Post-Bilski case on Beauregard claims, CyberSource v. Retail Decisions, Federal Circuit 2011 (Software Patents)

The Federal Circuit reviewed an appeal by CyberSource Corporation from a decision of the District Court for the Northern District of California. The district court had granted summary judgment of invalidity of claims 2 and 3 of U.S. Patent No. 6,029,154 (“’154 patent”) under 35 U.S.C. § 101 for failure to recite patent-eligible subject matter. The patent relates to a method and system for detecting fraud in a credit card transaction between a consumer and a merchant over the Internet.

The Federal Circuit refused to hold that all Beauregard claims are necessarily statutory. Instead, they treated a Beauregard claims as a process claim and then applied the machine-or-transformation test.

Claim 3, after reexamination, reads:

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.

Claim 2, after reexamination, is a Beauregard claim and reads:

2. A computer readable medium containing program instructions for detecting fraud in a credit card transaction between a consumer and a merchant over the Internet, wherein execution of the program instructions by one or more processors of a computer system causes the one or more processors to carry out the steps of:

a) obtaining credit card information relating to the transactions from the consumer; and

b) verifying the credit card information based upon values of plurality of parameters, in combination with information that identifies the consumer, and that may provide an indication whether the credit card transaction is fraudulent,

wherein each value among the plurality of parameters is weighted in the verifying step according to an importance, as determined by the merchant, of that value to the credit card transaction, so as to provide the merchant with a quantifiable indication of whether the credit card transaction is fraudulent,

wherein execution of the program instructions by one or more processors of a computer system causes that one or more processors to carry out the further 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 Federal Circuit first considered claim 3. The Federal circuit noted that CyberSource acknowledged that the “Internet address” recited in step (a) of claim 3 “may be, for example, an Internet protocol (IP) address or an e-mail address for the particular credit card transaction.” The Federal Circuit noted that CyberSource further concedes that the “map of credit card numbers” recited in step (b) can be as simple as a list of credit card transactions relating to a particular IP address. Finally, the Federal Circuit noted that step (c) does not limit claim 3 to any specific fraud detection formula or mathematical algorithm, but rather broadly purports to encompass any means of “utilizing the map of credit card numbers to determine if the credit card transaction is valid.”

The district court found that claim 3 fails to meet either prong of the machine-or-transformation test. The Federal Circuit agreed and agreed with the district court that the method of claim 3 simply requires one to “obtain and compare intangible data pertinent to business risks.” The mere collection and organization of data regarding credit card numbers and Internet addresses is insufficient to meet the transformation prong of the test, and the plain language of claim 3 does not require the method to be performed by a particular machine, or even a machine at all.

The Supreme Court affirmed the invalidity of Bilski’s claims. The Supreme Court declined to generally invalidate software patents and instead held that the Federal Circuit’s Machine-or-Transformation test is not the exclusive test to determining if a method is statutory.

The Federal Circuit then went on to claim 2, the Beauregard claim. A Beauregard claim, named after In re Beauregard, 53 F.3d 1583 (Fed. Cir. 1995), is a claim to a computer readable medium (e.g., a disk, hard drive, or other data storage device) containing program instructions for a computer to perform a particular process.

The Federal Circuit stated that regardless of what statutory category a claim’s language is crafted to literally invoke, we look to the underlying invention for patent-eligibility purposes. Here, it is clear that the invention underlying both claims 2 and 3 is a method for detecting credit card fraud, not a manufacture for storing computer-readable information. This case is thus similar to In re Abele, 684 F.2d 902 (CCPA 1982).

The Federal Circuit went on to say that in the present case, CyberSource had not met its burden to demonstrate that claim 2 is “truly drawn to a specific” computer readable medium, rather than to the underlying method of credit card fraud detection.

The Federal Circuit acknowledged that, after Abele, they 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 stated that they 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 Federal Circuit stated that one could mentally perform the fraud detection method that underlies both claims 2 and 3 of the ’154 patent, as the method consists of only the general approach of obtaining information about credit card transactions utilizing an Internet address and then using that information in some undefined manner to determine if the credit card transaction is valid. Because claims 2 and 3 attempt to capture unpatentable mental processes (i.e., abstract ideas), they are invalid under § 101.

The Federal Circuit affirmed the district court holding.

The Federal Circuit decision can be found here:

www.cafc.uscourts.gov/images/stories/opinions-orders/09-1358.pdf