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Federal Circuit Takes Another Look at What it Means to be Abstract

August 17, 2011

Yesterday, the Federal Circuit affirmed a finding by the District Court for the Northern District of California that claims directed to a system and method of detecting credit card fraud were invalid because they were directed to an abstract idea.  The case is Cybersource Corporation v. Retail Decisions, Inc..

The first claim the court looked at was for “a method of verifying the validity of a credit card transaction over the Internet.”  The claim did not explicitly recite any hardware for performing the steps of the method.  However, it did recite “constructing a map of credit card numbers.”  The court reasoned that because all of the recited steps could be done either in a human mind, or by a human using a pen and paper, they were merely mental steps.  Therefore, the claim as a whole is directed to an abstract idea and is not patentable under 35 U.S.C. §101.

The court next looked at another independent claim presented as a “Beauregard” claim.  A Beauregard claims recites a computer readable medium (e.g., a hard drive or other data storage device) containing program instructions to perform a particular process.  The court stated:

Regardless of 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 to patent-eligibility purposes.  Here, it is clear that the invention underlying both claims is a method for detecting credit card fraud, not a manufacture for storing computer-readable information.

In particular, the court put the burden on the patent holder to “demonstrate that the claims are truly drawn to a specific apparatus distinct from other apparatuses capable of performing the identical functions.”  Because the patent owner could not meet that burden, the court analyzed the Beuaregard claim as a process claim.  It again found it to be directed to an abstract idea because all of the recited functions were capable of being performed mentally (or with a pen and paper).

Therefore, the case on its face appears to create a “pen and paper” rule that treats steps that can be performed using a pen and paper as merely mental steps.  It also places the burden on the patentee to show that any Beauregard claims are drawn to a specific apparatus distinct from other apparatuses capable of performing the recited functions.

The logic of the decision is difficult to follow.  How are patent applicants and the public at large supposed to determine what the underlying invention is apart from the literal claim language?  I always thought the claim defined the invention, not vice versa.  The court also does not satisfactorily explain why using pen and paper, which is completely physical and external from the body, is a mental step.  This case has real potential to cause confusion in the Patent Office and in the courts.

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