Federal Circuit Continues to Reject Business Method Patents

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The Federal Circuit took another step toward restricting the scope of patentable business methods in its August opinion in Cybersource v. Retail Decisions, 2011 WL 3584472, finding Cybersource’s patent claims invalid as unpatentable “mental processes.”  Of particular interest was the Court’s solidifying “mental processes” as a subcategory of unpatentable “abstract ideas,” and its holding that the addition of concrete structure in a claim, such as a computer hard drive, will not be sufficient to render an otherwise unpatentable abstract idea patentable.

The Court described the Cybersource claims as “broad” and encompassing “any method or system for detecting credit card fraud which utilizes information relating credit card transactions to particular ‘Internet address[es].’”  The method claim involved obtaining information about previous transactions that were conducted through a particular Internet address which was the same address as a current credit card transaction, mapping credit card numbers associated with the previous transactions and using the map to determine if the current transaction is valid.  According to the Court, the computer media claim recited the same method, but in the form of computer instructions on a computer readable medium (e.g., hard drive or DVD). 

Affirming the District Court’s judgment of invalidity, the Federal Circuit held Cybersource’s patent failed to meet the subject matter requirements for patentability under 35 U.S.C. § 101.   

The Court first analyzed the method claim under the “machine or transformation test,” where the claimed subject matter must either be “tied to a particular machine or apparatus” or “transform a particular article into a different state or thing.”  Cybersource’s method claim failed this test, but the Court ultimately premised its decision on the ground that the patent claims comprised only “mental processes,” a subcategory of one of the three case law defined exceptions to patentable subject matter — abstract ideas. 

Quoting from prior decisions, the Federal Circuit explained: “‘[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.’”  The Court was not persuaded by arguments that the claims were rendered patentable because they required physical data gathering steps (obtaining information about prior Internet transactions), instead finding the method could be performed “in the human mind or by a human using a pen and paper.”  The Court held, “[m]ethods 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, but rather because computational methods which can be performed entirely in the human mind are the types of methods that embody the ‘basic tools of scientific and technological work’ that are free to all men and reserved exclusively to none.”

In addition, the Federal Circuit held that claiming the invention in the form of computer media did not render the claim patentable.  The Court explained that regardless of the statutory category of the claim (e.g., process or article of manufacture), it is the underlying invention which must be assessed for patent eligibility purposes.  The Federal Circuit viewed the underlying invention of Cybersource’s computer media claim as identical to its method claim (a method for detecting fraud), and thus reached the same conclusion that the computer media claim was unpatentable.  The reasoning of the Court was consistent with its prior decisions finding unpatentable methods were not saved by the addition of the use of a computer in an “insignificant” manner.  The fact that the computer media claim recited a physical structure or involved the use of a computer to perform the method steps was insufficient to render the claim patentable because those elements of the claim were merely incidental.  In other words, the claim was merely a “software implementation” of a mental process where the addition of computer elements did not impose “meaningful limits on the claim’s scope” or “play a significant part in permitting the claimed method to be performed.” 

With the Cybersource decision, the Federal Circuit has tightened the chokehold on business method patents, more firmly entrenching the “mental processes” exception to patentability and expanding the scope of what will be considered insignificant computer or machine elements in a claim to include “computer readable media.”  Notwithstanding the Supreme Court’s latest pronouncement in Bilski v. Kappos that business method patents are not, as a class, unpatentable, it remains to be seen exactly what types of business methods could past muster given the Federal Circuit’s current treatment of such methods.

As the law continues to evolve on these matters, please note that this article is current as of date and time of publication and may not reflect subsequent developments. The content and interpretation of the issues addressed herein is subject to change. Cole Schotz P.C. disclaims any and all liability with respect to actions taken or not taken based on any or all of the contents of this publication to the fullest extent permitted by law. This is for general informational purposes and does not constitute legal advice or create an attorney-client relationship. Do not act or refrain from acting upon the information contained in this publication without obtaining legal, financial and tax advice. For further information, please do not hesitate to reach out to your firm contact or to any of the attorneys listed in this publication.

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