IP: Revenge of the Humans—Defending Business Method Patents

A recent circuit court decision gives companies the teeth with which to bite back.

Software patents. Business method patents. The words alone make me clutch my wallet. Easy to get. Costly to defend. And too often just plain absurd.

I remember defending a case involving a software patent on a method of updating address book contacts by emailing people and asking them for their current information. Really? I could do that with a telephone and pencil. Another favorite was a case involving a method of inducing people to watch more TV commercials by making them more interesting. Again, really? Isn’t that just a matter of better writing and directing? But both patents used a computer for some thing or another, which allowed the plaintiff to argue that the inventions were “tied to” a machine and, therefore, satisfied the machine-or-transformation test used to determine patent-eligible subject matter.

Tied to? I always liked that one. What the heck does that mean? No one really knew even before the Supreme Court made matters worse by downgrading the machine-or-transformation test from a “test” to a mere “clue,” or rather “the clue,” as the Court so helpfully emphasized, thank you very much. And so, if I discover a new way to San Jose that shaves an hour and passes a good delicatessen, I can get a patent simply by reciting a “vehicle with propulsion means” in my claims.

Not anymore.

On Aug. 16, 2011, the Federal Circuit gave the machine-or-transformation test—excuse me, “clue”—some real teeth. In Cybersource v. Retail Decisions, the court affirmed a judgment invalidating a patent on a method of detecting Internet credit card fraud by comparing credit card transactions with IP addresses. Although countless machines—personal computers, servers, etc.—were inherently involved, the claims could literally be infringed by a human being using a pencil and scratch pad, no matter how inefficient or herculean the task.

The decision is important for at least two reasons: First, the court created a clear rule that businesses, the bench, and the bar can understand and apply. If you can practice the claimed method without the claimed machine, then the claimed machine is irrelevant and the claimed method isn’t patentable. That’s a good rule. Countless business method and software patents recite methods of doing things that can be done—perhaps not easily or even practically—without computers, and now these patents are invalid.

Second, the court put the kibosh on what is known as Beauregard claims. A Beauregard claim is a way of circumventing the prohibition against patenting naked algorithms simply by saying you’re not patenting the instructions, but rather a “computer readable medium” that can execute them. It’s a goofy form of claim with a highly questionable pedigree, and district courts have long been perplexed about how to treat them. But in Cybersource, the Federal Circuit said, “No more.” You can’t get a patent on naked algorithms simply by claiming the computer disk on which they are stored. Sounds obvious, but now it’s the law.

The next time your company stares down the barrel of a software or business method patent, ask if the claimed method can be performed by a human being without the claimed machine. You might need to be a Kasparov to do it, but that’s still checkmate against the plaintiff.

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Jeffrey Dean

Jeffrey Dean is a partner of Marshall, Gerstein & Borun LLP, and concentrates on the defense of patent infringement claims on behalf of corporations....

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