CyberSource Corp. v. Retail Decisions, Inc.
654 F.3d 1366, 2011 WL 3584472 (2011)
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Rule of Law:
A method claim is not patent-eligible subject matter under 35 U.S.C. § 101 if it describes a process that can be performed entirely in the human mind. Simply adding a 'computer readable medium' containing instructions to perform such a mental process does not make an otherwise unpatentable abstract idea patentable.
Facts:
- CyberSource Corporation owned the '154 patent, which described a method for detecting fraud in internet credit card transactions.
- The patent was intended to solve fraud detection issues for downloadable products where traditional address verification is ineffective.
- The patented method involved obtaining a customer's internet address (e.g., IP address) for a transaction.
- This internet address was then used to find other transactions that utilized the same address to build a 'map' of credit card numbers.
- Based on this 'map,' the method would determine if the current transaction was fraudulent.
- The steps of the method—obtaining data, constructing a list ('map'), and using it to make a determination—could be performed by a human using pen and paper or mentally.
- CyberSource's CEO admitted that prior to developing a computer-implemented system, employees could identify fraudulent orders 'just by looking' at the transaction data.
Procedural Posture:
- CyberSource Corporation sued Retail Decisions, Inc. in the U.S. District Court for the Northern District of California, alleging patent infringement.
- The district court proceedings were stayed while Retail Decisions initiated an ex parte reexamination of the patent with the U.S. Patent and Trademark Office (PTO).
- The PTO reissued the patent with amended claims, and the district court resumed the case.
- Retail Decisions moved for summary judgment, arguing the patent claims were invalid under 35 U.S.C. § 101.
- The district court granted summary judgment of invalidity, holding that claim 3 recited an unpatentable mental process and claim 2 was merely an unpatentable process implemented on a computer-readable medium.
- CyberSource Corporation (appellant) appealed the district court's judgment to the U.S. Court of Appeals for the Federal Circuit.
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Issue:
Does a patent claim directed to a method for detecting credit card fraud, which can be performed mentally, and a corresponding claim for a computer-readable medium containing instructions for that method, constitute patent-eligible subject matter under 35 U.S.C. § 101?
Opinions:
Majority - Dyk, Circuit Judge.
No, a patent claim for a method that can be performed mentally, or a computer-readable medium containing instructions for that method, does not constitute patent-eligible subject matter. Both claims are invalid because they are directed to an unpatentable abstract idea. Claim 3, the method claim, is unpatentable because it describes a 'mental process'—a series of steps that can be performed entirely in the human mind or with pen and paper. Such mental processes are a subcategory of abstract ideas, which are one of the three judicial exceptions to patent eligibility. The steps of obtaining transaction information, constructing a map of credit card numbers, and utilizing that map to assess validity are all cognitive functions. The claim is not tied to any particular machine and does not transform any article into a different state or thing. Claim 2, the 'computer readable medium' claim, is also invalid. Simply reciting that an unpatentable mental process is to be performed by a computer or stored on a computer medium does not make the idea patentable. The court must look to the substance of the underlying invention, which is the mental process itself, not the medium it is stored on. The use of a generic computer is merely an incidental 'insignificant post-solution activity' that does not impose meaningful limits on the scope of the abstract idea.
Analysis:
This decision significantly clarified and reinforced the 'mental process' doctrine as a powerful tool for invalidating software and business method patents under § 101, especially following the Supreme Court's decision in Bilski. The court established that merely automating a cognitive process on a generic computer is not enough to confer patent eligibility. This ruling places the focus on whether the claimed invention is truly a specific application or implementation, rather than the abstract idea itself, raising the bar for so-called 'Beauregard claims' (claims for a computer-readable medium). The case signaled a trend of increased scrutiny for software patents, pushing inventors to claim more than just the automation of well-known human activities.
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