On 16 August 2011, the Court of Appeals for the Federal Circuit (“Federal Circuit”) issued an important, precedential decision on the patentability of software in Cybersource v. Retail Decision (PDF). This case is another one of many cases where a court has rendered a broadly written software patent invalid under 35 U.S.C. § 101 as interpreted by Bilski v. Kappos, 130 S. Ct. 3218 (2010).

Most patent decisions involve questions of whether an invention is obvious under 35 U.S.C. § 103(a), anticipated by a single reference under 35 U.S.C. § 102(b), or sufficiently described under 35 U.S.C. § 112. Section 101 asks a  different question – whether an invention is the type of innovation that properly fits within the U.S. patent system. The language of Section 101 has not changed much over 200 years. Section 101 indicates that a patent should be awarded to an inventor of “any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.” Over the years, courts have interpreted this language to mean that most anything is patentable, except that it is unlawful to patent “laws of nature, physical phenomena, and abstract ideas.”

CyberSource was granted U.S. Patent No. 6,029,154 (the “154 patent”). The claims are broad and “essentially purport to encompass any method or system for detecting credit card fraud which utilizes information relating to credit card transactions to particular ‘Internet addresses.’” Claim 3 is illustrative:

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 trial proceedings were stayed pending the outcome of a reexamination proceeding; the claims were amended during the reexamination. Back at trial, the district court granted summary judgment and granted summary judgment on the ground of invalidity. The court  found that claim 3 recited “an unpatentable mental process for collecting data and weighing values,” which did “not become patentable by tossing in references to [I]nternet commerce.” CyberSource, 620 F. Supp. 2d at 1077.

In CyberSource, the Federal Circuit reviews the Bilski decision of the Supreme Court (2010) and indicates that Bilski addressed the same issue. The Supreme Court stated the machine-or-transformation test is not the exclusive test for a process’s patent-eligibility, and “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.’” Slip Op. at *7. The Federal Circuit notes that the district court found that claim 3 “fails to meet either prong of the machine-or-transformation test” and agrees! The Federal Circuit finds that the method of claim 3 (shown above) simply requires one to “obtain and compare intangible data pertinent to business risks.” Id. at *8.

Merely collecting and organizing data is not enough to make an invention patentable under 35 U.S.C. § 101. The Federal Circuit was not persuaded by the argument that the method in claim 3 is tied to a particular machine because it referred to the Internet. The Internet was “merely the source of the data.” Id. at *9.

In 1972, the Supreme Court 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).

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 943, 965 (Fed. Cir. 2008).

The lesson is simple – don’t try to patent mental steps. Mental steps are a subcategory of unpatentable abstract ideas. See a professional because patenting software is a non-trivial undertaking.