CYBERSOURCE CORP. v. RETAIL DECISIONS, INC. No. 2009-1358.
654 F.3d 1366 (2011)
CYBERSOURCE CORPORATION, Plaintiff-Appellant, v. RETAIL DECISIONS, INC., Defendant-Appellee.
United States Court of Appeals, Federal Circuit.
August 16, 2011.
J. Michael Jakes, Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, of Washington, DC, argued for plaintiff-appellant. With him on the brief were Erika H. Arner and Justin R. Lowery. Of counsel on the brief was Marc J. Pernick, Morrison & Forester, LLP, of Palo Alto, CA.
Scott J. Bornstein, Greenberg Traurig, LLP, of New York, NY argued for defendant-appellee. With him on the brief was Allan A. Kassenoff. Of counsel was James W. Soong, of E. Palo Alto, CA.
Before BRYSON, DYK, and PROST, Circuit Judges.
DYK, Circuit Judge.
Plaintiff-appellant CyberSource Corporation ("CyberSource") appeals from a decision of the United States District Court for the Northern District of California. The district court 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. See CyberSource Corp. v. Retail Decisions, Inc.,
CyberSource is the owner by assignment of the '154 patent, which recites a "method and system for detecting fraud in a credit card transaction between [a] consumer and a merchant over the Internet." '154 patent, at . The '154 patent's specification explains that prior art credit card fraud detection systems — which generally rely on billing addresses and personal identification information — work well for "face-to-face" transactions and transactions where "the merchant is actually shipping a package ... to the address of a customer." Id. col.1 ll.21-24. But for online sales where the product purchased is downloadable content, the patent explains, "address and identity information are not enough to adequately verify that the customer who is purchasing the goods is actually the owner of the credit card." Id. col.1 ll.28-30.
The '154 patent purports to solve this problem by using "Internet address" information (IP addresses, MAC addresses, e-mail addresses, etc.) to determine whether an Internet address relating to a particular transaction "is consistent with other Internet addresses [that have been] used in
CyberSource brought suit against Retail Decisions, Inc. ("Retail Decisions") on August 11, 2004, alleging infringement of the '154 patent. Retail Decisions thereafter initiated an ex parte reexamination of the '154 patent, and the district court stayed its proceedings while the U.S. Patent and Trademark Office ("PTO") conducted the examination. The district court resumed proceedings after the PTO reissued the '154 patent with amended claims on August 5, 2008. On October 30, 2008, this court decided In re Bilski,
CyberSource appealed to this court in April 2009. After the Supreme Court granted certiorari in Bilski v. Doll, ___
We review grants of summary judgment de novo. Tokai Corp. v. Easton Enters., Inc.,
Two claims of the '154 patent are at issue in this case. Claim 3 recites a process for verifying the validity of credit card transactions over the Internet. See J.A. 32 ('154 Patent Reexamination Certificate), col.2 ll.38-47. Claim 2 recites a computer readable medium containing program instructions for executing the same process. See id. col.2 ll.9-37.
The categories of patent-eligible subject matter are set forth in § 101, which provides:
35 U.S.C. § 101. Section 100(b) of the Patent Act defines the "process" category tautologically, stating that:
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,
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 patent-eligibility principles: `laws of nature, physical phenomena, and abstract ideas.'" Id. at 3225 (quoting Diamond, 447 U.S. at 309, 100 S.Ct. 2204). The Court noted that these judicially created
We first address claim 3 of the '154 patent, which recites a method for verifying the validity of a credit card transaction over the Internet. Claim 3, as amended during reexamination, reads in its entirety:
J.A. 32 ('154 Patent Reexamination Certificate), col.2 ll.38-47. CyberSource acknowledges 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." Appellant's Br. 7. 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. See Appellant's Br. 9. Finally, 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." J.A. 32, col.2 ll.46-47.
The district court found that claim 3 fails to meet either prong of the machine-or-transformation test. CyberSource, 620 F.Supp.2d at 1078. We agree. As the district court correctly held, the method of claim 3 simply requires one to "obtain and compare intangible data pertinent to business risks." Id. at 1073. 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.
We are not persuaded by the appellant's argument that the claimed method is tied to a particular machine because it "would not be necessary or possible without the Internet." Appellant's Br. 42. Regardless of whether "the Internet" can be viewed as a machine, it is clear that the Internet cannot perform the fraud detection steps of the claimed method. Moreover, while claim 3 describes a method of analyzing data regarding Internet credit card transactions, nothing in claim 3 requires an infringer to use the Internet to obtain that data (as opposed to obtaining the data from a pre-compiled database). The Internet is merely described as the source of the data. We have held that mere "[data-gathering] step[s] cannot make an otherwise nonstatutory claim statutory." In re Grams,
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,
Id. at 67, 93 S.Ct. 253. Thus, in finding that the process in Benson was not patent-eligible, the Supreme Court appeared to endorse the view that methods which can be performed mentally, or which are the equivalent of human mental work, are unpatentable abstract ideas — the "basic tools of scientific and technological work" that are open to all. Id.
The Supreme Court reaffirmed and extended its Benson holding in the case of Parker v. Flook,
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,
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.
First, step (a) — which requires "obtaining information about other transactions that have utilized an Internet address that is identified with the  credit card transaction" — can be performed by a human who simply reads records of Internet credit card transactions from a preexisting database. J.A. 32, col.2 ll.40-42. While the '154 patent's specification discusses referencing "a database of Internet addresses," '154 patent, col.3 ll.13-14, CyberSource concedes that claim 3 does not cover the initial creation of the database. Oral Arg. at 1:15-1:30, available at http://www.cafc. uscourts.gov/oral-argument-recordings/all/ cybersource.html. Moreover, as discussed above, even if some physical steps are required to obtain information from the database (e.g., entering a query via a keyboard, clicking a mouse), such data-gathering steps cannot alone confer patentability. Grams, 888 F.2d at 839-40.
Second, a person may "construct a map of credit card numbers" as required by step (b) by writing down a list of credit card transactions made from a particular IP address. J.A. 32, col.2 ll.43-44. There is no language in claim 3 or in the '154 patent's specification that requires the constructed "map" to consist of anything more than a list of a few credit card transactions. This is readily apparent from the appellant's brief, in which CyberSource
Finally, step (c) — which requires "utilizing the map of credit card numbers to determine if the credit card transaction is valid" — is so broadly worded that it encompasses literally any method for detecting fraud based on the gathered transaction and Internet address data. J.A. 32, col.2 ll.45-46. This necessarily includes even logical reasoning that can be performed entirely in the human mind. For example, a person could literally infringe step (c) by identifying a likely instance of fraud based on the simple observation that numerous transactions using different credit cards, having different user names and billing addresses, all originated from the same IP address. Indeed, CyberSource's CEO admitted that, before CyberSource created a computer implemented fraud detection system, "[w]e could see just by looking that more than half of our orders were fraudulent." J.A. 375.
Thus, claim 3's steps can all be performed in the human mind. Such a method that can be performed by human thought alone is merely an abstract idea and is not patent-eligible under § 101. Methods which can be performed entirely in the human mind are unpatentable not because there is anything wrong with claiming mental method steps as part of a process containing non-mental steps,
We turn next to claim 2 of the '154 patent, which recites a so-called "Beauregard claim." A Beauregard claim — named after In re Beauregard,
J.A. 32 ('154 Patent Reexamination Certificate), col.2 ll.9-37 (emphases added). While claim 2 contains somewhat redundant language, it is clear from the emphasized text that claim 2 recites nothing more than a computer readable medium containing program instructions for executing the method of claim 3.
As discussed above, we found claim 3 to be unpatentable because it is drawn to a mental process — i.e., an abstract idea. The method underlying claim 2 is clearly the same method of fraud detection recited in claim 3. Nonetheless, CyberSource contends that claim 2 should be patentable. CyberSource's main argument is that coupling the unpatentable mental process recited in claim 3 with a manufacture or machine renders it patent-eligible.
CyberSource argues that claim 2 is patent-eligible per se because it recites a "manufacture," rather than a "process," under the statutory language of § 101. CyberSource contends that, by definition, a tangible, man-made article of manufacture such as a "computer readable medium containing program instructions" cannot possibly fall within any of the three patent-eligibility exceptions the Supreme Court has recognized for "laws of nature, physical phenomena, [or] abstract ideas." Appellant's Br. 47-48 (quoting Bilski, 130 S.Ct. at 3225). We disagree.
Regardless of what statutory category ("process, machine, manufacture, or composition of matter," 35 U.S.C. § 101) 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,
In the present case, CyberSource has not met its burden to demonstrate that
Analyzing claim 2 as a process claim, CyberSource first asserts that claim 2 satisfies the transformation prong of the machine-or-transformation test because it recites a patentable transformation of data representing Internet credit card transactions. According to CyberSource, the claimed technique uses an "Internet address" such as an IP address or e-mail address and constructs a "map" of credit card numbers from Internet transactions that have utilized that Internet address. We agree with the district court that the claimed process manipulates data to organize it in a logical way such that additional fraud tests may be performed. The mere manipulation or reorganization of data, however, does not satisfy the transformation prong. Thus, claim 2 fails to meet the transformation test.
CyberSource additionally argues that claim 2 satisfies the machine prong of the machine-or-transformation test, since the recited "computer readable medium" contains software instructions that can only be executed by "one or more processors of a computer system." J.A. 32, col.2 ll.12-14. As we stated in Bilski, to impart patent-eligibility 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,
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. As discussed above, the Supreme Court found in Benson that a claim to a method of programming a general-purpose computer to convert BCD numbers into pure binary was unpatentable because the conversion of BCD numerals to pure binary
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.
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.,
In contrast, it is clear in the present case 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
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