Bilski Test For Patentable Subject Matter Applied in District Court

by Brian Fletcher on March 27, 2009

CyberSource Corp. v. Retail Decisions Inc., case number 04-cv-03268, in the U.S. District Court for the Northern District of California.

A federal judge invalidated a patent held by CyberSource Corp. for a system to detect fraud in online credit card transactions, finding that it does not meet the Bilski test. Retail Decisions Inc. was the accused infringer.

During a hearing on Monday, March 23, Judge Marilyn Hall Patel of the U.S. District Court for the Northern District of California ruled that the asserted claims of CyberSource’s patent were invalid because they did not meet the patentability standard articulated by the U.S. Court of Appeals for the Federal Circuit in In re Bilski.  The judge granted Retail Decisions’ motion for summary judgment after hearing oral arguments.  No word yet about an appeal.

The patent at issue discloses a business method for detecting fraud in credit card transactions over the Internet.  In 2004, California-based CyberSource sued U.K.-based Retail Decisions, claiming that its fraud prevention software products ebitGuard and ReD Shield infringe CyberSource’s patent.

In the Bilski decision last year, the Federal Circuit announced a test requiring that a patentable process either be tied to a machine or apparatus or involve a transformation.

In its motion for summary judgment, Retail Decisions argued that CyberSource’s patent is neither tied to a particular machine or apparatus nor capable of transforming a particular article into a different state, and therefore failed the Bilski test.

The asserted claims of the patent “do not claim anything that can be remotely described as patentable subject matter,” the motion stated.  ”To the contrary, they claim abstract ideas, a vaguely expressed recipe of mental steps for detecting fraud in credit card transactions.”

In response, CyberSource unsuccessfully argued that the patent covered a new and useful apparatus for detecting fraud and was tied to specific machines, namely computers and networks, since it was designed to detect fraud online.  ”The claims are limited to very specific and practical applications, and they do not seek to cover any ‘fundamental principles’ or ‘abstract ideas’ of the type that have been held unpatentable,” the company wrote in its memo opposing Retail Decisions’ motion.

The patent at issue is U.S. Patent No. 6,029,154, issued in 2000 and titled “Method and system for detecting fraud in a credit card transaction over the Internet.”

Attorneys from Morrison & Foerster LLP represent CyberSource.  Attorneys from Greenberg Traurig LLP and Ropes & Gray LLP represent Retail Decisions.

Source:  multiple sources including IP Law360

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