That's Easy! I Can Do That With Pen and Paper!: Why the Mental Steps Doctrine Could Bring an End to Patent Protection for Software

• Publication year: 2011

Marc Macenko⁰ and Bentley J. Olive¹

In August of 2011, the U.S. Court of Appeals for the Federal Circuit issued a ruling in CyberSource v. Retail Decisions that held a piece of computer software as unpatentable because it did not fit any allowable subject matter. This decision was reached through an application of the test for processes to a claim that recited a manufacture. This decision should be reviewed by the Federal Circuit en banc. If it is not reversed, it may bring the subject of software patent eligibility into question.

I. Introduction

The Framers of our Constitution believed it necessary to protect inventors in order to encourage their contributions.² Inventors put their invention into the knowledge base of society and in return are granted a monopoly on the invention for a specified time. The current requirements for receiving patent protection are found in Title 35 of the United States Code.³ While the language of the Constitution is very broad, § 101 of Title 35 specifically sets out four categories of invention that can receive patent protection: "process, machine, manufacture, or composition of matter . . . ."⁴

In 2004, CyberSource Corp. filed a patent infringement suit against Retail Decisions, Inc. in the United States District Court for the Northern District of California.⁵ The patent⁶ involved a method for determining if an online credit card transaction was fraudulent. The invention sought to build a database accessible and updatable by many online retailers that would include the Internet Protocol (IP) address used for the transaction and many other features, such as time of day and geographic location, to determine the probability that this use was fraudulent.⁷ This allowed retailers to save costs by not permitting some illegal transactions.⁸

This Recent Development proposes that the decision in CyberSource v. Retail Decisions endangers the future of software patents. By inquiring whether or not a claim could be completed using only pen and paper and purely mental steps, any software can be found to be so abstract that it is no longer eligible for patent protection. Part II discusses the current status of "process" patents and their validity. Part III provides insight into how a practitioner can craft process claims that are patent eligible. Part IV discusses the special circumstances that apply to software patents and how those circumstances alter the category those patents belong to. Part V outlines potential changes in the analysis of software patents. Part VI sketches preferable alternative ways to invalidate the patent in CyberSource using the other requirements of patentability. Finally, Part VII discusses the effects of the CyberSource decision on current matters and how it could affect the future of software patentability.

II. Process Patents

While the latter three categories in § 101, machine, manufacture, and composition of matter, have endured some refinement,⁹ the most difficult category to define with particularity has been "process." It is the only category defined within the statute, but its text is not elucidating: "[t]he term 'process' means process, art, or method, and includes a new use of a known process, machine, manufacture, composition of matter, or material."¹⁰ Over the years, there has been considerable judicial rulemaking regarding which types of process cannot be patentable. These judicial exceptions are "laws of nature, natural phenomena, and abstract ideas,"¹¹ because "[s]uch discoveries are 'manifestations of . . . nature, free to all men and reserved exclusively to none.' "¹² Even when a process depends almost completely on one of these exceptions, it is possible for it to still be patentable if it falls within an exception to the exceptions.¹³ Electricity, for example, is a natural phenomenon and therefore cannot be patented. An invention that merely uses this phenomenon as part of its operation can be eligible for patent protection.

Courts have applied many tests to determine whether or not a process falls within these exceptions. One of the more recent tests was articulated in State Street Bank and Trust Company v. Signature Financial Group, Inc.,¹⁴ in which abstract mathematical concepts such as how to limit tax liabilities by simply following IRS guidelines were patentable when "reduced to some type of practical application, i.e., 'a useful, concrete and tangible result.' "¹⁵ The Federal Circuit replaced this test in its en banc decision in In re Bilski.¹⁶ The patent application was for " '[a] method for managing the consumption risk costs of a commodity sold by a commodity provider at a fixed price . . . .' "¹⁷ The new test asserted that "[a] claimed process is surely 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."¹⁸ The "machine-or-transformation" ("MOT") test as the sole determiner of the eligibility of processes did not last long. Although the Supreme Court holds the rulemaking ability of the Federal Circuit in high esteem,¹⁹ it stated that:

The machine-or-transformation test is not the sole test for patent eligibility under § 101. The Court's precedents establish that although that test may be a useful and important clue or investigative tool, it is not the sole test for deciding whether an invention is a patent-eligible "process" under § 101.²⁰

Thus, a claim that fails the MOT test might still be patent eligible. Bilski has changed the shape of the patent landscape in many important ways. It has been used in numerous rejections by examiners and the Board of Patent Appeals and Interferences.²¹ It has been cited in several patent cases including Prometheus Laboratories v. Mayo Collaborative Services,²² where, in light of their decision in Bilski, the Supreme Court remanded it for rehearing by the Federal Circuit.²³ The Federal Circuit came to the same conclusion as the first time,²⁴ against subject matter ineligibility, but by using the new tests set out in Bilski.²⁵ This could still be further refined as the Supreme Court has granted a writ of certiorari to rehear this case.²⁶ In Research Corp. Technologies v. Microsoft Corp.²⁷ the Federal Circuit used the analysis from Bilski and reversed a summary judgment holding that a software patent was too abstract to be eligible for protection.²⁸

III. Patent Prosecution since Bilski

From a practitioner's standpoint, it is interesting to speculate how claims such as those in CyberSource might have been amended during prosecution to become patent-eligible under § 101. As discussed herein, the Supreme Court in Bilski explicitly sets forth that a claim is patent-eligible under § 101 if it meets the MOT test. Thus, it should be clear that method claims written with the MOT test in mind should meet the requirements of § 101.

It is also helpful to keep in mind guidance provided by the U.S. Patent and Trademark Office for determining patent-eligible method claims. In a memorandum to its patent examiners following Bilski, the Acting Associate Commissioner for Patent Examination Policy outlined factors for consideration by examiners in determining whether a claim is patent-eligible under § 101.²⁹ The memorandum notes that no factor is conclusive by itself, and the weight accorded each factor will vary based upon the facts of the application.³⁰ In addition, the memorandum notes that the factors are not intended to be exclusive or exhaustive.³¹ Factors identified in the memorandum as weighing toward eligibility include: (1) the claim recites a machine or transformation (either express or inherent);³² (2) the claim directs toward applying a law of nature;³³ and (3) the claim is more than a mere statement of a concept.³⁴ Factors identified that weigh against eligibility for patent protection include: (1) no recitation of a machine or transformation (either express or inherent); (2) insufficient recitation of a machine or transformation; (3) involvement of machine, or transformation, with the steps is merely nominally, insignificantly, or tangentially related to the performance of the steps, e.g., data gathering, or merely recites a field in which the method is intended to be applied;³⁵ (4) the claim is not directed to an application of a law of nature;³⁶ and (5) the claim is a mere statement of a general concept.³⁷

The factors appear to make clear that including features in the claim (1) that require that the claimed steps are implemented by a particular machine, or (2) where the machine meaningfully limits the execution of the steps, should make the claim patent eligible at least in view from the U.S. Patent and Trademark Office. These factors correlate closely with the MOT test of Bilski.

Reviewing factor (1), a claim reciting method steps have often been found to be patent-eligible under § 101 if the claim also recites that the steps are implemented by a processor and memory. In practice, examiners having declared a method claim patent ineligible under § 101 will suggest making such claim amendments to make the claim patent eligible. Such additional limitations to the claim will usually not have a practical effect on the scope of the claim, since a potential infringer would most likely implement the steps on a device including a processor and memory. It is also noted that a broad definition of processor and memory should be included in the specification of the patent application.

Reviewing factor (2), a method claim will more likely be deemed patent-eligible if the claim recites more specific machine components or modules. For example, a step in implementing a telecommunications process may include a server, input/output module, or some other telecommunications-specific equipment. A practitioner should seek to find specific machine components that may be recited in one or more of the steps of the method claim and that do not unduly limit a scope of protection desired by the...