” transactions and trans-actions where “the merchant is actually shipping a package . . . to the address of a customer.” But for online sales where the product purchased is downloadable content, the patent explains, “address and identity information are not enough to adequately verify that the customer who is purchasing the goods is actually the owner of the credit card.”
The ’154 patent purports to solve this problem 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.” As we discuss in detail below, the claims of the ’154 patent are broad and essentially purport to encompass any method or system for detecting credit card fraud which utilizes information relating credit card transactions to particular “Internet address[es].
Lower Court’s Decision: CyberSource brought suit against Retail Decisions, Inc. (“Retail Decisions”) on August 11, 2004, alleging infringement of the ’154 patent. Retail Decisions thereafter initiated an ex parte reexamination of the ’154 patent, and the district court stayed its proceedings while the U.S. Patent and Trademark Office (“PTO”) conducted the examination. The district court resumed proceedings after the PTO reissued the ’154 patent with amended claims on August 5, 2008. On October 30, 2008, this court decided In re Bilski, 545 F.3d 943 (Fed. Cir. 2008) (en banc). Retail Decisions thereafter moved for summary judgment of invalidity under 35 U.S.C. § 101. After briefing and a hearing, 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.” CyberSource, 620 F. Supp. 2d at 1077. The court further 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.” The district court thus granted summary judgment of invalidity.
Findings on Appeal: Two claims of the ’154 patent are at issue in this case. 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.
We first address claim 3 of the ’154 patent, which re-cites a method for verifying the validity of a credit card transaction over the Internet. Claim 3, as amended during reexamination, reads in its entirety:
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 trans-actions and;
c) utilizing the map of credit card numbers to determine if the credit card transaction is valid.
The district court found that claim 3 fails to meet either prong of the machine-or-transformation test. Cyber-Source, 620 F. Supp. 2d at 1078. We agree. As the district court correctly held, the 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 prong of the test, and the plain language of claim 3 does not require the method to be per-formed by a particular machine, or even a machine at all.
Thus, the district court did not err in holding that claim 3 fails to meet the machine-or-transformation test. However, our analysis does not end there. In holding that the machine-or-transformation test “is not the sole test for deciding whether an invention is a patent-eligible process,” Bilski, 130 S. Ct. at 3227, the Supreme Court has made clear that a patent claim’s failure to satisfy the machine-or-transformation test is not dispositive of the § 101 inquiry. Nonetheless, we find that claim 3 of the ’154 patent fails to recite patent-eligible subject matter be-cause it is drawn to an unpatentable mental process—a subcategory of unpatentable abstract ideas.
Following the Supreme Court, we have similarly held that mental processes are not patent-eligible subject matter because the “application of [only] human intelligence to the solution of practical problems is no more than a claim to a fundamental principle.” Bilski, 545 F.3d at 965 (quotation marks omitted); see also id. at 952, 960–61. After our en banc decision in Bilski, this court—relying on Benson, Flook, and our prior decisions—noted that we have consistently “refused to find processes patentable when they merely claimed a mental process standing alone and untied to another category of statutory subject matter[,] even when a practical application was claimed.”
It is clear that unpatentable mental processes are the subject matter of claim 3. All of claim 3’s method steps can be performed in the human mind, or by a human using a pen and paper. Claim 3 does not limit its scope to any particular fraud detection algorithm, and no algorithms are disclosed in the ’154 patent’s specification. Rather, the broad scope of claim 3 extends to essentially any method of detecting credit card fraud based on information relating past transactions to a particular “Internet address,” even methods that can be performed in the human mind.
We turn next to claim 2 of the ’154 patent, which re-cites a so-called “Beauregard claim.” A Beauregard claim—named after In re Beauregard, 53 F.3d 1583 (Fed. Cir. 1995)—is a claim to a computer readable medium (e.g., a disk, hard drive, or other data storage device) containing program instructions for a computer to per-form a particular process. Claim 2, as amended during reexamination, reads in its entirety:
2. A computer readable medium containing pro-gram 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:
a) obtaining credit card information relating to the transactions from the consumer; and
b) 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.
As discussed above, we found claim 3 to be unpatentable because it is drawn to a mental process—i.e., an abstract idea. The method underlying claim 2 is clearly the same method of fraud detection recited in claim 3. Nonetheless, CyberSource contends that claim 2 should be patentable. CyberSource’s main argument is that coupling the unpatentable mental process recited in claim 3 with a manufacture or machine renders it patent-eligible.
CyberSource argues that claim 2 is patent-eligible per se because it recites a “manufacture,” rather than a “process,” under the statutory language of § 101. Cyber-Source contends that, by definition, a tangible, man-made article of manufacture such as a “computer readable medium containing program instructions” cannot possibly fall within any of the three patent-eligibility exceptions the Supreme Court has recognized for “laws of nature, physical phenomena, [or] abstract ideas.”
Regardless of what statutory category (“process, machine, manufacture, or composition of matter,” 35 U.S.C. § 101) a claim’s language is crafted to literally invoke, we look to the underlying invention for patent-eligibility purposes. Here, it is clear that the invention underlying both claims 2 and 3 is a method for detecting credit card fraud, not a manufacture for storing computer-readable information.
In the present case, CyberSource has not met its bur-den to demonstrate that claim 2 is “truly drawn to a specific” computer readable medium, rather than to the underlying method of credit card fraud detection. To be sure, after Abele, we have held that, as a general matter, programming a general purpose computer to perform an algorithm “creates a new machine, because a general purpose computer in effect becomes a special purpose computer once it is programmed to perform particular functions pursuant to instructions from program soft-ware.” In re Alappat, 33 F.3d 1526, 1545 (Fed. Cir. 1994). But we have never suggested that simply reciting the use of a computer to execute an algorithm that can be per-formed entirely in the human mind falls within the Alappat rule. Thus, despite its Beauregard claim format, under Abele, we treat claim 2 as a process claim for patent-eligibility purposes.
Following Benson, as noted earlier, the Supreme Court in Flook and Bilski found other method claims invalid under § 101 for being drawn to abstract ideas. In so holding, the Court did not indicate that those claims could have avoided invalidity under § 101 by merely requiring a computer to perform the method, or by reciting a computer readable medium containing program instructions for performing the method.4
This is entirely unlike cases where, as a practical matter, the use of a computer is required to perform the claimed method. It is clear in the present case that one could mentally perform the fraud detection method that underlies both claims 2 and 3 of the ’154 patent, as the method consists of only the general approach of obtaining information about credit card transactions utilizing an Internet address and then using that information in some undefined manner to determine if the credit card transaction is valid. Because claims 2 and 3 attempt to capture unpatentable mental processes (i.e., abstract ideas), they are invalid under § 101.
Allen’s Observations: This case is relatively straightforward. The Beauregard claim will not be treated with any more deference than any process claim. As a result the process must require a computer to meet the “machine” prong of the machine or transformation test. If the computer is optional, then the process will likely be found to be “abstract.”
