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If Software Method is not Patentable, then neither is “Computer Readable Medium”

CyberSource Corp. v. Retail Decisions, Inc. 

In an important decision, the Court of Appeals for the Federal Circuit has rendered many broadly written software patents invalid under 35 U.S.C. § 101 as interpreted byBilski 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) or sufficiently described under 35 U.S.C. § 112. Section 101 asks a slightly different question – whether the patented invention is the type of innovation that properly fits within our patent system. In language virtually unchanged for over 200 years, Section 101 indicates that a patent should be awarded to the 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 repeatedly held that Section 101 bars the patenting of “laws of nature, physical phenomena, and abstract ideas”.

CyberSource’s patented invention is simple: when validating online credit card purchases, use IP address information (such as IP addresses) as a check against fraud. Thus, the patented method might raise a red flag if someone attempts to make a large internet purchase through an IP address that had previously been used for a fraudulent transaction.

In the lawsuit, CyberSource only asserted two claims: Claim 3 is the method of fraud detection roughly described above and Claim 2 is directed to a “computer readable medium containing program instructions” for causing a computer to perform the method. Claim 2 is written in “Beauregard” form. See In re Beauregard, 53 F.3d 1583 (Fed. Cir. 1995).

The claimed method is written as follows:

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.


As written, the claim does not require the use of any machine and it does not require the transformation of any article into a different state or thing. Here, the court repeated its stance that mere data gathering steps such as “obtaining information” cannot be sufficient to “make an otherwise non-statutory claim statutory.” And, although the patent is designed to facilitate transactions over the internet, nothing in the claim actually requires that the internet be used. Finally, data structures such as the claimed “information” and “map of credit card numbers” will not be considered technical because they could be simply written down using pencil and paper. Thus, at the outset the claim fails the Machine-or-Transformation test that the Supreme Court identified as an important clue of patentability under 35 U.S.C. § 101.

Because the machine-or-transformation test offers only a legal clue to patentability, the court went on to consider additional indicia that led to the conclusion that the claim does not qualify for patenting under Section 101. In particular, the court focused on prior case law holding that mental processes standing alone are not patentable. CyberSource’s claimed method is such a mental process because it can be “performed … by a human using a pen and paper.” Thus, the claim is invalid.

Beauregard Claims

CyberSource’s claim 2 comes in a different form. However, the court interpreted it as “nothing more than a computer readable medium containing program instructions for executing the method of claim 3.” The most natural implementation of the invention is using software and the claimed “computer readable medium” is the storage device that holds the software.

The claim:

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.

Claim Form Versus the Underlying Invention

CyberSource argued that the claim is patent eligible per se because it is directed to a man-made article of manufacture – “a computer readable medium.” The court rejected that technical distinction. Instead, for patent eligibility purposes, the court directed focus away from the claim’s literal statutory category and instead focus on the “underlying invention.”

Regardless of what statutory category (“process, ma-chine, 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, 684 F.2d 902 (CCPA 1982). In Abele, claim 5 of the patent at issue recited “[a] method of displaying data” comprising the steps of “calculating the difference” between two numbers and “displaying the value.” Id. at 908. The court concluded that claim 5 was not directed to patent-eligible subject matter because it claimed an abstract idea. Id. However, claim 7 was argued to be different because it recited an “[a]pparatus for displaying data” comprising “means for calculating the differences” between two numbers and “means for displaying the value.” Id. at 909 (emphases added). Though claim 7 literally invoked an “[a]pparatus,” the court treated it as a method claim for the purpose of its § 101 analysis. Due to its “broad” and “functionally-defined” nature, the court found that treating claim 7 as an apparatus claim would “exalt form over substance since the claim is really to the method or series of functions itself.” Id. (citation omitted). Accordingly, the court placed “the burden . . . on the applicant to demonstrate that the claims [were] truly drawn to [a] specific apparatus distinct from other apparatus[es] capable of performing the identical functions.” Id. (citation omitted).

Here, the patentee was unable to provide suitable reasoning why the computer readable medium invention was fundamentally different from the method claim.

Pen, Paper, Computer

Following precedent set by Benson and Abele, the court here held that an unpatentable mental process remains unpatentable even when restricted to use on a computer.

Abele made clear that the basic character of a process claim drawn to an abstract idea is not changed by claiming only its performance by computers, or by claiming the process embodied in program instructions on a computer readable medium. Thus, merely claiming a software implementation of a purely mental process that could otherwise be performed without the use of a computer does not satisfy the machine prong of the machine-or-transformation test.

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.


Invalidity affirmed. Neither the method nor the computer readable medium qualify as patentable subject matter.

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