Cybersource Decision Raises The Patent-Eligibility Bar For Software

On August 16, 2011, the Court of Appeals for the Federal Circuit (CAFC) issued its decision in CyberSource Corp. v. Retail Decisions, Inc., affirming patent-ineligibility of a reexamined software patent. The patent-in-dispute, U.S. Patent 6,029,154, is directed to detecting credit card fraud on the Internet and claims 2 and 3 were at issue. The court's reasoning recognized that software is still patent-eligible after Bilski, but held that the bar has been raised – which has important implications for the software industry. In analyzing the patent-eligibility of claim 3 - the process claim of the '154 patent - the court first applied the machine-or-transformation test and concluded that claim 3 fails both prongs. Slip. Op. at 8. On the transformation prong, the court asserted that "mere collection and organization of data regarding credit card numbers and Internet addresses" is insufficient for transformation. Slip. Op. at 9. On the machine prong, the court reasoned that claim 3 is not tied to a particular machine even though it recites the Internet. Slip. Op. at 9. The court noted that (1) the Internet cannot perform the recited fraud detection steps; and (2) the recited Internet is merely a data source. Id. Since the machine-or-transformation test "is not the sole test for deciding whether an invention is patent-eligible process," the court went on to characterize claim 3 as an unpatentable abstract idea because all three recited steps of claim 3 can be performed by human thought alone. Slip Op. at 9 (quoting Bilski v. Kappos, 130 S.Ct. 3218, 3227). According to the court, computational methods which can be performed entirely in the human mind are the type of methods that embody the "basic tools of scientific and technological work" that are free to all men and reserved exclusively to none. Slip. Op. at 14 (quoting Gottschalk v. Benson, 409 U.S. 63, 67). In analyzing the patent-eligibility of claim 2 - the Beauregard claim of the '154 patent – the court first asserted that claim 2 recites nothing more than a computer-readable medium containing program instructions for executing the method of claim 3. Slip. Op. at 16. The court, in its decision In re Beauregard, 53 F.3d 1583, (Fed. Cir. 1995), endorsed a claim format that recites a computer-readable medium (e.g., CD-ROM, floppy disk, etc.) containing software instructions that, when executed by a computer, causes the computer to perform a method. Hence, the name Beauregard claim. Six years...