Patent Law – Business method software patents undermined by Cybersource case

The recent court ruling in the Cybersource Corporation v. Retail Decisions, Inc., case is a warning that those seeking to patent software-related inventions need to explain how the invention incorporates the use of a machine such that it is patent-eligible (click here for a Google Scholar version of the ruling).

To obtain a patent an invention must involve a “new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.”  The patent at issue in the Cybersource case was a system for detecting credit card fraud on the internet.  This type of patent is considered to be a “business method” patent.  Business method patents have been issued in the US for over 200 years but in the internet age the number of business method patents have mushroomed (click here for a history of business method patents).  Many have criticized the issuance of software patents since software is eligible for copyright protection as well as patent protection.

In the Cybersource case, the court ruled this particular business method should not have been granted a patent because the method at its core compares a list of prior credit card transactions from a particular internet address and the credit card numbers used in those transactions.  This system, as stated in the patent claims, only describes the collection of data and does not state that the internet or any specific machine is necessary to collect or compare the data.  Although one of the claims referred to a “computer readable medium,” the court looked to the underlying invention to determine if the method is patent-eligible, and the court ruled the underlying invention was a method for detecting credit card fraud, not a manufacture for storing computer-readable information.

Many of the recent patent infringement lawsuits filed by so-called “patent trolls” concern patents that are vaguely-written (and often never marketed or licensed) and used to later claim that other companies’ existing products and systems infringe their patents.  The attorney for Retail Decisions hoped this court decision would limit such “troll litigation.”  (see his comment in this story).

For more on this case, also see this commentary from the former Retail Decisions Chief Technological Officer, under whom Retail Decisions developed the credit card fraud detection system that was accused of infringing the subject patent.


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