08/23/2011

IP & Technology Alert: Software and E-Commerce Inventions: Can They Be Patented After CyberSource?

The decision by the U.S. Court of Appeals for the Federal Circuit in CyberSource Corp. v. Retail Decisions, Inc. calls into question the patentability of software and e-commerce inventions, particularly those involving a method that could readily be performed without the use of a computer.

In its decision, the Court held that a patent claim directed to a method for verifying the validity of a credit card transaction over the Internet was not eligible for patent protection under 35 U.S.C. § 101. To support its holding, the Court reasoned that each of the method steps could be performed "in the human mind" or "by a human using a pen and paper" and, thus, the method was nothing more than an abstract idea. This holding is not surprising in view of the Supreme Court's recent Bilski decision addressing the patentability of method/process claims.

However, the Court further held that a patent claim directed to a computer-readable medium (e.g., a disk, hard drive, or other data storage device) containing program instructions for a computer to perform a process was also patent-ineligible under § 101. The following are key points from the Court's opinion:

• The statutory category that is literally invoked by the language of a claim ("process, machine, manufacture, or composition of matter," 35 U.S.C. § 101) is not dispositive – one must look to the "underlying invention" to determine whether the invention is eligible for patent protection. Thus, a claim directed to a computer-readable-medium, which literally falls within the "manufacture" category, may be treated as a "process" claim for patent-eligibility purposes.
• A computer that is programmed to perform a patent-eligible method may be patented; however, simply reciting the use of a computer to execute an algorithm that can be performed "entirely in the human mind" is not eligible for patent protection.
• "[M]erely claiming a software implementation of a purely mental process that could otherwise be performed without the use of a computer" does not satisfy the test for patent-eligibility.
• An invention may be eligible for patent protection if "the use of a computer is required to perform the claimed method."

There is no question that the CyberSource decision promulgates a new test for whether software and e-commerce inventions are patent eligible – a test that ignores the statutory category of a claim and focuses on the relative complexity of the "underlying invention." Under this new test, a computer that is programmed to perform a method (i) may be eligible for patent protection if the use of a computer is required to perform the method but (ii) may not be eligible for patent protection if the method could readily be performed "in the human mind" or "by a human using a pen and paper." It remains to be seen how the Patent Office and district courts will draw the line between (i) and (ii) as they apply the CyberSource decision.

We welcome you to contact any of our patent attorneys to discuss how the CyberSource decision could impact the patents and patent applications owned by your company.