This case involves patents for methods of detecting credit card fraud over the Internet. The district court granted summary judgment of invalidity, finding the claims recited unpatentable subject matter under 35 USC 101. The appellate court affirmed, finding that (1) the claims failed the machine-or-transformation test as they did not tie the methods to particular machines or transform any articles; and (2) the claims essentially recited abstract ideas of collecting and analyzing data, which could be performed mentally or with pen and paper. Merely implementing the methods via a computer or claiming a computer readable medium was not enough to render the abstract ideas patent-eligible.

1. CyberSource Corp. v.
Retail Decisions, Inc.
Alex Chartove
September 2011
© 2011 Morrison & Foerster LLP All Rights Reserved | www.mofo.com

2. WHO SHOULD READ THIS CASE?
You should read this case if you face issues
concerning:
Patented methods that are implemented
via the Internet.
Patented methods that are implemented
using a computer.
This is MoFo 2

3. CLAIM 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.
This is MoFo 3

4. CLAIM 2
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.
This is MoFo 4

5. LITIGATION
•patentee sues alleged infringer
•alleged infringer moves for SJ of invalidity under 35 USC
§101:
“Whoever invents or discovers any new and useful
process, machine, manufacture, or composition of
matter, or any new and useful improvement thereof,
may obtain a patent therefor, subject to the conditions
and requirements of this title.”
•district court grants SJ of invalidity
•patentee appeals to CAFC
This is MoFo 5

6. §101 VALIDITY TESTS
•a process is patent-eligible under §101 if:
•(1) it is tied to a particular machine or apparatus, or
•(2) it transforms a particular article into a different
state or thing
•to satisfy machine prong, machine must impose
meaningful limits on claim scope
•M-or-T test is not exclusive test for patentability of a
process
•laws of nature, physical phenomena and abstract ideas
are not patentable
This is MoFo 6

7. CLAIM 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;
[“Internet address” may include IP address or e-mail address]
b) constructing a map of credit card numbers based upon the other
transactions and;
[“map” may include list of credit card numbers]
c) utilizing the map of credit card numbers to determine if the credit
card transaction is valid.
[“utilizing” may include any fraud detection formula or mathematical
algorithm]
This is MoFo 7

8. CLAIM 3 FAILS M-or-T TEST
•transformation prong
•mere collection and organization of data regarding
credit card numbers and Internet addresses is
insufficient
•machine prong
•no machine is defined or required for performing
method
•Internet does not perform steps of claimed method
•Internet is merely a data source
This is MoFo 8

9. CLAIM 3 RECITES ABSTRACT IDEA
•failure to satisfy M-or-T test is not dispositive of
§101 inquiry
•claim 3 scope is not limited to a particular algorithm
•each step can be performed in human mind alone, or
by human using pen and paper
•method which can be performed mentally, or by pen
and paper, is a mental process - a subcategory of
unpatentable abstract idea
•even if mental process has a practical application
This is MoFo 9

10. “BEAUREGARD” CLAIM 2
•a computer readable medium (e.g., disk, hard drive, data storage,
etc.) containing program instructions for a computer to perform a
particular process
•regardless of statutory category recited in claim (process, machine,
manufacture, composition of matter), look to “underlying” invention to
determine §101 patent-eligibility
•invention “underlying” both claims 2 and 3 is a method for detecting
credit card fraud, not a medium for storing computer-readable
information
•claim 2 recites nothing more than a medium containing program
instructions for executing method of claim 3
•despite Beauregard format, claim 2 is treated as a process claim for
patent-eligibility purposes
This is MoFo 10

11. CLAIM 2 FAILS
TRANSFORMATION PRONG
•claimed process manipulates data to
organize it in a logical way such that
additional fraud tests may be performed
•mere manipulation or reorganization of
data does not satisfy transformation prong
This is MoFo 11

12. CLAIM 2 FAILS MACHINE PRONG
•claim 2 recites “computer readable medium” containing
software instructions requiring execution by “processors
of a computer system”
•to pass machine prong, use of machine must impose
meaningful limits on claim scope
•use of computer to perform mental process of claim 3
does not impose sufficiently meaningful limit on claim
scope
•merely claiming software implementation of a purely
mental process that could be performed without a
computer does not satisfy machine prong
•claim 2 limitations do not make unpatentable method
patent-eligible under §101
This is MoFo 12

13. CLAIM 2 RECITES ABSTRACT IDEA
•method can be performed entirely in human mind, without a machine
•merely coupling unpatentable mental process with a manufacture or
machine does not render mental process patent-eligible
•method claims invalid under §101 for being drawn to abstract ideas
cannot avoid invalidity under §101 by
•merely requiring a computer to perform the method, or
•merely reciting a computer readable medium containing program
instructions for performing the method
•result may be different where, as a practical matter, a computer is
required to perform the claimed method
•claims 2 and 3 are invalid under §101 as a matter of law
This is MoFo 13

14. PRACTICAL OBSERVATIONS
•merely converting a non-patent eligible method
claim to Beauregard format will not be sufficient
to
•avoid M-or-T test, or
•pass M-or-T test
•risk of §101 invalidity can be reduced by
•reciting a specific algorithm
•recite steps that cannot be performed mentally
or by pen and paper
This is MoFo 14