Cybersource Corp. v. Retail Decisions, Inc.

• Decision Date: 27 March 2009
• Docket Number: No. C 04-03268 MHP.,C 04-03268 MHP.
• Citation: 620 F.Supp.2d 1068
• Court: U.S. District Court — Northern District of California
• Parties: CYBERSOURCE CORPORATION, Plaintiff, v. RETAIL DECISIONS, INC., Defendant.

620 F.Supp.2d 1068

CYBERSOURCE CORPORATION, Plaintiff, v. RETAIL DECISIONS, INC., Defendant.

No. C 04-03268 MHP.

United States District Court, N.D. California.

March 27, 2009.

COPYRIGHT MATERIAL OMITTED

Karl J. Kramer, Colette R. Verkuil, Marc J. Pernick, Paul Forrest Coyne, Morrison & Foerster LLP, Palo Alto, CA, Harold J. McElhinny, Morrison & Foerster LLP, San Francisco, CA, for Plaintiff.

Scott J. Bornstein, Allan A. Kassenoff, Greenberg Traurig, LLP, New York, NY, David Joseph Perez, James William Soong, Greenberg Traurig LLP, East Palo Alto, CA, for Defendant.

OPINION

Re: Defendant's Motion for Summary Judgment of Invalidity Under 35 U.S.C. § 101 for Failure to Claim Patent-Eligible Subject Matter

MARILYN HALL PATEL, District Judge.

In this patent infringement litigation, plaintiff CyberSource Corporation has asserted claims 2 and 3 of U.S. Patent No. 6,029,154 ("the '154 patent") against defendant Retail Decisions, Inc. Defendant brings a motion for summary judgment of invalidity, contending that the patent claims are not drawn to patent-eligible subject matter as required by 35 U.S.C. section 101. Having considered the parties' arguments and submissions, the court enters the following opinion.

BACKGROUND

I. The '154 Patent

The patent claims a method and system for detecting fraud in a credit card transaction between a consumer and a merchant over the internet. Claims 2 and 3 are independent claims, but claim 2 recites the steps of claim 3.¹ Claim 3, as amended during reexamination, reads in its entirety:

3. A method for verifying the validity of a credit card transaction over the Internet comprising the steps of:

a) obtaining information about other transactions that have utilized an Internet address that is identified with the credit card transaction;

b) constructing a map of credit card numbers based upon the other transactions and;

c) utilizing the map of credit card numbers to determine if the credit card transaction is valid.

Docket No. 166, Exh. A (Reexamination Certificate) at 4, column 2, lines 38-46. Amended claim 2 reads in its entirety:

2. A computer readable medium containing program instructions for detecting fraud in a credit card transaction between a consumer and a merchant over the Internet, wherein execution of the program instructions by one or more processors of a computer system causes the one or more processors to carry out the steps of:

a) obtaining credit card information relating to transactions from the consumer; and

b) verifying the credit card information based upon values of plurality of parameters, in combination with information that identifies the consumer, and that may provide an indication whether the credit card transaction is fraudulent,

wherein each value among the plurality of parameters is weighted in the verifying step according to an importance, as determined by the merchant, of that value to the credit card transaction, so as to provide the merchant with a quantifiable indication of whether the credit card transaction is fraudulent,

wherein execution of the program instructions by one or more processors of a computer system causes the one or more processors to carry out the further steps of;

obtaining information about other transactions that have utilized an Internet address that is identified with the credit card transaction; constructing a map of credit card numbers based upon the other transactions; and utilizing the map of credit card numbers to determine if the credit card transaction is valid.

Id., lines 9-37. The last set of steps recited in claim 2 is identical to the three steps recited in claim 3.

II. Relevant Procedural History

On July 28, 1997, John Philip Pettit filed the application for what became the '154 patent. The patent issued on February 22, 2000. Plaintiff, the assignee of the '154 patent, initiated this action on August 11, 2004. Defendant thereafter sought ex parte reexamination of the patent by the U.S. Patent and Trademark Office (USPTO) and obtained a stay of this action for that purpose. The ex parte reexamination certificate issued on August 5, 2008. On December 19, 2008, the parties filed their joint claim construction statement. Defendant filed this motion on January 26, 2009, and the court heard oral argument on the motion on March 23, 2009.

LEGAL STANDARDS

I. Patent Validity and Statutory Subject Matter

Patents are presumed to be valid. 35 U.S.C. § 282. A party asserting invalidity has the burden of establishing such by clear and convincing evidence. Takeda Chem. Indus., Ltd. v. Alphapharm Pty., Ltd., 492 F.3d 1350, 1355 (Fed.Cir.2007).

The first substantive section of the patent statute provides, "Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title." 35 U.S.C. § 101. Excluded from patent protection are fundamental principles, including laws of nature, natural phenomena and abstract ideas, even when these may be deemed literally to fall within one or more statutory categories. Diamond v. Diehr, 450 U.S. 175, 185, 101 S.Ct. 1048, 67 L.Ed.2d 155 (1981); see also In re Ferguson, 558 F.3d 1359, 1363-64 (Fed.Cir.2009). The drawing of a claim to statutory subject matter is a threshold requirement for patentability. Parker v. Flook, 437 U.S. 584, 593, 98 S.Ct. 2522, 57 L.Ed.2d 451 (1978); see also Diehr, 450 U.S. at 188, 101 S.Ct. 1048.

The U.S. Court of Appeals for the Federal Circuit recently clarified the proper legal test for determining whether an invention may be considered a statutory "process" under section 101. See In re Bilski, 545 F.3d 943 (Fed.Cir.2008) (en banc). The Bilski court held the "machine-or-transformation test" to be the exclusive test for such determinations. Id. at 956. Under this test, a claimed process is patent-eligible "if: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing." Id. at 954, citing Gottschalk v. Benson, 409 U.S. 63, 70, 93 S.Ct. 253, 34 L.Ed.2d 273 (1972). An applicant may demonstrate patent eligibility by meeting either prong of the test. Bilski, 545 F.3d at 961. However, the "machine implementation" or "transformation" must "impose meaningful limits on the claim's scope." Id. at 961 (citation omitted). In addition, "the involvement of the machine or transformation in the claimed process must not merely be insignificant extra-solution activity." Id. at 962, citing Flook, 437 U.S. at 590, 98 S.Ct. 2522.

The Bilski applicants did not contend that their process met the machine implementation prong of the test; therefore, the court left to future cases the task of "elaborating the precise contours" of that prong. Bilski, 545 F.3d at 962. The facts of Bilski did provide the court an opportunity to elaborate upon the "transformation" prong of the test. The patent at issue in Bilski claimed a method for hedging risk in the field of commodities options trading. Id. at 950. The court held that the claims at issue in that case did not meet the section 101 threshold because they did not transform any "article"—i.e., they did not "involve the transformation of any physical object or substance, or an electronic signal representative of any physical object or substance." Id. at 964. "Purported transformations or manipulations simply of public or private legal obligations or relationships, business risks, or other such abstractions cannot meet the test because they are not physical objects or substances, and they are not representative of physical objects or substances." Id. at 963. The court also noted that "the application of only human intelligence to the solution of practical problems is no more than a claim to a fundamental principle." Id. at 965, citing In re Comiskey, 499 F.3d 1365, 1377-1379 (Fed.Cir.2007) ("Comiskey I"). A mental process is not patent-eligible subject matter. See Bilski, 545 F.3d at 952, 960-961, 965.

II. Summary Judgment

Summary judgment may be granted only when, drawing all inferences and resolving all doubts in favor of the non-moving party, there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); see generally Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The moving party bears the burden of identifying those portions of the pleadings, discovery and affidavits that demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). A material fact is "genuine" if the evidence is such that a reasonable jury could return a verdict for the non-moving party. Anderson, 477 U.S. at 248, 106 S.Ct. 2505. Once the moving party meets its initial burden, the non-moving party must go beyond the pleadings and, by its own affidavits or discovery, set forth specific facts showing that there is a genuine issue for trial. Fed R. Civ. P. 56(e); see Anderson, 477 U.S. at 250, 106 S.Ct. 2505.

DISCUSSION

Defendant contends that claims 2 and 3 of the '154 patent claim mental processes that fail to meet either the "transformation" or "machine implementation" prongs of the machine-or-transformation test. Plaintiff argues that the claims do not preempt any fundamental principles and attempts to demonstrate that both claims meet one or both prongs of the test. Plaintiff argues, in the alternative, that claim 2 is a "Beauregard claim" not subject to Bilski's analysis.

The Federal Circuit has characterized claim construction as "an important first step" in a section 101 analysis. Bilski, 545 F.3d at 951. The parties have filed a joint claim construction statement detailing their respective proposed constructions. See Docket No. 159 (Joint Claim Construction Statement). In this case, ruling on defendant's section...