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After Cybersource - Software Inventions Still Patentable - Precise Claim Wording Ever More Crucial

August 2011

By: Joshua S. Matloff

Hamilton Brook Smith Reynolds Alert

Patent claims that recite a “computer readable medium … containing program instructions for a computer to perform” a sequence of steps have become a popular way to cover software implemented inventions ever since the In re Beauregard decision of the Court of Appeals for the Federal Circuit (CAFC) in 1995.  This week, that same Court spoke again on the topic in CyberSource Corp. v. Retail Decisions, Inc.   That ruling calls into question the validity of these so-called Beauregard claims, seemingly removing what has been thought of as a safe harbor for many software-related  inventions.  Clients may now want to consider strategies for amending such claims.

The patent involved in CyberSource was directed to detecting credit card fraud on the Internet and it had both process-type claims and Beauregard-type claims.  The process claims were found not to be patent eligible under 35 U.S.C. §101 because “all of [the] method steps could be … performed in the human mind.”  The Court treated the Beauregard claims as a process, and reasoned that the mere recitation of a computer readable medium alone was insufficient.   Such claims also fail the “machine-or-transformation test” (as per the U.S. Supreme Court’s Bilski decision last year)  because “incidental use of a computer to perform [a] mental process” does not satisfy the machine prong and “mere … reorganization of data .. representing credit card numbers”  … does not satisfy the transformation prong.   The CAFC did note that the claims in this case were quite abstract, containing “no hint as to how the information regarding the Internet transactions will be sorted, weighed, and ultimately converted into a useable conclusion that a particular transaction is fraudulent.”

CyberSource does suggest that an invention may still be patent-eligible even when a computer is required to perform the claimed method steps.  It references the recent SiRF Tech. Inc. v. Int’l Trade Comm’n decision, where the invention was “a method of calculating an absolute position of a GPS receiver," and Research Corp. Techs. v. Microsoft Corp., where the invention was a “method for rendering a halftone image of a digital image by comparing, pixel by pixel, the digital image against a blue noise mask”.  In both cases the CAFC ruled the claims patent-eligible because the recited methods “could not, as a practical matter, be performed entirely in a human’s mind.”

After CyberSource clients have several prudent forward-looking strategies.  Despite expected media commentary to the contrary, the CAFC has not eviscerated all software patents.  However, mere recitation of a “computer readable medium” or “operation over the Internet” no longer gets you over the statutory subject matter hurdle.  Tying claims to a specific machine that plays a significant part in the invention, reciting a practical use or steps occurring outside of a computer, or manipulating data in a way that necessarily implicates a machine are still the best avenues for successfully patenting software.

If you have any questions or concerns, please contact your attorney at Hamilton Brook Smith Reynolds.