CyberSource v. Retail Decisions (CAFC 2009-1358) precedential; Judges Bryson, Dyk (author), and Prost

Judge Dyk showed his dismissive slant early on, sprinkling "purport" while ignoring the substance purported: "The '154 patent purports to solve this problem..." and: "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]."

Actually, '154 does solve its addressed problem. And the only problem with broad claims is that the courts won't allow them, law be damned. But then, the courts pretty much get to make up the law as they please.

The categories of patent-eligible subject matter are set forth in §101, which provides:

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. 35 U.S.C. § 101.

Section 100(b) of the Patent Act defines the "process" category tautologically, stating that:

The term "process" means process, art or method, and includes a new use of a known process, machine, manufacture, composition of matter, or material.

35 U.S.C. § 100(b). "In choosing such expansive terms . . . modified by the comprehensive 'any,' Congress plainly contemplated that the patent laws would be given wide scope." Bilski, 130 S. Ct. at 3225 (quoting Diamond v. Chakrabarty, 447 U.S. 303, 308 (1980)).

Dyk is wrong that §100(b) is a tautological definition. Something tautologous is redundant. §100(b) is simply an overloading definition - defining "process" to mean more than what one otherwise might think it meant.

The irony in quoting Congressional intent as part of this ruling is the blunt admission that the courts are ignoring Congress. By §101, Congress meant patent protection to include unforeseen technologies, with the guiding metrics stated twice (redundantly): "any new and useful..." The CAFC largely ignores that mandate, to come up with rigid-minded tests, about "machine-or-transformation" or "more than mental."

In interpreting § 101, this court concluded in Bilski that the "machine-or-transformation" test was the appropriate test for the patentability of process claims. 545 F.3d at 943. Thus, we held that a claimed process would only be "patent-eligible under § 101 if: (1) it is tied to a particular machine or apparatus; or (2) it transforms a particular article into a different state or thing." Id. at 954. We further held that, to satisfy the machine prong of the test, the use of a machine "must impose meaningful limits on the claim's scope." Id. at 961. Applying this test, we found that Bilski's claimed "method of hedging risk in the field of commodities trading" was unpatentable under § 101. Id. at 949, 963-66. The Supreme Court affirmed our Bilski decision, but in doing so it rejected use of the machine-or-transformation test as the exclusive test for the patentability of a claimed process. See Bilski, 130 S. Ct. at 3226. While the "machine-or-transformation test is a useful and important clue," the Court stated, it "is not the sole test for deciding whether an invention is a patent-eligible 'process.'" Id. at 3227. The Court declined to "define further what constitutes a patentable 'process,' beyond pointing to the definition of that term provided in § 100(b) and looking to the guideposts in [the Court's precedents]." Id. at 3232. "The Court's precedents provide three specific exceptions to § 101's broad patenteligibility principles: 'laws of nature, physical phenomena, and abstract ideas.'" Id. at 3225 (quoting Diamond, 447 U.S. at 309). The Court noted that these judicially created exceptions "have defined the reach of the statute as a matter of statutory stare decisis going back 150 years," and are "'part of the storehouse of knowledge of all men . . . free to all men and reserved exclusively to none.'" Id. (quoting Funk Bros. Seed Co. v. Kalo Inoculant Co., 333 U.S. 127, 130 (1948)). In holding that the machine-or-transformation test is not the exclusive test for a process's patent-eligibility, the Supreme Court expressly left open the door for "the Federal Circuit's development of other limiting criteria that further the purposes of the Patent Act and are not inconsistent with its text." Id. at 3231.

The judges on the CAFC appear anti-patent because they think patents are anti-business (unless the patents are owned by large corporations), and so admittedly seek "limiting criteria," not rational guidelines to fit what Congress meant by "useful." The Supreme Court, while having the same biases, at least has a longer view - which means leaving guidelines vague, and ruling narrowly.

The damned claims went to "verifying the validity of a credit card transaction." Useful and practical, but did not meet the court's machine-or-transformation test, as "it is clear that the Internet cannot perform the fraud detection steps of the claimed method," - an incredibly stupid statement, as the method necessarily requires a computer. Even if the claim went a step further in practical application, and denied or accepted a transaction, it would have still run afoul of the crooked CAFC.

3. A method for verifying the validity of a credit 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 transactions and;

c) utilizing the map of credit card numbers to determine if the credit card transaction is valid.

The court goes on to confuse practical, useful non-physical tasks with abstract ideas:

Nonetheless, we find that claim 3 of the '154 patent fails to recite patent-eligible subject matter because it is drawn to an unpatentable mental process--a subcategory of unpatentable abstract ideas.

The Supreme Court has stated that "[p]henomena of nature, though just discovered, mental processes, and abstract intellectual concepts are not patentable, as they are the basic tools of scientific and technological work." Gottschalk v. Benson, 409 U.S. 63, 67 (1972) (emphasis added).

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." In re Comiskey, 554 F.3d 967, 980 (Fed. Cir. 2009).

We concluded:

[T]he patent statute does not allow patents on particular systems that depend for their operation on human intelligence alone, a field of endeavor that both the framers and Congress intended to be beyond the reach of patentable subject matter. . . . [I]t is established that the application of human intelligence to the solution of practical problems is not in and of itself patentable.

Id. Thus, because the method of arbitration claims in Comiskey essentially sought "to patent the use of human intelligence in and of itself," the claims were drawn to abstract ideas and were invalid under § 101. Id. at 981.

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.

This ignores that the claim inherently requires use of a computer, and applies to computer transactions.

Claim 2 was a Beauregard claim - a process-by-product claim that essentially claims a method in apparatus form. The apparatus is a computer. Beauregard claims are part of the nonsense in U.S. patent law - trying to obtain coverage in a different patentability category. The CAFC ruled that claim form doesn't make a §101 non-compliant claim copasetic. It does so by somewhat convoluted reasoning, necessary to get around its own precedent.

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 software." 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 performed 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.

The thing that bothered the CAFC the most was that the claim was broad. Broad claims are bad for business (the plutocratic courts think), and so must be killed, especially if owned by some pipsqueak company like CyberSource.

As we stated in Bilski, to impart patenteligibility to an otherwise unpatentable process under the theory that the process is linked to a machine, the use of the machine "must impose meaningful limits on the claim's scope." 545 F.3d at 961. In other words, the machine "must play a significant part in permitting the claimed method to be performed." SiRF Tech., Inc. v. Int'l Trade Comm'n, 601 F.3d 1319, 1333 (Fed. Cir. 2010). Here, the incidental use of a computer to perform the mental process of claim 3 does not impose a sufficiently meaningful limit on the claim's scope. As such, the "computer readable medium" limitation of claim 2 does not make the otherwise unpatentable method patenteligible under § 101. See Grams, 888 F.2d at 840-41 (after finding claims unpatentable for being drawn to a mental process, the court found that claim 16's requirement "that the [same] method be performed with a programmed computer" did not alter the method's unpatentability under § 101). Abele made clear that the basic character of a process claim drawn to an abstract idea is not changed by claiming only its performance by computers, or by claiming the process embodied in program instructions on a computer readable medium. Thus, merely claiming a software implementation of a purely mental process that could otherwise be performed without the use of a computer does not satisfy the machine prong of the machine-or-transformation test.

That purely mental processes can be unpatentable, even when performed by a computer, was precisely the holding of the Supreme Court in Gottschalk v. Benson.

There is the work-around to implicitly outlawing software patents while not explicitly outlawing software patents: kill the broad, clever ideas (especially those owned by small entities) by declaring them "mental." Nothing really changes inside a computer anyway, according to this creed. Forget "useful."

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

⁴The Supreme Court in Diamond v. Diehr characterized Flook as a case involving the use of a mathematical formula in the abstract, regardless of whether the patent "is intended to cover all uses of the formula or only limited uses." 450 U.S. 175, 192 n.14 (1981). Significantly, the Diehr Court noted that, in Flook, "the patent application did not purport to explain how the variables used in the formula were to be selected, nor did the application contain any disclosure relating to chemical processes at work or the means of setting off an alarm or adjusting the alarm unit." Id. The analogy with the claims in this case is a close one: here, the claims contain no hint as to how the information regarding the Internet transactions will be sorted, weighed, and ultimately converted into a useable conclusion that a particular transaction is fraudulent. The claims in this case are therefore even more abstract than the claims in Flook.

Footnote 4 explains the court confusing broad with vague. There is no legal requirement that a claim explain its workings. If an application does not enable a claim, the claim is not legal per §112 ¶1, not §101. The disclosure of '154 is enabling of the claims, by the way.

This is entirely unlike cases where, as a practical matter, the use of a computer is required to perform the claimed method. For example, in SiRF Tech., we found that claims to a "method for calculating an absolute position of a GPS receiver and an absolute time of reception of satellite signals" recited patent-eligible subject matter. 601 F.3d at 1331. The court noted that we were "not dealing with . . . a method that [could] be performed without a machine" and that there was "no evidence . . . that the calculations [could] be performed entirely in the human mind." Id. at 1333. To the contrary, we found it was "clear that the methods at issue could not be performed without the use of a GPS receiver." Id. at 1332.

Similarly, in Research Corp. Techs. v. Microsoft Corp., 627 F.3d 859 (Fed. Cir. 2010), we upheld the patentability of a claimed method "for rendering a halftone image of a digital image by comparing, pixel by pixel, the digital image against a blue noise mask." Id. at 868. Because the method required the manipulation of computer data structures (e.g., the pixels of a digital image and a twodimensional array known as a mask) and the output of a modified computer data structure (a halftoned digital image), the method could not, as a practical matter, be performed entirely in a human's mind.

There is no way for the claimed fraud detection method to work without using a computer and tracking the Internet addresses used for purchase transactions. The CAFC judges disingenuously ignore the facts inherent in the claim.

Hal Wegner pointed out that this ruling, particularly the Beauregard claim bashing, conflicts with Research Corp. v. Microsoft 627 F.3d 859, 868 (Fed. Cir. 2010), as well as the seminal State Street Bank & Trust Co. v. Signature Financial Group, Inc., 149 F.3d 1368, 1372 (Fed. Cir. 1998). The fate of over 40,000 Beauregard claims, now look much less tangible than the medium they claim.

This is another instance of court corruption, in ruling against a small entity with valuable claims - another patent that would have been worth at least hundreds of millions has been put illicitly into the public domain.

Affirmed.