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 earlier, the same
court, in its decision In re Iwahashi, 888 F.2d 1370,
(Fed. Cir. 1989), once construed a Read-Only Memory (ROM) as a
device. In CyberSource, however, the court corrected what
it considered the long-held misconception that a computer-readable
medium can be construed as a device. Thus, despite its Beauregard
claim format, claim 2 is treated as a process claim and held as
patent-ineligible because the underlying process is not directed to
patentable subject matter. Slip Op. at 18.
The court then rebutted the patent owner's argument that the
computer-readable medium of claim 2 meets the machine prong (i.e.,
the medium contains software instructions that can only be executed
by "one or more processors of a computer system").
Slip. Op. at 18. The court noted that incidental use of a
computer to perform a mental process does not impose a sufficiently
meaningful limit on the claim's scope. Slip. Op. at
19. Citing Benson, the court also noted that, even
when performed by a computer, a purely mental process can still be
unpatentable. Slip. Op. at 19. The court further noted
that Benson and its progeny never indicated that the Beauregard
claim format would automatically confer patent-eligibility over a
process claim. Slip. Op. at 20-21.
The machine prong of the machine-or-transformation test is
considered by many as more robust for patent-eligibility than the
transformation prong. The decision casts doubt on this common
perception. For a software invention to be patent-eligible, the
court underscored the importance to tie the invention to a specific
machine. Slip. Op. at 9. Since all software algorithms may
be implemented by a human using paper and pencil, the court
suggested that a patent-eligible algorithmic process, as a
practical matter, cannot be performed entirely in a human's
mind and without a machine. Slip. Op. at 21 (emphasis
added). However, the court also noted that "if an
algorithm is so abstract and sweeping as to cover both known and
unknown uses," then the algorithm is not patent-eligible even
though the algorithm had "no substantial practical application
except in connection with a digital computer." Slip. Op.
at 20 (quoting Benson at 71). Thus, the court seemed to
suggest that Benson allows the judicially-created abstract
idea exception to override a favorable finding under the machine
prong. In view of this transcending abstract idea exception,
software patent applicants must endeavor not to word their claimed
inventions "so abstract and sweeping as to cover both known
and unknown uses." Id.
This decision also casts uncertainty of patent-eligibility for
certain categories of software inventions. For example, the
court's characterization of the Internet may be a hindrance to
software inventions in cloud computing, which relies on the
Internet and collects data from the Internet. Slip. Op. at
9. The court's categorical treatment of human intelligence
as patent-ineligible also has implications for those software
disciplines studying software algorithms that mimic human
intelligence (e.g., artificial intelligence and machine learning).
Slip. Op. at 11-12 (Citing In re Comiskey, 554 F.3d 967, 980
(Fed. Cir. 2009)).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
