CyberSource Corp. v. Retail Decisions, Inc.

Last updated
CyberSource Corp. v. Retail Decisions, Inc.
Court United States Court of Appeals for the Federal Circuit
Full case nameCyberSource Corp. v. Retail Decisions, Inc.
DecidedAugust 16, 2011
Citation(s)654 F.3d 1366; 99 U.S.P.Q.2d 1690
Case history
Prior history620 F. Supp. 2d 1068 (N.D. Cal. 2009)
Court membership
Judge(s) sitting William Curtis Bryson, Timothy B. Dyk, Sharon Prost
Case opinions
MajorityDyk, joined by a unanimous panel
Laws applied
35 U.S.C.   § 101
Keywords
patent eligibility, machine-or-transformation test, Beauregard claim, credit card transaction

CyberSource Corp. v. Retail Decisions, Inc., 654 F.3d 1366 (Fed. Cir. 2011), [1] is a United States Court of Appeals for the Federal Circuit case that disputed patent eligibility for the '154 patent, which describes a method and system for detecting fraud of credit card transactions through the internet. This court affirmed the decision of United States District Court for the Northern District of California which ruled that the patent is actually unpatentable.

Contents

Background

CyberSource Corporation is the owner of '154 patent (U.S. Patent No. 6,029,154), [2] which describes a method and system for detecting fraud of credit card transactions through internet by using IP addresses, MAC addresses, e-mail addresses, etc. in order to determine if an address is associated with the credit card. Essentially, the patent is divided into a method and a system part. The method aspect is described in Claim 3, and the system part is described in Claim 2. The details are as follows:

Method claim (Claim 3)

Claim 3 is the method for verifying the validity of a credit card transaction over the Internet by obtaining information about other transactions over the web with similar card transaction information, constructing a map of the card numbers and using it to determine whether or not the credit card transaction is valid or not.

System claim (Claim 2)

Claim 2 generally mentions a computer readable medium containing program instructions, but mostly contains nearly identically the exact process described in Claim 3.

The disputing point was whether Claim 3 and Claim 2 are patent-eligible. The district court affirmed that both Claim 3 and Claim 2 are unpatentable [3] based on the fact that these claims were not sufficient under 35 U.S.C. § 101, [4] citing the In re Bilski [5] case, which disputed a method of hedging risk in the field of commodities trading. Moreover, the court noted that both claims were directed as an unpatentable "mental process". The decision was made with reference to Bilski's case, as the Bilski case was appealed to the Supreme Court while this case was proceeding. History of these cases are documented in the timeline below.

Timeline of events

  1. CyberSource sued Retail Decisions Inc. for patent infringement on August 11, 2004.
  2. Retail Decisions initiated an ex parte reexamination of the '154 patent to the U.S. Patent and Trademark Office.
  3. District court suspended proceedings until the patent is reissued.
  4. Patent certificate reissued with amended claims on August 5, 2008.
  5. District court restarted the proceeding.
  6. Federal Circuit decided In re Bilski on October 30, 2008.
  7. District court dismissed the claims of CyberSource.
  8. CyberSource appealed to Federal circuit court in April 2009.
  9. The court suspended proceedings until the decision of Bilski.
  10. Supreme Court of the United States made the decision of Bilski v. Kappos [6] on June 28, 2010.
  11. The proceeding started again on October 28, 2010.

Opinion of the Court

The federal circuit court affirmed the district court decision, that both Claim 3 and Claim 2 are not patent-eligible, because they attempted to capture "unpatentable mental processes". Moreover, they were invalid under 35 U.S.C section 101. This court also referenced unpatentability from In re Bilski . Further, the court mentioned that the "machine-or-transformation test", which is one of the determining patent-eligibility tests, can not be the only test for judging the patent eligibility citing Bilski v. Kappos . The court also took into consideration three specific exceptions under 35 U.S.C section 101, which are "laws of nature", "physical phenomena", and "abstract ideas". [1]

Method Claim

First, the court argued that the Claim 3 did not pass the machine-or-transformation test because the internet cannot perform the fraud detection steps by itself. Further, the court mentioned 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. Moreover, the internet is not an exclusive source of the data needed for the analysis, and the court found the process is not tied to any particular machine, regardless of whether or not the internet can be considered as a machine.

Second, the court examined the claim outside the scope of the machine-or-transformation test like in the Bilski v. Kappos case. Interpreting the Supreme Court's decision and rationale, the court likened the claim to something which can be performed mentally by a human, demonstrating that it is not patent-eligible. Because no algorithms of any kind and each of the steps in Claim 3 are conceivably doable in the human mind, they are represented by "basic tools of scientific and technological work". [1]

System claim

The court categorized Claim 2 as a Beauregard claim, a claim involving a computer readable medium containing instructions for a computer to perform the process. The court noted that Claim 2 contains language nearly identical to that in Claim 3 will only a few additions. As such, Claim 2 was also found unpatentable because it is related to a mental process. While CyberSource claims that the claim is indeed patentable because it is coupled with a manufacture or machine unlike in Claim 3, the court ignores the claim's structural category based on its general language. Citing court decisions in Gottschalk v. Benson, [7] the court determined that mental processes are not patentable, even if they are performed by computers. [1]

Impact of Bilski case

This case is one of the judicially refining software patent eligibility cases after the Bilski decision. [8] After deciding the Bilski case, the Federal Circuit court has not created a new test or expanded the machine-or-transformation test. [9] This case has shed light on patent-eligibility specifically related to the broad treatment of the internet as a machine. [10]

See also

Related Research Articles

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Diamond v. Diehr, 450 U.S. 175 (1981), was a United States Supreme Court decision which held that controlling the execution of a physical process, by running a computer program did not preclude patentability of the invention as a whole. The high court reiterated its earlier holdings that mathematical formulas in the abstract could not be patented, but it held that the mere presence of a software element did not make an otherwise patent-eligible machine or process patent ineligible. Diehr was the third member of a trilogy of Supreme Court decisions on the patent-eligibility of computer software related inventions.

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<i>In re Bilski</i>

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<i>In re Ferguson</i>

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<i>In re Lowry</i>

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<i>In re Alappat</i>

In re Alappat, 33 F.3d 1526, along with In re Lowry and the State Street Bank case, form an important mid-to-late-1990s trilogy of Federal Circuit opinions because in these cases, that court changed course by abandoning the Freeman-Walter-Abele Test that it had previously used to determine patent eligibility of software patents and patent applications. The result was to open a floodgate of software and business-method patent applications, many or most of which later became invalid patents as a result of Supreme Court opinions in the early part of the following century in Bilski v. Kappos and Alice v. CLS Bank.

<i>In re Schrader</i>

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Versata Development Group, Inc. v. SAP America, Inc., 793 F.3d 1306, is a July 2015 decision of the Federal Circuit affirming the final order of the Patent Trial and Appeal Board (PTAB), the recently created adjudicatory arm of the United States Patent and Trademark Office (USPTO), invalidating as patent ineligible the claims in issue of Versata's U.S. Patent No. 6,553,350. This was the first case in the Federal Circuit reviewing a final order in a Covered Business Method (CBM) invalidation proceeding under the America Invents Act (AIA). The case set an important precedent by deciding several unsettled issues in the interpretation of the CBM provisions of the AIA>, including what are business-method patents under the AIA and whether the AIA authorizes the PTO to hold such patents invalid in CBM proceedings on the ground that they are patent ineligible under 35 U.S.C. § 101 as "abstract ideas."

Association for Molecular Pathology v. Myriad Genetics, Inc., 569 U.S. 576 (2013), was a Supreme Court case, which decided, that "a naturally occurring DNA segment is a product of nature and not patent eligible merely because it has been isolated.” However, as a "bizzare conciliatory prize" the Court allowed patenting of complementary DNA, which contains exactly the same protein-coding base pair sequence as the natural DNA, albeit with introns removed.

<span class="mw-page-title-main">Patentable subject matter in the United States</span>

Patentable subject matter in the United States is governed by 35 U.S.C. 101. The current patentable subject matter practice in the U.S. is very different from the corresponding practices by WIPO/Patent Cooperation Treaty, and it is considered to be broader in general. Since the enactment of the subject matter requirement ca. 1970, the interpretation of the statute changed multiple times. Although Section 101 of Title 35 U.S.C. reads:

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.

References

  1. 1 2 3 4 CyberSource Corp. v. Retail Decisions, Inc., 654F.3d1366 ( Fed. Cir. 2011).
  2. ↑ U.S. Patent, No. 6,029,154
  3. ↑ CyberSource Corp. v. Retail Decisions, Inc., 620F. Supp. 2d1068 ( N.D. Cal. 2009).
  4. ↑ 35 U.S.C.   § 101.
  5. ↑ In re Bilski , 545F.3d943 ( Fed. Cir. 2008).
  6. ↑ Bilski v. Kappos , 561 U.S. 593 (2010).
  7. 1 2 Gottschalk v. Benson , 409 U.S. 63 (1972).
  8. ↑ Judicially Re(De)Fining Software Patent Eligibility: A Survey of Post-Bilski Jurisprudence written by Blake Reese (April 6, 2010)
  9. ↑ Federal Circuit Limits Patentable Processes written by Audrey A. Millemann cited from "The IP law blog" (Sep 6, 2011)
  10. ↑ Jeff Zuber; Sarah S. Brooks (26 September 2011). "Cybersource v. Retail Decisions: Federal Circuit Upholds Use of Machine or Transformation Test; Discusses Internet-related Process Claims". LawUpdates.
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