Federal Circuit Rules Beauregard Claims are Unpatentable

Last week in Cybersource Corp. v. Retail Decisions, Inc., the Federal Circuit panel of Judges Bryson, Dyk, and Prost overruled a large amount of precedent in holding that claims to computer-readable media are directed to non-patentable subject matter if the media contain code for methods that themselves are non-patentable subject matter.

The patent-at-issue in the case was directed to a “method and system for detecting fraud in a credit card transaction between [a] consumer and a merchant over the Internet.”  The district court had granted summary judgment that both claims-at-issue in the case were invalid as directed to non-patentable subject matter.

Method Claim

Claim 3 of the patent was directed to the method:

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.

In the opinion by Judge Dyk, the Federal Circuit agreed with the district court that the method does not meet the machine-or-transformation test.  The patentee argued that the Internet constitutes a machine for purposes of the test.  The court held, however, that the Internet does not perform the step of detecting fraud, but is merely the source of the data. 

The court held that the claim was directed to an unpatentable “mental process.”  All of the steps can be performed by the human mind or by a human with a pencil and paper, as the claim is not limited to a particular algorithm.  Step (c) of the claim is “so broadly worded that it encompasses literally any method for detecting fraud based on the gathered transaction and Internet address data.”

Such a method that can be performed by human thought alone is merely an abstract idea and is not patent-eligible under § 101.

Computer-Readable Media Claim

The court next turned to claim 2, a Beauregard claim, directed to a computer readable medium that includes program instructions for performing a particular method.  Such claims have been considered patentable subject matter since at least 1995 when the Federal Circuit issued its opinion In re Beauregard.

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.

The court characterized the claim as “nothing more than a computer readable medium containing program instructions for executing the method of claim 3.”  Within the parlance of § 101 of the Patent Act, claim 2 is directed to a “manufacture” rather than a “process.”  The court was not so moved.

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.

Incredibly, the court therefore chose to analyze claim 2 as a process claim instead of a manufacture claim.  The court held that the “computer readable medium” limitation was merely incidental to the claimed process and does not impart any patentable limitation to the claim.  The court attempted to distinguish several recent cases that had held otherwise on the basis that the processes involved steps that could not be performed entirely within the human mind.  Those methods were apparently more complex than the process claimed in Cybersource.

On the computer-readable media claim, the Federal Circuit overruled a great deal of precedent and is in conflict with a great deal more, including some that it attempted to distinguish.  The opinion calls into question literally tens of thousands of issued patents that were patentable under prior court precedent.  Some are even suggesting that this case could have implications for further review of Myriad.

Hopefully, the court will review this case en banc, as it is simply too sweeping a reversal of settled law to permit repudiation by a panel of the court.

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8 Responses to “Federal Circuit Rules Beauregard Claims are Unpatentable”

  1. Tom Says:

    Well, abstract ideas, however complex, are non patentable material, yes?

    And if the abstract idea, as most are, is some as some set of steps that consume information and produce information, then there is no material transformation (neurons in the brain and marks on paper don’t count), right?

    So, a “business processes” and an “information processes” (software steps) are all words used to describe a information input / processing / output ONLY activity, and that makes it an abstract idea.

    Beside being abstract and protected by copyright, the vast majority of software patents are either obvious in the requirements domain (e.g. Amazon One Click = bar tab = you know me and i promise to pay), or obvious in the technology domain (e.g. One Click = common use of browser cookies), or both (One Click)..

    Consider the billions of dollars of software based value and profit created before the first software patents. Software patents are just greed and bad law used by those individual with power to damage the marketplace of ideas and our civil governance (lobbying/bribing congress) for their own stock options and fees.

    By example, the player piano got the patents, the music, in “binary-player-piano-form gets the copyright. The piano roll DOES NOT Make the piano a new unique machine subject to patent rights, regardless of clever lawyering and the precedence of past, incorrect clever lawyering.

    The DEMAND is that “intellectual property” – a non-legal term, be turned into someone’s exclusive real-property, but a demand does not change physics or math, it can just distort the Constitution, usually with lots and lots of money.

  2. mike Says:

    The title is a bit misleading. The CAFC didn’t rule that Beauregard claims were unpatentable, but that “Beauregard language doesn’t make unpatentable subject matter patentable.”

  3. Online Global Week in Review 26 August 2011 from IP Think Tank Says:

    [...] says only hard math is patentable: Cybersource v. Retail Decisions (ArsTechnica) (Inventive Step) (Patent [...]

  4. Immunization Methods are Patent Eligible « INVENTIVE STEP Says:

    [...] Judge Rader cited Beauregard and Swiss style claims as examples of the type of claims that would be patent eligible.  As for Beauregard claims, perhaps he hasn’t read Cybersource? [...]

  5. Patentable Subject Matter at the Supreme Court « INVENTIVE STEP Says:

    [...] CyberSource, the Federal Circuit repudiated tens of thousands of patents in holding that Beauregard-type claims may be considered as methods directed to abstract ideas.  Beuregard-type claims are claims that are directed to computer-readable media that include [...]

  6. Nick Says:

    Mike is correct. Cybersource did not hold that Beauregard claims are non-patent eligible subject matter. The court in Cybersource decided that when the recited process does not by itself satisfy the requirements of 35 USC 101, a Beauregard claim will not satisfy the requirements of 35 USC 101 either.

  7. Colin Says:

    Is the court conflating the concepts of:

    1. A claim which DOES recite only method steps which are broad enough to read on mental steps which COULD be carried out by a person (“mental process”)

    and

    2. A claim whose claimed SUBJECT is a THING which has been arranged to perform steps which produce the same results which (arguably different) human-mind-neuronal steps performed by a person COULD also produce.

    ?

    Clearly 1 READS ON “mental processes” but clearly claim 2 CANNOT.

    If someone today invented an abacus for performing arithmetic, do we tell the inventor because the THING, through its elements, arrangement, and by having its little balls on wires pushed around, does produce a result which is the same as the result of a human mind performing mental steps, that he/she is out of luck?

    Perhaps there are other, more appropriate issues involved in the analysis of whether the particular Beauregard claim is valid, but invoking the line of reasoning paralleling the analysis of the method claim specifically re. “mental processes” or unpatentable subject matter, does not seem particularly “rigorous”..

    Perhaps I am missing something?

  8. Alun Palmer Says:

    The headline is alarming and misleading. The court ruled those particular claims unpatentable, not Beauregard claims in general.

    Alun Palmer, US Patent Agent

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