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Federal Circuit Guidance on Process Claims Recited In Conjunction With a “Computer Readable Medium”

Posted Monday, August 29, 2011 by Mike Gibbons

August 16, 2011: Today, the Court of Appeals for the Federal Circuit affirmed the decision of the District Court for the Northern District of California in CYBERSOURCE CORPORATION v. RETAIL DECISIONS, INC.

CyberSource had patented a process for detecting credit card fraud in Internet purchases. The patent included a method claim (Claim 3) and an apparatus claim (Claim 2) to “A computer readable medium containing program instructions,” where the instructions recited the exact method specified by Claim 3. Reciting a method claim embodied in a computer readable medium is known as a “Beauregard claim.”

The method claim for detecting fraud pertaining to a particular transaction involved: (1) obtaining data about individual credit card transactions from the same Internet address as this transaction, (2) using that data to assemble a list of transactions, and (3) comparing the first transaction to the contents of the list to make a decision about whether the first transaction was fraudulent. While the patent doesn’t expressly say so, using this method one presumably detects fraud when the transactions coming from the same Internet address all involve different credit card numbers.

CyberSource subsequently sued Retail Decisions, Inc. for infringement. Retail Decisions defended on the grounds that the CyberSource patent was invalid. The District Court judge agreed with Retail Decisions, holding that Claims 2 and 3 were directed towards subject matter not contained within the limits of 35 U.S.C. 101. CyberSource appealed the finding that their patent was invalid to the Federal Circuit.

On appeal, the Federal Circuit affirmed the finding that the method recited by Claim 3 was unpatentable, stating “All of claim 3’s method steps can be performed in the human mind, or by a human using a pen and paper. … Such a method that can be performed by human thought alone is merely an abstract idea and is not patent-eligible under §101.”

The interesting discussion in this case relates to Claim 2, and CyberSource’s recital of the same method within a claim to “A computer readable medium containing program instructions” that goes on to recite the steps of Claim 3. In holding Claim 2 also invalid, the Court cited a 1982 decision from its predecessor court, the Court of Customs and Patent Appeals, In re Abele, 684 F.2d 902.

Abele featured a similar set of claims: a method claim followed by an apparatus claim embodying the process recited by the method claim. In Abele, even though the apparatus claim literally recited a machine, the court still examined the steps performed by the machine to see if the apparatus claim recited patent-eligible subject matter, finding that to treat the claim as an apparatus claim rather than a method claim would “exalt form over substance since the claim is really to the method or series of functions itself.”

In the CyberSource case, the Court treated Claim 2 (the Beauregard claim) as a method claim rather than as the computer readable apparatus described by Claim 2. Reminding us that a 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), the Court said the incidental use of the computer in Claim 2 to perform the mental process of Claim 3 was insufficient to elevate Claim 2 to patentable subject matter. The Court seems to be saying that if the method claim recites a method process that can be performed by human thought alone, encoding it in software or building a hardware platform to perform the process does not automatically make the software or hardware patentable.

However, where the process is one that could not be performed without the software or hardware recited in the Beauregard claim, the claim may contain patent-eligible subject matter. The Court listed a method for calculating an absolute position of a GPS receiver and an absolute time of reception of satellite signals as an example of one which would be too complex to be performed entirely in the human mind and requiring hardware or software.

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