CyberSource Corp. v. Retail Decisions, Inc.

September 8, 2011 By Intellectual Property Practice Group
Legal Updates

A conversation between William Morriss, Ria Farrell Schalnat, and Steven Goldstein about the impact of the latest software patent decision from the Federal Circuit.  CyberSource Corp. v. Retail Decisions, Inc. --- F.3d --- (Fed. Cir. 2011)Click here to read the decision. 

Steven:  So, does this decision affect your software clients?

Ria:  Upon reading the Cybersource decision, the first thing that occurred to me, regarding software claims, was the scene from Monty Python's Holy Grail where the dead are being carted away and one old man yells out, "I'm not dead yet!"  In general though, I feel a bit sorry for the litigators who get stuck with a pre-Bilski patent that falls into the genre of Beauregard claims (i.e., computer readable medium containing program instructions).

William:  Yes, the claims are written broadly, but could easily have been written to avoid this ruling by adding explicit recitations of various computer systems. This isn't the fault of the prosecutors, who got the claims before all of this nonsense started. I'm betting though, that this ruling will largely be limited to patents issued before the rise of the machine or transformation test.

Ria:  Right, for the applications in process (filed before all this nonsense started), the patent office has been regularly rejecting applications based on patentable subject matter (35 USC 101) and on the grounds of written description/definiteness (35 USC 112).  It isn't too difficult (if somewhat annoying) to amend the claims to add some structure to overcome these issues. The Cybersource decision even gives some hints (e.g., the initial creation of the database) as to the type of structure that the court might have been looking for in the claims to give them a pass. 

William:  But we're still making some educated guesses on the future - we've had two Fed. Cir. cases analyzing Bilski v. Kappos in the software context.  One of them (Research Technologies Corp. v. Microsoft) used very permissive analysis. The other, Cybersource, was very restrictive.  But we don't know which mode of analysis the Federal Circuit will ultimately embrace. Judge Dyk, the author of the Cybersource decision, was also the author of a stridently pro machine or transformation concurrence in In re Bilski.  Given that, and the heavy reliance on machine or transformation in Cybersource, I suspect that Judge Dyk would have found a way to invalidate any method which achieves a result which could be obtained by a human (assuming infinite time, patience, attention to detail and memory). If that's the course the Federal Circuit ultimately takes, adding various computers and databases to the claim wouldn't help, since anything a computer can do a human, in theory, could do as well.

Ria:  Of course, this misses the entire point of the invention at issue in Cybersource (regardless of how artfully the claims were actually drafted). The real innovation here is being able to efficiently handle this type of verification when dealing with terabytes of transactional data. Sure, a human could take a single transaction and figure it out, but no human is going to be able to do it at a volume of X thousands of transactions per hour.  So, this decision provides a good learning tip – claim the structure that actually achieves whatever is useful about the invention. If you simply boil it down to a single transaction, you may run the risk of it being equated to a mental process and running afoul of other recent software decisions.

William:  I guess the bottom line for me in all this is to stay flexible, continue to try and get the broadest protection I can for our clients, and watch what the Federal Circuit does to see if they appear to be settling on one rule or another. My guess is that we're going to see a split between judges who think breadth = abstraction and those who don't. 

Ria:  It is also a good time to take a look at your issued patent portfolio so you can assess potential areas of concern in light of this (and other recent software decisions). Once the law settles down, it may be worthwhile to consider options like reissuing  (35 USC 251) any patents that were granted in the previous two years.  

William:  I also generally recommend that clients keep a continuation application on hand, for any important inventions, to deal with changes in the law like the Cybersource decision. 

Steven:  Thanks for the suggestions – it sounds like clients have a couple of options available including portfolio evaluation, the possibility of a reissue application or utilizing continuation applications to react to the volatile landscape of software-oriented patents.